Financial year 2020-21 is reaching to its ends in few days. 31st March is an important deadline with reference to tax Planning, missing it may result in higher tax liability. We are required to complete our tax planning before 31st march 2021, as we are required to file Income tax return for FY 2020-21 during 2021-22. For claiming many deductions and exemptions in our income tax return, we need to take right step before 31st march 2021. So if you have not completed your tax planning for FY 2020-201 you are left with few days only. For your reference, given below is the list of eleven important financial decisions which are required to be taken before 31st march 2021.
Decision regarding Capital Gain Planning
In budget 2018, Long term capital gain (covered under STT) above Rs. 100000/- are made taxable @ 10%. This tax on long term capital gain is applicable w.e.f. 01-04-2018. Hence upto 31-03-2018, all long term capital gains (covered under STT) was exempt u/s 10(38). Still you have to decide regarding LTCG on the basis of your equity planning and market price of your portfolio.
Review your portfolio for tax planning on capital gain. For example if in your return you have carried forwarded any short term capital loss which is allowed to carry forward only upto 8 assessment years. If this is your 8th year, review your portfolio any if any short term capital gain is available, sell the shares and book short term capital gain to adjust carried forwarded short term capital loss(STCL) otherwise this will laspe. You can buy your shares again by paying marginal brokerage which you have to bear. But remember that sell and buy transaction should not be done on the same day.
Decision regarding Investment to claim deduction U/s 80C
U/s 80C a deduction of Rs 1,50,000 can be claimed, it means An Individual or HUF can reduce your total taxable income up to Rs 1,50,000 from through section 80C. Section 80C provides list of investments/ expenditures which is allowed as deduction. If you are short of limit u/s 80C, you are left with only few days to consider option best suitable to you, by investing in these you will get deduction u/s 80C from upto Rs. 150000/-. List of some important investment deductible u/s 80C is given below:
- PPF (Public Provident Fund)
- EPF (Employees’ Provident Fund)
- 5 years Bank or Post office Tax saving Deposits
- National Savings Certificates (NSC)
- ULIPs
- ELSS Mutual Funds (Equity Linked Saving Schemes)
- Children’s Tuition Fees
- Life Insurance Premium
- Sukanya Samriddhi Account Deposit Scheme
- SCSS (Post office Senior Citizen Savings Scheme)
- Repayment of Home Loan (Principal only)
- Subscription to deposit scheme of a public sector or company engaged in providing housing finance
- Contribution to notified Pension Fund.
- National Pension System
- NABARD rural Bonds
- Contribution to notified annuity Plan of LIC.
Although the cut off date for investment in tax saving instrument was extended upto 31st July for last year i.e. FY 2019-20 but for FY 2020-21 the cutoff date for these investment is 31st march 2021 and is not yet extended.
Decision regarding contribution to NPS u/s 80CCD(1B)
U/s 80CCD(1B) a deduction of Rs 50,000 can be claimed which is over & above the limit of Rs. 150000/- u/s 80C. If you are in 30% Tax bracket then making an contribution to NPS is going to save immediate Rs. 15000/- of your tax. You may decide to open an NPS account if you have not opened earlier or contribute to earlier opened account.
Decision regarding continuity of social security schemes.
If you have chosen to invest in any social security schemes like Public Provident Fund (PPF), National Pension Scheme(NPS) or Sukanya Samridhi Yojana (SSY) etc. which requires a minimum amount to be deposited in every year to keep them active. If you forgot to invest the minimum amount in these schemes, then you have to pay a penalty along with unpaid amount to make the scheme active again. Make sure that you have deposited at least minimum amount before 31st march 2021.
31st March 2021 is last date to file belated Income tax return(ITR) u/s 139(4) and revised ITR u/s 139(5) for FY 2019-20 (AY 2020-21)
If you have not filed your income tax return for financial year 2019-20 or you want to revise your income tax return for 2019-20 (only if assessment is not yet completed) then it is last chance for you because 31st March 2021 is the last date to file your belated or revised income tax return for the FY 2019-20 (AY 20-21)
As per section 139(4):-
- upto to FY 2015-16- belated return could be filed at any time before completion of one year from the end of assessment year or before completion of assessment whichever is earlier.
- From FY 2016-17- belated return can be filed at any time before the end of assessment year or before completion of assessment whichever is earlier.(form FY 2016-17, a belated return can also be revised)
As per section 139(5):-
- upto to FY 2016-17- revised return could be filed at any time before completion of one year from the end of assessment year or before completion of assessment whichever is earlier.
- From FY 2017-18- revised return can be filed at any time before the end of assessment year or before completion of assessment whichever is earlier.
31st March 2021 is the extended deadline for Adhaar PAN linking.
If you have not yet linked your PAN with ADHAAR then 31st March 2021 is deadline for linking the PAN with ADHAAR. This was extended from 31st March 2020 last year. IF ADHAAR is not linked with your PAN then your PAN may be cancelled.
31st March 2021 is the extended deadline to file TDS & TCS return for Quarter1 & Quarter2 of FY 2020-21
If you have not filed your TDS or TCS return for quarter 1 (1-4-2020 to 30-6-2020) or Quarter 2 (1-7-2020 to 30-9-2020) then 31st March 2021 is the last date to file these returns. Ensure to file before this deadline to avoid late fee. As per section 234E, where a person fails to file the TDS/TCS return on or before the due date prescribed in this regard, then he shall be liable to pay, by way of fee, a sum of Rs. 200 for every day during which the failure continues. The amount of late fees shall not exceed the amount of TDS.
Payment of tax liability including Advance tax.
If your tax liability is more than Rs. 10000/- then make sure that you have paid all tax dues as advance tax. If any sum is pending make sure that it is deposited before 31st march 2021 to reduce your interest liability u/s 234B. For delayed payments of advanced tax interest u/s 234B & 234C are charged.
Interest u/s 234C on last installment if you forgot to pay 100% of your advance tax till 15th March then if you
- If you pay this on 16th march:- Interest u/s 234C @1% for one month and no interest u/s 234B.
- If you pay on 31st March;- Interest u/s 234C @1% for one month and no interest u/s 234B.
- If you pay this on 1st April:- Interest u/s 234C @1% for one month only and interest u/s 234B is 1% for one month.
- If you pay this on 15th May;- Interest u/s 234C@1% for one month only and interest u/s 234B is 1% for two months (being 2% in total).
- If you pay this on 31st July (at the time of ITR filing):- Interest u/s 234C @ 1% for one month only and interest u/s 234B is 1% for four months (being 4% in total).
Interest 234C is for the period upto 31st march for default in payment of advance tax as per installment schedule. Interest u/s 234C is not charged for after 31st march of same financial year. It tax is not paid even upto 31st march then interest w.e.f 1st April till the actual payment of tax covered by section 234B which is charged @1% per month or part of month.
Click here for Due date for payment of tax for FY 2020-21 (AY 2021-22)
Simple Understanding of Calculation of interest u/s 234C is given below:
Assessee declaring income u/s 44AD & 44ADA
- Assessee declaring income u/s 44AD & 44ADA has to deposit 100% of advance tax upto 15th march.
- There is no earlier installments, this is first & last installment.
- Where the whole amount of advance tax paid by any assessee on or before 15th March is less than the tax due on the income returned then the assessee shall be liable to pay simple interest @ 1% on the amount of shortfall from the tax due on the returned income.
- This was last installment for advance tax, hence interest is calculated only for one month without considering the actual date of payment of this tax. Interest for payment after 31st march is covered u/s 234B hence no interest for payment after 31st march is changed under 234C.
Other assessee:
- They are required to pay advance tax in four installments (1) 15% upto 15th June (2) 45% upto 15th September (3) 75% upto 15th December and (4) 100% upto 15% march.
- Where the advance tax paid on or before 15th June, 15th September, 15th December is less than 15%, 45% and 75% respectively on the returned income, then they shall be liable to pay simple interest at the rate of 1% per month for a period of three months on the amount of the shortfall. (interest of three months is calculated separately for each installment)
- Where the whole amount of advance tax paid by any assessee on or before 15th March is less than the tax due on the income returned then the assessee shall be liable to pay simple interest @ 1% on the amount of shortfall from the tax due on the returned income.
- This was last installment for advance tax, hence interest is calculated only for one month without considering the actual date of payment of this tax. Interest for payment after 31st march is covered u/s 234B hence no interest for payment after 31st march is changed under 234C.
Furnishing detail of other income and Investment to your Employer
Salaried Individuals are required to furnish their details of other income and Investment to their employer so that this detail is considered by your employer while deducting tax at source. Different employer provides different time limit for furnishing such detail. But employer may consider your detail, before deducting tax at source in respect of last month of financial year i.e. march-2021 depending on procedures required to be followed. If you have not furnished such detail to employer then ask your employer and do it immediately. Due date for issuance of Form 16 by employer for FY 2020-21 is 31st May 2021.
Decision regarding other deduction available u/s 80D, 80DDB etc.
U/s 80D , If you paid your Health insurance premium for mediclaim policy for Self, Spouse or dependent children is tax deductible upto Rs 25,000. If any one of the persons specified is a senior citizen and Mediclaim Insurance premium is paid for such senior citizen then the deduction amount now is Rs. 50,000. Additional deduction for Health Insurance premium paid for parents is tax deductible upto Rs 25,000. If your parents are senior citizens then the maximum allowable deduction is Rs 50,000. In case, both taxpayer and parent(s) are 60 years or above, the maximum deduction available under this section is up to Rs.1 lakh.
U/s 80DDB, A deduction Rs. 40,000/- or amount actually paid on himself or dependent relative for medical treatment of specified disease or ailment, is available. The diseases have been specified in Rule 11DD. In case the individual on behalf of whom such expenses are incurred is a senior citizen, the individual or HUF taxpayer can claim a deduction up to Rs 1 lakh. Until FY 2017-18, the deduction that could be claimed for a senior citizen and a super senior citizen was Rs 60,000 and Rs 80,000 respectively. This has now become a common deduction available upto Rs 1 lakh for all senior citizens (including super senior citizens) unlike earlier.For example, If person is under 20% slab rate who will be under 30% slab next year.
Decision regarding LTC Cash Voucher Scheme for FY 2020-21
Generally LTC exemption is allowed for travel expenditure of exployees twice in a span of four year. In view of the Covid-19 pandemic and resultant nationwide lockdown as well as disruption of transport sector a number of employees are not able to avail of Leave Travel Concession (LTC) in the current Block of 2018-21. With a view to compensate Central Government employees and to boost economy by incentivize consumption, the Government of lndia announced LTC cash voucher scheme. Under LTC cash voucher scheme , lncome-tax Exemption is allowed the for
deemed LTC fare to the Central Government Employees for 1/3 value of purchase of goods or services (with GST rate 12% or more) for the period 12th October 2020 to 31st March 2021, subject to fulfillment of certain conditions.ln order to provide the similar benefit to other employees (i.e. non-Central Government employees), the similar income-tax exemption for the deemed LTC fare has been extended to the non-Central Government employees also.An amount subject to maximum of Rs. 36,000/- per person as Deemed LTC fare per person (Round Trip) to non-Central Government employees, shall be allowed income-tax exemption subject to fulfillment of specified conditions. Employee who want to claim deemed LTC then he should submit the bills of specified transaction to his employer before the last date specified by the employer to get the exemption in form-16 itself.
Ensure that you have you have done respective expenditure/investment before 31st March-2021 to claim deduction under chapter-VI-A.