Before 31stMarch Ends: Last Minute Tax Tips
“Normally, people work on the Principle of Rocket. Unless and until it is on fire, it doesn’t move.
We are at the end of the financial year. Let us just have a last minute re-look at our financial and taxation activities to see if any of this can help in further saving tax.
Tax Saving Option U/s 80C & beyond:
- School fee of children is also eligible for deduction u/s 80C. There are instances where parents have not paid the amount of child school fees due to corona, lockdown & restrictions. All such taxpayers may just review if they have done alternative investment/expenditure so as to fully utilize the deduction limit of Rs. 1.50 Lakh u/s 80C.
- Though most of the taxpayers are optimally utilizing the limit of Rs. 1.50 Lakh available u/s 80C by investing the amount in LIC, PPF, NSC, Housing Loan repayment, etc, there are other deductions as well which are often ignored. One such deduction is by making investment in the National Pension Scheme (NPS) which offers additional deduction of Rs. 50,000/- u/s 80CCD(1B). This deduction of Rs. 50,000/- is over and above the deduction limit of Rs. 1,50,000/- u/s 80C. Taxpayers can open as well deposit the amount online in NPS A/ online by making few clicks athttps://enps.nsdl.com/eNPS/OnlineSubscriberRegistration.htmlor athttps://enps.nsdl.com
- One deduction which is not very often claimed by taxpayers is the deduction of Rs. 5,000/- available u/s 80D toward preventive health check up. In view of prevailing pandemics in the form of Corona, most of the people may have gone for preventive health check up. Taxpayers may plan for this deduction by keeping a proper document of check up and payment. Further, those who have not taken mediclaim policy may also plan for it in view of the deduction admissible u/s 80D.
Payment of advance taxinclusive of surcharge:
- Taxpayers are required to pay the amount of tax in different installments during the year only if the net tax liability exceeds Rs. 10,000/-.Taxpayers have to pay the tax in advance in four installments i.e., on or before 15th June (15%), 15thSept (45%), 15thDec (75%) &15thMarch(100%). Non-payment of advance tax attracts interest.The last date for payment of the last installment of advance tax is over on 15thMarch. However, if the taxpayer has not paid the amount of advance tax or there is a short payment in the installment of advance tax, it is advisable to pay it by the 31stMarch so as to avoid the interest u/s 234B.
- Senior citizens not engaged in any business or professions are not required to pay advance tax.
- Advance tax provision is applicable even to salaried persons also if the tax liability exceeds Rs. 10,000/- even after TDS due to rent, interest, dividend, or other income whatsoever.
- It may be noted that the rate of surcharge for individual/ HUF is considerably enhanced as compared to preceding years i.e., it is 10% for income between Rs. 50 Lakh to Rs. 1 Cr, 15% for income between Rs. 1 Cr to Rs. 2 Cr, 25% of tax if income is between Rs. 2 Cr to 5 Cr & 37.50% of tax if income exceeds Rs. 5 Cr. The amount of surcharge may also be considered while working out the advance tax liability.
Deposits in the PPF accounts:
- In case a person has a PPF account, a minimum Rs. 500 is required to be contributed every year so as to avoid the account getting dormant.
- There is a yearly maximum ceiling of Rs. 1,50,000/- for deposits in a PPF A/c and the interest on PPF A/c is also exempt from tax.
- Those taxpayers who have not deposited the amount in their PPF accounts must utilize the available time in making a deposit in the PPF A/c.
Purchase Car or other assets to claim Depreciation
If the taxpayers have higher profits and have plans to purchase a car or other fixed assets in a month or two can purchase it before 31stMarch so as to claim depreciation and save tax on income. Similarly, in case of newly set up units, the assessee can decide the date of commencement of commercial production as the deduction towards depreciation is mandatory after the assets are put to use (it is not optional but mandatory).
Minimizing the taxable income by booking loss:
- Any Long Term Capital Gains (LTCG) on sale of listed equity shares or equity oriented schemes are fully exempt upto Rs. 1 Lakh and the balance is taxed @ 10% [Section 112A].
- Taxpayers who have investment in Shares/Equity Mutual funds can plan their transactions in such a way so as to use this limit optimally.
- If LTCG is more than Rs. 1 Lakh:
It often happens that the taxpayer sells only those shares which are profitable and don’t sell the shares where taxpayers may incur loss. In such cases, taxpayers can also book a loss by selling some of the loss making shares. As a result, the taxpayer can reduce the amount of taxable profit and will be able to pay the tax on a real income basis and not just on realized gain basis. Shares sold at a loss can be purchased by such taxpayers on the next day if they still want to hold it on a long term basis. The transactions can be planned in such a way that the LTCG amount doesn’t exceed Rs. 1 Lakh. LTCG from shares to the tune of Rs. 1 Lakh don’t have any tax impact. - If LTCG is Nil or less than Rs. 1 Lakh:
There may be instances where taxpayers may not have sold the shares even if the rates are higher. In such a case, taxpayers may plan in such a way that they earn up to Rs 1 Lakh in this financial year by following the strategy suggested in (3) above.
Ensure that the benefit of Brought forward Loss is not lost:
There is a limitation on the number of years for which loss can be carried forward for set off against current year income. If taxpayers have brought forward loss then the taxpayer can plan for accrual of income in such a way that no part of the brought forward loss is wasted without adjustments against current year income.
Filing or Revising Income Tax Return:
- Though the due date of filing income tax return is already over, taxpayers who have not filed the return for the FY 2019-20 must note that the last opportunity to file the income tax return in such case is 31stMarch, although with late fee. After 31stMarch 2021, return for the FY 2019-20 cannot be filed voluntarily.
- It may be noted that the partnership firm, companies are required to file the return of income even if there is no business carried out by them.
- Similarly, there are occasions where returns filed by the taxpayers are invalidated. In such cases also, the taxpayer must file the return before 31stMarch as it is the last opportunity of filing.
- If a taxpayer notices any mistakes or errors in the return filed for the FY 2019-20 then it may be noted that 31stMarch 2021 is the last date to revise such return. Taxpayers may again have a look at the 26AS of FY 2019-20 to check if any new TDS credit is getting reflected. Often, it is seen that the deductor revises their TDS return after filing of income tax return by the deductee. By filing revised returns, taxpayers may claim such excess TDS amount.
Linking PAN with Aadhar:
The deadline to link Aadhaar with PAN is notified as 31stMarch 2020. The linking is mandated under section 139AA of the Income Tax Act – 1961. Non-linking will not only make PAN inactive but will also be liable for a penalty of Rs. 10,000/-.
With just a few days to go, it is the last option to review a tax planning aspect and make optimum use of it. Happy Holi & Happy March ending!
[Readers may forward their feedback & queries atnareshjakhotia@gmail.com.Other articles & response to queries are available atwww.theTAXtalk.com]
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