Tax Planning

Final Minute Tax Planning: 6 issues to do earlier than March 31

Taxpayers may need to consider this fact if they propose to book long-term capital gains to claim this exemption.

As the Financial Year 2021-22 is on the verge of completion, taxpayers have a final chance to review whether they have utilized all the available tax optimization opportunities before 31st March 2022.

Here are certain last-minute checks that taxpayers must ensure depending on the availability of the tax-saving options;

Evaluating Tax Savings Investment Options

Suresh Surana, Founder, RSM India, says, “Section 80C of the Income Tax Act, 1961 is one of the most sought sections by the taxpayers for claiming tax deductions on investments.” Provisions of section 80C permit various investments to be claimed as a deduction up to Rs 150,000 from the Gross Total Income of a taxpayer, ultimately resulting in reducing the total tax liability.

Some of the eligible investments eligible for deduction u/s 80C include payment towards Life Insurance Premium, investments in Public Provident Funds (PPFs), ELSS, Sukanya Samridhi Yojana, Subscription in National Savings Certificate, principal repayment of housing loan, registration/stamp duty on property, etc.

Apart from those, expenditures in the form of tuition fees paid in India, principal repayment on home loans, etc. are also eligible for deduction u/s 80C. However, Surana says, “it is pertinent to note that, the maximum deduction that an assessee can claim under this section is restricted to Rs 1,50,000.”

He further adds, “The taxpayers may evaluate other investment options such as contribution to National Pension Scheme for which a deduction is available upto Rs 50,000 under section 80CCD.”

Along with that, under section 80D deduction is available for medical expenditure, upto Rs 25,000 for self and spouse and children. Additional deduction up to Rs 25,000 is available on the health insurance of parents, and up to Rs 50,000 in case they are senior citizens.

Submission of investment proofs to the employers

Industry experts say employers are responsible for withholding tax u/s 192 of the IT Act on the salaries of the employees. “For the computation of such tax, the employers take into account the investment declaration and proof submitted by the employees,” says Surana. Such investment proof may constitute rent receipts, interest certificates, leave travel expenditure, etc.

Thus, he adds, “all employees must make the desired tax-saving investments, collate the investment proofs and submit the same with their employer at the earliest to avoid higher deduction of tax at source. This will also avoid unnecessary blockage of funds in the form of TDS, which may be deducted by the employer if the employee doesn’t submit the investment-related documents.”

Aadhar PAN Linkage to be done by 31St March 2022

All the resident taxpayers who have not yet linked their PAN and Aadhar must mandatorily link it before 31st March 2022. Non-compliance with the same may attract a penalty upto Rs 1000 u/s 234H of the IT Act.

Moreover, Surana explains, “non-linking can make the PAN inoperative which may not only hamper one’s financial transactions involving PAN but also result in a penalty of Rs 10,000 u/s 272A of the IT Act.

Submission of Belated or Revised Return on or before 31St March 2022

As per the provisions of section 139(4) (for belated return) and 139(5) (for revised return) of the IT Act, belated/revised return, Surana says, “can be filed by a taxpayer either 3 months before the end of the relevant Assessment Year or before the completion of the assessment, whichever is earlier.”

However, with regards to the Financial Year 2020-21 under Assessment Year 2021-22, the last date to file a belated/revised return has been extended from 31st December 2021 to 31st March 2022 vide Circular No.17 of 2021 dated 9th September 2021 owing to the pandemic situation in the country.

“Non-filing of return may entail a penalty u/s 234F of the IT Act of Rs 1,000 for taxpayers with a total income of less than Rs 5 lakhs whereas such penalty would be enhanced to Rs 5,000 in other cases,” says Surana. Thus, every taxpayer must file their tax returns or revise the already filed returns, if necessary, before 31st March 2022.

Advance Tax Payments

All the taxpayers with a tax liability of Rs 10,000 or more are liable to pay advance tax. Such advance tax liability is, however, not imposed on resident senior citizens not deriving any income from business or profession. Experts say taxpayers are required to determine income from various sources and accordingly pay advance tax on the same.

“The taxpayers are liable to pay the entire amount of advance tax upto 15th March 2022 for FY 2021-22. Failure to pay the advance tax within the due time would be subject to the taxpayers to interest consequences,” adds Surana.

Long Term Capital Gains on sale of listed shares/securities exempt upto Rs 100,000

Taxpayers are eligible to claim exemption upto Rs 1 lakh on long term capital gains u/s 112A of the IT Act on listed equity shares, units of equity-oriented mutual funds, etc.

Thus, Surana adds, “taxpayers may need to consider this fact if they propose to book long term capital gains to claim this exemption.”

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