As the financial year 2021- 2022 is nearing completion, taxpayers have one last chance to determine whether they have used all available tax benefits OR NOT,
WHAT’S INSIDE?
Here are some last-minute checks that taxpayers must perform based on the availability of tax savings options:
Deduction under Section 80C/80CCD/80D :
Section 80C of the Income Tax Act, 1961 is one of the most sought-after sections by the taxpayers for claiming tax deductions on investments. Provisions of section 80C permit various investments to be claimed as a deduction up to Rs 150,000 from the Gross Total Income of a taxpayer, ultimately resulting in reducing the total tax liability.
The taxpayers may evaluate other investment options such as contribution to National Pension Scheme for which a deduction is available up to Rs 50,000 under section 80CCD.
Along with that, under section 80D deduction is available for medical expenditure, up to Rs 25,000 for self and spouse and children. Additional deduction up to Rs 25,000 is available on the health insurance of parents, and up to Rs 50,000 in case they are senior citizens.
Aadhar PAN Linkage to be done by 31st March 2022 :
All the resident taxpayers who have not yet linked their PAN and Aadhar must mandatorily link it before 31st March 2022. Non-compliance with the same may attract a penalty up to Rs 1000 u/s 234H of the IT Act.
Additionally, non-linking can make the PAN inoperative which may not only hamper one’s financial transactions involving PAN but also result in a penalty of Rs 10,000 u/s 272A of the IT Act
Tax Loss Harvesting on Capital Gain :
If you hold stocks or mutual funds in your portfolio that have unrealized losses, you can set off these losses against realized profits, on which you have to pay taxes. To do this, you can book the losses before 31st March 2022, effectively reducing the realized gains and hence also reducing the tax payable.
If you intend to hold these stocks and don’t want to sell them, you can buy the stock back after two days of selling. Two days because that is the settlement cycle when you buy or sell stocks—it takes 2 days for the stock to be debited from your Demat. You can also potentially sell your stock holdings and buy similar stocks in the same sector immediately.
Submission of Investment
Proofs to the Employers: Employers are responsible for withholding tax u/s 192 of the IT Act on the salaries of the employees. For the computation of such tax, the employers take into account the investment declaration and proof submitted by the employees, Such investment proof may constitute rent receipts, interest certificates, Leave Travel expenditure, etc.
Thus all employees must make the desired tax-saving investments, collate the investment proofs and submit the same to their employer at the earliest to avoid higher deduction of tax at source. This will also avoid unnecessary blockage of funds in the form of TDS, which may be deducted by the employer if the employee doesn’t submit the investment-related documents.
Submission of Belated or Revised Return on or before 31st March 2022 :
As per the provisions of section 139(4) (for belated return) and 139(5) (for revised return) of the IT Act, belated/revised return can be filed by a taxpayer either 3 months before the end of the relevant Assessment Year or before the completion of the assessment, whichever is earlier.
However, with regards to the Financial Year 2020-21 under Assessment Year 2021-22, the last date to file a belated/revised return has been extended from 31st December 2021 to 31st March 2022 vide Circular No.17 of 2021 dated 9th September 2021 owing to the pandemic situation in the country.
Non-filing of return may entail a penalty u/s 234F of the IT Act of Rs 1,000 for taxpayers with a total income of less than Rs 5 lakhs whereas such penalty would be enhanced to Rs 5,000 in other cases, Thus, every taxpayer must file their tax returns or revise the already filed returns, if necessary, before 31st March 2022.