The last date of the financial year (FY) 2014-15—31 March—is just a week away. Make sure that you are done with things for which this date matters, especially in terms of income tax. Do remember that only the incomes, expenses, investments and so on for the FY are considered. Anything before 1st April and after 31st March are not parts of that FY.
Choose the appropriate investments
To bring down your income tax outgo, you can invest in various instruments which qualify for the deduction under various sections, such as 80C, 80D and so on. But investment made only during the particular FY can be considered for deductions against the income earned in the relevant year. If you are a salaried individual, make sure you have submitted all the investment proof documents to the employer. Parizad Sirwalla, partner and national head–global mobility services (tax), KPMG India, said, “Submit proof of investments or expenses (receipt for insurance premium paid, deposits made in Public Provident Fund, or PPF, children’s tuition fees, investment in equity-linked savings schemes, and others) with the employer in order to claim deduction under section 80C.”
Only when you submit the proof will the employer compute your tax liability. Doing this will help in avoiding payment of excess tax. “Also, if you have not been able to make such investments by the deadline provided by your employer to compute the March payroll, you should still make these investments and claim relief in the return of income,” added Sirwalla.
If you had invested in products that require recurrent contributions, ensure you continue with those and put in at least the minimum amount needed.
There are some financial instruments where it is necessary for the investor or the account holder to make at least the minimum contribution or transaction in a year. For instance, if you have a PPF account or have invested in a scheme with the National Pension System (NPS), it is compulsory to make the minimum contribution as per the requirement of the scheme in that FY. If you don’t do this, “the account would become dormant and it may be a cumbersome process to revive it, if at all that is possible,” said Tapati Ghose, partner, Deloitte Haskins & Sells LLP. This should not be difficult as these are usually small amounts, and with many transactions having moved online, the process has become much easier. For instance, the minimum contribution to be made in a PPF account every FY is `500, and `6,000 in NPS.
Typically, your salary structure consists of different components—basic salary, house rent, leave travel allowance, medical allowance, and so on. “Do ensure that you appropriately apply for all the tax relief reimbursements given by the company along with the supporting documents,” said Ghose. If you do not submit proof of such expenditure, the components become taxable, and you may not be able to claim any tax exemption on these after 31 March. For instance, if you are entitled to claim medical allowance of `15,000 every year, but have submitted bills of only `10,000, the remaining `5,000 will be taxed and paid to you.
Pay Advance Tax
Generally, when you receive income from a particular source, the payer deducts tax at source. But it may be that tax deducted at source (TDS) is charged at a lower rate, but your total taxable income falls under a higher tax bracket. In such a case, it is your responsibility to keep track of other incomes such as interest earned on savings bank account, fixed deposit, capital gains and so on. Advance tax liability may arise even if TDS has been deducted on such income. If TDS is not sufficient to cover the entire tax liability, make sure you pay the shortfall by way of advance tax. “If the tax liability of an individual net of any TDS is exceeding `10,000, she is required to pay the tax on the income in advance in three instalments—30% by 15 September, 60% by 15 December and 100% by 15 March of each financial year,” said Sirwalla.
Even if you pay such tax after 15 March but before the end of the FY, interest for default in payment of the advance tax can be avoided. “Any deficit in payment of advance tax would lead to interest liability at the time of filing of the tax return. Interest at the rate of 1% per month is payable,” said Ghose.
For instance, if your estimated tax liability for FY14-15 was `2 lakh, you should have paid advance tax of `60,000 by 15 September 2014. If you have not done so, by 15 December, you should have paid `60,000 plus 1% simple interest on this for three months, apart from the second instalment amount of `60,000. This makes it a total of `1,21,800 (`1,800 being the interest for three months). If you have missed the 15 December date as well, the next deadline is 15 March, and the same process applies. You should have paid 1% interest on the tax amount due from 15 September and from 15 December, which is 3 months and 6 months, respectively, when you file the final instalment. Your penalty would be `2,700 (`3,600 + `1,800). So, the total amount that you should have paid by 15 March would be `2 lakh plus `5,400. If you have not paid this, do so by 31 March to avoid further penalty.
Pay Wealth Tax
You may not be required to pay wealth tax from the next FY as the finance minister has proposed to abolish the tax in Union budget 2015. If the Finance Bill is passed, the rule will become effective from 1 April 2015. However, for the current financial year (2014-15), if your taxable wealth is in excess of `30 lakh as on 31 March 2015, wealth tax has to be paid. Ghose said, “It is important to estimate the wealth tax liability and pay it within the due date.” Determining taxable wealth involves valuation of assets, which may take time. It’s advisable to be prepared for this. “Interest and penalties may arise in case of non-compliance,” added Ghose.
According to income tax rules, you have to file your income tax return (ITR) for any financial year, before 31 July of the subsequent year. But you can file the ITR even after that. Neha Malhotra, manager-direct taxation, Nangia & Co., said, “An individual who didn’t file her ITR for FY 2013-14 by 31 July 2014 can file it by 31 March 2015, without attracting penalty for late filing.”
You can even file tax return for FY2012-13, till 31 March 2015. “But the assessing officer can levy a penalty of `5,000 under section 271F for not filing the return on time,” said Malhotra.
You should also remember that if you don’t file your tax return, you will not get your income tax refund either.
By this time, your employer must have already asked you to submit all the documents related to investment, expenditure and so on during the FY. If you have not submitted these documents, do so as soon as possible. If you submit the documents, you can avoid TDS. If higher TDS is reduced, you will have to wait to get the refund from the tax authority. Since a penny saved is a penny earned, ensure that you correctly calculate the total investments made during the FY. If you have not used up the full deduction limit, do remember to include expenses such as preventive health check-ups and children’s tuition fees. Apart from these, starting FY2014-15, the government has raised limit of deductions for a few sections—by `50,000 for sections 80C and 24(b) each. submission of relevant proof will save you from excess taxes. The money is better used elsewhere.
Note: The above article is Contributed by our Active Member Mr.Ravi Vyas.
Note: The above article is Contributed by our Active Member Mr.Ravi Vyas.