Do timely submit the proof of any tax saving investment you have made or deduction you are eligible to, so that excess deduction of taxes doesn’t take place.
It is the right time to review your taxes as we are in the last quarter of the year. The article discusses the practical approach one needs to adopt to plan tax-saving investments, the key deadlines and other obligation one needs to be aware of in order to be smartly prepared for tax compliance.The choices
Section 80C of the Income Tax Act, 1961, comprises several investment options that are eligible for tax break such as life insurance premium, contribution towards recognized provident fund (EPF) or public provident fund or approved superannuation fund, subscription to NSCs or NPS or ULIPs of UTI/LIC or other mutual funds, contribution towards Sukanya Samriddhi Account, term deposit of 5 years or more etc.
Even certain expenditure such as repayment of principal of housing loan and tuition fees are eligible for deduction. The overall deduction one can claim is limited to Rs 1.5 lakh. Therefore, you first have to determine how much you really need to invest.
There are certain savings like employee’s contribution to EPF, repaying the housing loan, tuition fees etc., which you might have already incurred and are eligible for deduction under section 80C. You now only need to invest the remaining amount to utilise entire 80C limit.
NPS is more attractive now
There is an additional deduction towards NPS to the extent of Rs 50,000 u/s 80CCD (1B), which is over and above the limit of Rs 1.5 lakh, under section 80C. Recently the government has announced to enhance the exemption limit of lump-sum payment on retirement from 40 percent to 60 percent. This will now bring NPS under Exempt-Exempt-Exempt (EEE) regime thus making it more attractive.
If you have bought medical cover for self and/or family, up to Rs 25,000 premium paid is eligible for deduction under section 80D. Additionally, Rs 50,000 is for senior citizen parents.
Preventive health check-up is also eligible and included within this overall limit subject to a maximum of Rs 5,000. In case your senior citizen parents are not covered under any medical insurance, you can claim deduction up to Rs 50,000 for the medical expenditure on their medical treatment.
Deduction for interest on education loans
Interest on educational loans for higher education for yourself or family is eligible for deduction u/s 80E.
Tax deduction for charity/ donation
Do keep records of charities you make to approved institutions as these qualify for deduction up to 50 or 100 percent of the amount.
Interest on housing loan
The rate of interest has gone up for housing loans in the recent past so do not forget to obtain the updated interest certificate to corect the deduction available to you.
Submit proof to your employer
Do timely submit the proof of any tax-saving investment you have made or deduction you are eligible to, so that excess deduction of taxes doesn’t take place. In addition, if you are getting HRA and paying rent and/or have LTA benefit, do submit the proof to your employer.
Tax withholding on rent paid
If you are living in a rented-accommodation, and paid a rent more than Rs 50,000 per month, you are also required to withhold the tax @5 percent in the last month of vacancy of the house or March (whichever is earlier). Such withheld taxes are required to be deposited within 30 days by filling the challan and no withholding tax return is required to be filled.
Taxes on other income-how to pay
Carefully collate details of your other income and taxes deducted on the same. Check your form 26AS. TDS on interest, rent etc. gets deducted at a lower rate than the actual tax liability where you fall in 20 percent or 30 percent tax bracket. You have the obligation to balance tax liability.
You may either report your other income details to your employer who in turn can do the tax withholding on the same, else pay taxes separately. You will have to pay taxes in advance where the tax liability (after claiming TDS), is Rs 10,000 or more.
Of such net taxes due, 15 percent of taxes need to be deposited before June 15, 45 percent before September 15, 75 percent before December 15 and 100 percent before March 15. Failure in doing so will attract penal interest.
Carefully account for foreign source income
If you are an ordinarily resident, do not forget to account for your foreign source income such as interest, dividend, etc. to compute your advance taxes.
Finish off your past filings/revisions, if any
If by any chance you are yet to file the return for last year (2017-18) or need to revise it or even revision for 2016-17, March 31, 2019 is the deadline.
Elevated use of technology and linking of high-value transactions with your tax records and automatic sharing of information among countries with which India has a treaty, has opened the sphere of questioning if there is any miss match or misreporting.
Therefore, carefully report income and other details in your tax return and also keep relevant records of your financial transactions, bank statements, proof of investments, etc. so that when you get any query from tax authorities, you can respond to those promptly without any hassles.The author is Partner and Leader Personal Tax, PwC India. Manavi Gupta, Manager-Personal Tax, PwC also contributed to this column. The views are personal.You can now invest in mutual funds with moneycontrol. Download moneycontrol transact app. A dedicated app to explore, research and buy mutual funds.