Save income tax by March 31: Here's a checklist
March 31, 2017 is just a few days from now which means that you must be worried about your tax savings for income tax filings for the year.
Although, income tax can be filed till July but in order to take full advantage of tax saving instruments, one has to make sure that the hard-earned money is invested in relevant securities like mutual funds, provident funds, etc by March 31, 2017.
Speaking to Zeebiz, Archit Gupta, Founder & CEO ClearTax.com, gave a checklist you must keep in mind before the deadline.
1. Pay the Advance Tax
Advance tax is to be paid by every individual if his tax liability net of TDS exceeds Rs 10,000. So Even if TDS has been deducted on your income but TDS is not sufficient to cover the entire tax liability, make sure that you pay the advance tax. The last due date for the payment of advance tax was 15th March but even if you pay after 15th March but before 31st March, it will be treated as advance tax payment. Penal interest @1% per month will be levied for the late payment of advance tax.
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2. In case of Salaried Individuals, submit the proof of the reimbursements allowed as per salary structure to the employer before 31st March to avail the tax benefit.
The Tax benefit of the reimbursements allowed to salaried individual can claimed only if the proof of such reimbursements are submitted to the employer before 31st March such as LTA, medical reimbursements, house rent allowance, Telephone etc. It cannot be claimed later in the return of employee. It can be claimed only through employer.
3. Payment for the investments being made for tax saving purpose should be made before 31st March in order to avail the tax benefit in the FY 2016-17.
Investments made in the period 1st April 2016 to 31st March 2017 only can be claimed as deduction from the total income. After this date it will not give you the tax benefit in FY 2016-17.
So everyone should estimate the tax payable by them and analyse the scope to reduce the tax outgo by making further investments in tax saving options.
The individual should look out to take advantage of the following deductions:
a. Deduction u/s 80C up to Rs 1.5 Lakhs
Investment made in any of the following will reduce your income by maximum up to Rs1.5 lakhs
- Equity Linked Saving Scheme (ELSS)- ELSS are diversified mutual fund scheme which have lock in period of 3 years.ELSS invests in share market and have the potential to earn high returns.
- Tax Saving Fixed Deposit – It is like any other fixed deposit in the bank but it has the lock in period of 5 yrs.
- Deposit in PPF Account – PPF is also a long term saving scheme by the government.Anyone can open PPF in SBI, Post office or other Banks. The interest from PPFand proceeds from maturity both are exempt from tax but it has a lock in period of 15 years.
- Sukanya Samridhi Account- This is a government saving scheme for the girl child. The investment is locked till your girl child turns 18.The amount received on Maturity amount is Tax free.
- Senior Citizen Saving Scheme- It is a saving scheme by the government for senior citizens. This Scheme gives regular income to senior citizens.
- National Saving Certificate (NSC) - It is a Post office small saving scheme. It is issued for 5 years.
b. Take Health insurance Plan u/s 80D
Premium paid for the Health insurance for yourself, spouse, and dependent children is allowed to be deducted from your income up to Rs 25,000. If you take the health insurance for your parents, additional Rs 25,000 are allowed as deduction from your income. So it means you can claim deduction of around Rs 50,000.
c. Invest in NPS
Investment in NPS gives you the deduction of Rs 50,000 under sec 80CCD (1b) in addition to the overall limit of Rs1.5 lakhs under sec 80C. In other words, the combined benefit of 80C + 80CCD (1b) is Rs 2 Lacs which can be availed.
However withdrawals from NPS are not allowed up to age of 60 years/retirement. Only in few cases withdrawal is allowed after 10 years subject to certain conditions. So investing in NPS is beneficial only if you have surplus funds.
d. Giving Away money for Charity u/s 80G
You can save tax on donations .However, not every charity gives you 100% tax saving. Some donations are eligible for 50% deduction. Donations to the PM relief fund, some notified NGO and Political parties can give you 100% tax benefit. Donation can also be made to scientific institutions and religious body.