As FY21-22 comes to an end, here’s a checklist of financial tasks you need to get done
Invest to save tax
If you haven’t made tax-saving investments so far, there is no option for you but to do it now
Find time to assess your income for the year and figure out how much you will need to invest in the tax saving instruments. Collect all the documents related to your big purchases, such as a house, during the year, as well as any investments you might have made, then calculate how much more you need to invest. Once you have a number, you can figure out where to invest.
It is important to avoid falling prey to mis-selling and investing in products which are not in line with their asset allocation, risk appetite or goals. So before buying that life insurance policy, investing in that five-year fixed deposit or equity-linked savings scheme, check their suitability to your needs and risk appetite. “Detailed suitability and risk profiling will help investors find out their tolerance and select the investment vehicle accordingly," said Tarun Birani, founder and CEO, TBNG Capital Advisors, an investment advisory firm.
Remember that from next year, you will get the option to switch between two different tax regimes. If you opt for the new tax regime, you won’t be able to claim most of the tax deductions currently available. So before committing to a tax-saving investment, which requires annual contribution, ensure that it merits a place in your portfolio irrespective of the deduction benefit.
Keep accounts active
You may need to make a minimum annual contribution to keep certain existing accounts active. For instance, you need to invest a minimum of ₹500 in a Public Provident Fund (PPF) account per year to keep it active. So even if you have already exhausted your Section 80C limit (under which PPF gives you a tax deduction benefit) for the year, you should invest the minimum required amount in the instrument to keep the account active.
Similarly, if you have a Sukanaya Samriddhi Yojana account for your daughter, you need to invest a minimum of ₹250 in a year to keep the account active. In the case of the National Pension Scheme (NPS), you need to make a minimum investment of ₹1,000 if you have a tier 1 account.
File belated ITR
Generally, 31 July is the last date for filing your income tax return (ITR) but for FY20, it was extended to 31 August 2021.
If you missed the deadline and have still not filed your returns for FY20, you can file belated ITR by the end of the assessment year (AY), that is by 31 March 2022, after paying a penalty. The penalty ranges from ₹5,000 to ₹10,000 depending on when you file. For those with a total income of less than ₹5 lakh, the penalty is ₹1,000
File advance tax
If your tax liability for the year is more than ₹10,000, you need to pay advance tax. If you are a salaried individual, your employer would have deducted it for you. But professionals and freelancers have to pay advance tax on their own. Although the official last date for filing advance tax was 15 March, you can still do it. “The tax department generally considers returns filed till 31 March and doesn’t charge any interest. So compute your advance tax liability and pay before 31 March 2022 to avoid interest penalty," said Kaushik.
Link PAN and Aadhaar
Another task for which the deadline is 31 March is linking your Aadhaar with your Permanent Account Number (PAN). The Central Board of Direct Taxes extended the deadline for this from 31 December 2019. If you don’t link the two, your PAN card will become inoperative, and you may not be able to perform certain financial transactions that require PAN.
Pay off disputed tax
In Budget 2020, the government announced the Vivad se Vishwas scheme, under which all those who have tax appeals or petitions pending on or before 31 January 2020 can get a complete waiver of interest or penalties if they pay their disputed taxes on or before 31 March 2020.
So get any disputes resolved and pay off taxes, if any, before the year ends.
Tie up loose ends
Once you have made your way through the checklist, you might also want to review your portfolio. In the wake of the ongoing stock market meltdown, it is important to keep an eye on your investments, and seek the help of an expert, if necessary.
Also, review your life and health insurance requirements. If you are underinsured, you may want to buy before 31 March as it will also give you the tax deduction benefit. The policy documents may take time to reach you, but to claim the tax deduction this year, you just need to make the purchase on or before 31 March.
“The tax laws look at the date of payment for allowing the tax deduction. Therefore, you would need the receipt of the payment made to claim tax deduction," said Kaushik. “If you have made the payment by cheque, the date on the cheque should be 31 March 2020 or earlier. If it is presented after 31 March by the insurance company, you should have sufficient balance in your account for it to get cleared. If the cheque bounces, the tax department may catch you and penalize you," he added.
These are troubled times, and you might be putting financial tasks on the back burner. But missing a deadline could create financial trouble for you later. So, if you are yet to complete any of these tasks, it’s a good idea to get cracking before the year ends.
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