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.
Claim reimbursements
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.
Mint Money
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.
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