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Business News/ Money / Personal Finance/  Income tax: Things to do before the financial year draws to a close
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Income tax: Things to do before the financial year draws to a close

Before the financial year comes to an end, make sure that you pay advance tax, file belated I-T return for the previous year, and make investments to be able to claim income tax deductions 

This means if a taxpayer has outstanding tax liability, they must clear it before March 15 to avoid penaltyPremium
This means if a taxpayer has outstanding tax liability, they must clear it before March 15 to avoid penalty

It's that time of the year when taxpayers must tie all loose ends before the financial year comes to an end. Be it making investments to be able to claim deductions, or payment of advance tax – the pending tasks ought to be completed at the earliest. And remember that once you miss a deadline you either lose out on deductions or exemptions you were entitled to, or become liable to pay interest on outstanding tax.

Key things that taxpayers need to do before March 31:

Pay advance tax: The rationale behind advance tax is ‘pay as you earn’. When you calculate income tax liability and it is estimated to be Rs 10,000 (after TDS cuts), you are liable to pay advance tax before the last date. Advance tax is payable by any taxpayer including individuals who have sources of income other than salary. The requirement for advance tax doesn’t arise since employer usually deducts tax on salary.

In case taxpayers have earned income through other sources such as capital gains, interest from deposits or rental income — it is imperative to pay advance tax. It is mandatory to pay advance tax in instalments and the last date of final instalment is March 15. This means if a taxpayer has outstanding tax liability, they must clear it before March 15 to avoid penalty.

If the estimated tax liability is Rs. 10,000 or more, then tax payers must discharge tax liability in form of advance tax

Last date         All tax payersTax payers opted for presumptive tax scheme  
June 15   Minimum 15 percent  NIL
Sept 15   Minimum 45 percent       NIL
Dec 15    Minimum 75 percentNIL
Mar 15    Minimum 100 percent     100 percent of advance tax

(Source: https://www.incometaxindia.gov.in/)

While calculating income tax liability, it is important to check for tax deducted at source (TDS) which is to be deducted to arrive at the tax payable figure. Unpaid tax attracts simple interest at the rate of one percent per month.

Filing belated returns: Ideally, tax payers must file their income tax returns on or before July 31. However, in case you missed the deadline, you can still file a belated return during the same financial year. As per section 139(4) of the I-T Act, taxpayers are eligible to file belated returns on or before March 31 of the next year.

Also, in case you missed furnishing some details or committed some computation errors at the time of filing of return, you can file a revised return with correct details.

It is vital to note that once a revised return is filed, the original return stands cancelled. The revised return can also be filed before the end of the financial year, i.e., March 31.

"Although there is a provision in the income tax law to file a belated return but it is not advisable to do so. When you file a belated return, you stand to lose the chance to carry forward the loss. However, there is an exception of losses from house property," says Deepak Aggarwal, a chartered accountant and financial advisor.

Avail deductions: Tax payers, especially the salaried class, often avail deductions offered under section 80C to reduce their taxable income. These deductions include EPF (employees provident fund), PPF (public provident fund), NSC (National Savings Certificate) and ELSS (Equity linked savings scheme), repayment of housing loan's principal, post office time deposit and senior citizen saving scheme.

To be able to apply for these deductions, it is imperative to make investments on or before March 31. These deductions can be availed for an amount upto Rs 1,50,000.

So, as we say whether it is payment of advance tax, or making investment for claiming deductions or even filing belated return – it is vital that you finish them this month.

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Published: 14 Mar 2022, 03:39 PM IST
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