The Financial Year 2020-21 is about to end, there are certain tax duties which we need to complete on or before 31st March 2021.
In this article we will discuss 7 of them in brief.
1. Submitting the details of salaries received from earlier employer
If you are a salaried person and were employed with more than one employer in the current year, please furnish details of your salaries from the previous employer/s in Form No. 12B, to your current employer immediately so as to ensure proper tax deductions on your aggregate salary earning is made by the current employer.
What would happen if you fail to do so? You may get a shock at the time of filing of your income tax return (ITR) finding that you have huge tax (along with interest) to pay.
This happens because all the employers would have given the benefits of initial exemption as well as various deductions, resulting into deduction of lower tax on aggregate basis.
2. Submit the proof of expenses to your employer
There are certain exemptions which are available to employees on expenses actually incurred. For items like House Rent Allowance (HRA) and Leave Travel Assistance (LTA) unless you submit the necessary documents, the employer will treat these allowances as taxable and deduct tax thereon.
If you fail to submit the documents, you can still claim these items as exempt and claim the refund for the excess tax while filing your ITR.
3. Verify quantum of deductions available from your bank records
Most of us use ECS debit facility for items like life insurance premium, SIP for equity linked saving schemes (ELSS), home loan EMIs etc. It might have happened that, due to any reason, the ECS might not have been debited. Likewise, even in case you have issued a cheque for such items, the same might not have been yet presented to the bank.
So please verify the details from your bank statement and cross check that for all the eligible deductions factored into by you amounts have been debited in your bank account. In case some items have not been debited, please ensure that either the payment is made for the same or investments are made in any alternate product available before the year end.
4. Payment of advance tax
You are required to pay advance tax on your current year’s income, in case your net tax liability for the year after reducing the tax deducted at source from all the sources exceeds ten thousand rupees. Senior citizens not engaged in any business or profession are not required to pay advance tax.
Though advance tax has to be paid in four instalments in the ratio of 15%, 30%, 30% and 25%, but in case you miss all the four instalments, at least pay the same by 31st March, as advance tax paid by 31st March is also treated as advance tax. Failure to pay adequate advance tax attracts punitive interest.
Even if you are salaried and tax has been deducted from your salary, you still have to pay advance tax on any other income like rent, interest, dividend, capital gains etc. in case the aggregate tax liability exceeds Rs 10,000.
For self-employed where the tax deducted is not sufficient enough to cover the aggregate tax liability, they also have to pay advance tax.
Even in cases of interest income where the tax is deducted at source at the rate of 10%, you may still have to pay advance tax in case you are in a higher tax slab.
5. Minimum contribution to PPF account and NPS account
In case you have a PPF account either in your own name or in the name of children or spouse, you have to contribute minimum Rs 500 every year in each account to avoid the account becoming dormant.
A dormant account can be made active by payment of a nominal amount and contribution of Rs 500 for each year of default. Likewise, in case you have an NPS account, you need to deposit minimum of Rs 500 every year in your account failing which the account gets frozen.
A frozen account can be reactivated by paying a nominal penalty and one time contribution of Rs 500.
6. File your pending income tax return for financial year 2019-2020
In case you have not yet filed your income tax return for the last financial year, i.e. 2019-2020, you have the last chance to file it by 31st March 2021, that too with penalty.
7. Book long-term capital gains on listed shares and equity mutual funds schemes upto Rs 1 lakh
Section 112A long-term capital gains on listed equity shares and equity-oriented schemes are fully exempt upto Rs 1 lakh and the balance is taxed @10%. So you can book long-term capital gains upto one lakh of rupees before march 31st March, 2021 in case not yet booked.
In case you have made these investments for long term, you may decide to sell the shares the same day and buy the same next day or carry out these transactions with different brokers on the same day. The purchase and redemption of the units can be done the same day.
By this strategy you can minimise your overall tax liability. I am sure this discussion will help you in taking better care of your investments and taxes.