Tax Saving Checklist: Essential Steps before the Year Ends

1. Background

As the calendar year 2024 draws to a close, it becomes crucial for the taxpayers to review their financial situation and implement strategies to minimize their tax liabilities as the tax year would end on 31 March 2025. The taxpayers should take this opportunity to familiarize themselves with the eligible tax-saving opportunities and avail such benefits under the Income Tax Act, 1961 (hereinafter referred to as the “IT Act”) as a well-planned approach cannot only save money but also align finances with the long-term goals.

In this article, we provide a brief overview on certain tax-saving checklist for taxpayers in India to ensure that taxpayers take adequate steps to review their tax status and any opportunity for tax planning.

2. Tax Saving Checklist 2024

2.1 Furnishing of belated income tax returns on or before 31^st December 2024

The due date for furnishing of Income Tax Returns (ITR) for taxpayers who are not required to have their accounts audited is typically 31st July. For other taxpayers including business owners or professionals who are required to have their accounts audited as well as those engaging in international transactions and being subjected to Transfer Pricing provisions, the due dates are 31^st October and 31^st November respectively.

If a taxpayer misses the aforementioned deadline, they may still file a belated return u/s 139(4) by 31st December of the relevant assessment year provided the assessment has not been completed as on the date of furnishing such belated return. For instance, belated return for Financial Year (relevant to Assessment Year 2024-25) can be furnished on or before 31^st December 2024. However, it is pertinent to note that the taxpayer may be subjected to consequences of non-furnishing of such return such as restriction on carry forward of losses (except House property loss) and interest consequences u/s 234A/ 234B/ 234C of the IT Act as well as late filing fees.

2.2 Furnishing of revised returns on or before 31^st December 2024

If a taxpayer identifies any errors or omissions in their originally filed Income Tax Return (ITR), they have an option to furnish a revised return by December 31, 2024, provided that the originally filed return has not yet been processed by the Income Tax Department and the assessment is not completed. 

2.3 Payment of Advance Tax

Taxpayers with a tax liability of Rs. 10,000 or more (after adjusting for TDS and other reliefs) are required to pay advance tax in four installments and any default in the payment of such advance tax may attract interest consequences u/s 234C of the IT Act (which levies simple interest @ 1% per month or part of a month for short payment/ non-payment of individual instalment(s) of advance tax):

Thus, taxpayers should ensure that the due date for the third installment of the advance tax is 15 December 2024 and the requisite tax has been paid by them in order to avoid interest consequences u/s 234C of the IT Act.

2.4 Applying under the Direct Tax Vivad se Vishwas Scheme 2024 on or before 31^st December 2024

To provide relief to taxpayers, the central government has introduced the Direct Tax Vivad se Vishwas Scheme 2024 aimed at resolving prolonged litigation, thereby offering a final resolution to pending disputes. This initiative is not only beneficial to taxpayers by facilitating the swift settlement of outstanding matters but also serves the interests of the revenue department by reducing litigation costs and enabling the prompt collection of disputed amounts.

The amount payable by the taxpayers under the scheme is as follows:

It is pertinent to note that the last date to apply under this scheme has not been notified yet. In order to settle the pending tax disputes, one needs to apply for the Scheme on or before 31 December, 2024, to avail a lower tax payment. If applied after 31 December, 2024, taxpayers will be required to pay an additional 10% in tax as tabulated above.

2.5 Tax Planning for deductions under chapter VIA of the IT Act

The IT Act offers a wide range of deductions to provide relief to taxpayers. However, to claim these deductions under the relevant provisions, taxpayers are required to make specific investments, payments, or incur eligible expenditures as prescribed under the IT Act. It is essential to note that such investments or payments must be completed before the end of the financial year, i.e., by March 31, 2025, to avail the associated benefits. Further, these deductions are available under the old tax regime.

With only three months remaining in the Financial Year 2024-25, this is an ideal time for taxpayers to plan and execute the necessary investments or payments to maximize their eligible deductions and exemptions under the IT Act.

2.6 Submit Proofs to Employer

Taxpayers should ensure that if they opt for the old tax regime, then all proofs related to tax-saving investments, expenses, and deductions are gathered, such as Investment receipts for PPF, ELSS, NSC, and tax-saving FDs., Insurance premium receipts for life and health policies, Tuition fee receipts for claiming deductions under Section 80C, Rent payment receipts or rental agreements for HRA claims etc. are submitted to the employer to allow adjustments in your TDS for the remaining months. Failure to submit these proofs can result in higher TDS deductions, causing liquidity constraints as such TDS refund can be claimed only at the time of furnishing the tax return.