Tax Compliance One Must Do Before March 31

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Tax Compliance One Must Do Before March 31

Every year around the time of February and March month, we start preparing and estimating the income tax payable by us on the income earned throughout the year. We call our financial advisor or chartered account to help us with ways we can reduce the tax outflow. This article is a useful read for people who are looking for advice on tax return compliance one must do before 31st March of every financial year.

Below are some of the important tax compliances one must follow before 31st March:

Invest in tax saving financial instruments

To reduce the tax outgo burden, you can invest in various financial instruments which are eligible for tax savings like tax saving fixed deposits in the bank, NPS, Insurance policy, PPF, tax saving mutual funds, ULIPS etc. Whichever tax-saving financial instrument you choose, the date of investment needs to fall within April to March of the financial year in order to eligible for claiming the income tax return.

For example – If you are paying monthly Life Insurance Corporation policy’s insurance premium of INR 1000 per month from past 5 years, then you can include the premium paid in the whole financial year. Hence, the premium of INR 12,000 paid between April and March of the financial year will be eligible for claiming in the income tax return.

Likewise, if you are going to invest in NPS, you will be required to pay the amount before the end of March. Keep in mind the minimum contribution is INR 6000 to ensure your account is active. The lowest contribution in Public Provident Fund (PPF) is INR 500.

In all the cases, be it tax saving ELSS mutual funds, NPS, PPF, tax saving FD or contribution to charity under section 80G, you need to make the payment before 31st March to claim returns for the financial year. The proof of all these documents needs to be given to the Human resources department or the employer. The proof documents can be the original/photocopy of the receipt of the insurance premium paid, children’s tuition fee, PPF investment or any other proof of investment made for tax saving purpose. Submitting the relevant investment documents will help your Employer to accurately calculate your tax liability, so there is no case of excess deduction of  tax from your salary. So in case, you do not utilise the entire limit under Section 80C or 80D of the Income Tax Act, you will be still able to gain the tax benefit if you make the payment before 31st March.

Advance Tax Payment

If your tax liability in a financial year increases to more than INR 10,000, you will need to pay advance tax. Even if the TDS is paid by you and is not sufficient to cover the whole tax liability, ensure you pay advance tax. If you are opting for a presumptive scheme then also you will be required to pay the advance tax before the 15th of March. People who are working as a freelancer, also need to pay advance tax if their tax liability increases above INR 10,000.  The last day of making the payment of advance tax is 15th March, but even if you pay after 15th but before 31st March, it will be treated as advance tax.  Late payment of advance tax will be charged an extra 1% interest, so remember to pay your advance tax on time.

Reimbursement claim

If you are employed on a monthly salary, then you are entitled to get certain reimbursements as per your salary structure. The reimbursement can be medical bills, telephone expenses, travel allowance, house rent allowance etc. You will need to submit the proof of these expenses to claim tax exemption. The tax exemption on these expenses is only valid to a certain amount. For example – on medical bills exemption of around INR 15,000 is allowed under the Income Tax Act. If you submit medical bills of say only INR 12,000 then remaining INR 3000 will be taxable. Also, proof of other expenses like rent receipts, travel bills, phone bills etc. needs to be submitted to the employer on time to claim the tax benefit. The tax benefit of such expenses can be only claimed through employer and not at the time of filing tax returns.

Filing the returns on time is very important

As per the income tax rules, the last date of filing the returns is before 31st March which marks the end of the financial year. A penalty of up to INR 5,000 may be charged by the Income Tax Department for late filing. There are many benefits of filing income tax returns as it falls into the compliance procedure requirement and paperwork for many things. If you are applying for a bank loan, applying for a visa to Europe, USA and many other destinations, you will need to submit proof of income tax. You will also need income tax return proof to claim for any refund on your income tax. So it is important to file your returns on time before 31st March of every financial year.

A few questions that might come into your mind could be:

  1. Can Income Tax department track Non-compliance and Non-filing of Returns?

Yes, Income Tax department monitors and tracks people who are non-compliant through a Non-filers Monitoring System (NMS). The identified persons who are non-filers with potential tax liability are informed via SMS, emails and through the post. The notice is issued in batches and the assessee can see the detailed information about it online by logging into the portal. A response to the notice can also be done through the portal itself.

  1. Will my pension get taxed and treated as salary income?

Yes, the pension will be taxed as per the income tax law. However, pension received from United Nations Organisations is exempt from tax.

  1. Why do we need to file income tax returns?

As an Indian Citizen, it is your statutory duty to file income tax so the money contributed by you goes to the development of the nation. Apart from that, filling income tax returns will also authenticate your creditworthiness and help you to get easy access to credit facilities.

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