Why Review Tax Planning In March?

We are on the verge of the end of this financial year i.e. FY 2016-2017.  March is always a significant month in our lives. Many things come to an end where from April we start with new. Be it a promotion in job, children school sessions, our own finances, and others. It’s important then that we do a quick review

 of what we did this year and is there any pending task to complete especially related to taxes. This will include tax planning, income tax rules, investments, your expenses etc.

Here are few aspects of your finances to review in the month of March:

Income Tax

1.       Tax Planning 

The first thing comes to your mind is  Tax Saving. Different situations can arise here. You would have given a declaration to your employer but are still to complete the investments.  If you fail to do so then you end up paying more taxes. So March is the month than where you can complete this task. On the other hand you would have missed giving a declaration to your employer as a result of which higher tax would have been deducted in the month of Feb and March. Even here the month of March is important as you can do your investment and claim the tax benefit while filing your ITR. However, do not strain your finances by this last minute tax saving and choose wisely. Long term committed savings are best to avoid at this juncture as they should be planned in alignment with your financial goals.

2.       Tax Liability

 Individuals who have a tax liability of more than Rs. 10000 in a year have to pay advance tax but in installments by specific dates as given below –

For Non-Corporate Assessee- Individuals

• On or before 15 September – not less than 30% of tax payable

• On or before 15 December – not less than 60% of tax payable

• On or before 15 March – not less than 100% of tax payable

So March 15th is the date of last installment or completing your advance tax payment. if you have missed payment of advance tax then note the date and pay it timely to avoid any penalties.

3.       ITR Filing

  Ideally, 31st July is the last date of filing income tax return for Individuals/HUF. But many of us miss this deadline and fail to file our ITR. Budget 2017 has introduced penalties for filing your ITR post 31st July but the provision will be applicable from AssessmentYear 2018-2019.  For FY 2015-2016 March 2017 is the last month where you can still file your ITR without a penalty only if you don’t have any tax liability. But if you do have then you will be required to pay it with penal interest.  For next financial year ITR i.e. from AY 2018-2019 you will have to bear a penalty of Rs 5000 if filed between July and December and Rs 10000 between Jan and March. For income below Rs 5.0 lakh, this penalty will be Rs 1000. So it’s time to bring discipline in filing your ITR. Go to Lee Rosen Website for more expert business articles.

Savings and Investments

There is your savings account and then your investment account which can get deactivated if you do not transact at all for a year. Saving account is deactivated by banks if it remains without any transactions in the financial year. On the other hand, PPF and NPS requires a minimum contribution to remain active. If you have not touched them then March is the month where you can avoid deactivation. Add or contribute the minimum required funds.

Demonetization

This has been a great event in this financial year. As per notification if you still have Rs 500 and Rs 1000 notes than you can change it till March 31st, 2017 but only at RBI offices. Check if there are any and avail the benefit.

Goal Setting

Although goal setting is part of your complete financial goals but short term goals do arise. Take the month of March. It’s the end of sessions at school and from April onwards your children will be joining new sessions. For parents, there is a good amount of expense coming. For new sessions, admission fees along with school fees will be payable which may happen in April. But in March also the expenses on school dress etc. will arise. Meeting all such short-term expenses you need to ensure funds are there in your savings account and so it’s good to review in March knowing that some of us are heavy burdened with outflows if we also do tax planning in last three months of Financial Year.

With this year-end planning, you will be able to complete any pending task and will be ready for review of Your Complete Financial Health Check in April so that you can draw the roadmap for next year. Lastly, avoid these common mistakes to ensure you do not strain your finances:

1.       Avoid new investments in Long-term instruments such as PPF, Life Insurance in March.

2.       This should be taken as the last year where you have delayed filing ITR up to March. There is a penalty coming from next FY.

3.       Avoid penalizing yourself by not paying advance tax. Pay it by 15th March.

4.       Arrange all your documents and find out the missing one so that you don’t have run behind someone in next financial year.

5.       Check your loans details especially if you have arranged it from relatives and repay the required installment if you wish to avail tax benefit.

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