Introduction: As the end of the financial year approaches, it’s imperative for taxpayers, business owners, and professionals to take proactive steps to ensure optimal financial health and compliance. March 31, 2024, marks a critical deadline for several financial obligations and opportunities. From advance tax calculations and fixed asset acquisitions to strategic investments for tax savings, these measures not only help in aligning with statutory requirements but also in leveraging tax benefits effectively. This guide outlines seven essential actions to consider before the fiscal year closes to mitigate liabilities and enhance financial well-being.
Taxpayers need to take care of this 7 Crucial things before the end of the Financial year :
1) Calculate & Pay Advance Tax: Paying advance tax before March 31st is crucial to avoid interest charges on tax payments. The principle of “Pay As You Earn” governs income tax obligations. However, a significant portion of salaried individuals earning over 10 lakhs and small business owners fail to adhere to this principle, leading to interest payments during Income Tax Return filing. Proactive payment is key to minimizing financial penalties.
2) File Updated ITR for FY 2020-21: Filing an updated income tax return for FY 2020-21 or AY 2021-22 is crucial and must be completed by March 31, 2024. Failure to meet this deadline means taxpayers cannot file or update their returns thereafter. Thus, ensure timely submission to avoid penalties or compliance issues.
3) Purchase Of Fixed Assets For Business or Profession: Investing in fixed assets for your business or profession offers significant benefits, particularly in claiming depreciation. Once the asset is put to use, you can avail of depreciation at 50% of the specified rate. This effectively reduces profits and subsequently lowers tax liabilities, making it a strategic tax-saving measure.
4) Calculate turnover for GST applicability: Calculate your GST turnover to determine the applicability of GST registration and payment obligations. Total turnover up to March 31st should be computed, including all taxable supplies, exempt supplies, exports, and inter-state supplies. This assessment ensures compliance with GST regulations and facilitates timely registration and payment processes.
5) Prepay your Loan: Consider prepaying your loans, especially when you have surplus funds in your bank account, given the prevailing high-interest rates. Conduct an annual wealth review each March for your entire family to assess financial health and plan for the future effectively. This includes evaluating investment portfolios, retirement plans, and debt management strategies.
6) Calculate Your Capital Gains: Calculating capital gains before March 31st in India is crucial for effective income tax planning, particularly for those who have sold capital assets like stocks, mutual funds, property, or gold during the financial year. Here’s why it’s important:
Tax Planning: By calculating capital gains before March 31st, you can strategically plan your tax liabilities. Capital losses incurred during the financial year can be offset against capital gains, reducing your overall tax liability.
Filing Tax Returns: Reporting capital gains or losses from the sale of capital assets is mandatory in your income tax returns. Calculating your capital gains before March 31st ensures timely and accurate filing of tax returns.
Record Keeping: Early calculation of capital gains helps maintain accurate records for future reference and tax planning purposes. This is essential for tracking investment performance and optimizing tax strategies.
Furthermore, selling capital assets before March 31st can qualify for the Rs 1 lakh exemption on Long-Term Capital Gains (LTCG), and any resulting capital loss can be set off against profits, providing additional tax-saving opportunities.
7) Make investments to save tax: Investing in tax-saving instruments is a prudent strategy to reduce taxable income. Here are some popular investment options under various sections of the Income Tax Act:
Section 80C Investments: You can invest up to Rs. 1.5 lakhs annually in:
Public Provident Fund (PPF)
Equity Linked Saving Scheme (ELSS)
National Pension System (NPS)
Tax-saving Fixed Deposits (FDs)
Senior Citizen Savings Scheme (SCSS)
Sukanya Samriddhi Yojana (SSY)
Section 80D Investments: Invest in health insurance premiums to avail tax deductions of up to Rs. 25,000 for self and family, and Rs. 50,000 for senior citizens.
Section 80E Investments: Deduct the entire interest paid on education loans from taxable income.
Section 80TTA Investments: Deduct interest earned on savings accounts, up to Rs. 10,000 annually, from taxable income.
Section 80G Investments: Enjoy tax deductions for donations made to specified charitable organizations.
Conclusion: The countdown to March 31, 2024, underscores the importance of diligent financial planning and tax compliance. By addressing these seven critical areas, individuals and businesses can avoid penalties, reduce tax liabilities, and position themselves for a healthier financial future. Whether it’s through timely tax return filings, smart investments, or strategic asset purchases, each action taken before the deadline can lead to significant savings and compliance advantages. As the financial year draws to a close, taking these steps will not only ensure peace of mind but also pave the way for a prosperous and compliant new fiscal year.
Each investment may have specific conditions and lock-in periods. Consulting with a Chartered Accountant (CA) can help identify the most suitable options based on your financial objectives and circumstances.
Author can be reached at ashwinisnco@gmail.com
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