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Last minute checks before the March 31, 2022 deadline

Evaluate investment options for tax savings

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As the Financial year 2021-22 is about to be completed, taxpayers have one last chance to check if they have used all available tax optimization opportunities before March 31, 2022. Suresh Surana, Founder -RSM India tells us about some audits of last minute that taxpayers can do to check if all the tax saving options have been correctly used by them.

Evaluate investment options for tax savings

Section 80C of the Income Tax Act, 1961 (hereinafter referred to as “the IT Law”) is one of the sections most sought after by taxpayers to claim investment tax deductions. The provisions of Section 80C allow various investments to be claimed as a deduction up to Rs. 150,000 from the total gross income of a taxpayer, which ultimately leads to a reduction in the total tax payable. Some of the eligible investments eligible for the u/s 80C deduction include payment of life insurance premium, investments in Public Provident Funds (PPF), ELSS, Sukanya Samridhi Yojana, subscription to National Savings Certificate , repayment of housing loan principal, registration/stamp duty on the property, etc.

Apart from the above-mentioned investments, expenses in the form of tuition fees paid in India, repayment of principal of home loans, etc. are also eligible for the u/s 80C deduction. However, it is pertinent to note that the maximum deduction an assessee can claim under this article is limited to Rs. 1,50,000.

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Taxpayers can assess other investment options such as National Pension Scheme contribution for which a deduction is available up to Rs. 50,000 under Section 80CCD.

Under Section 80D, a deduction is available for medical expenses (medical examination and hospitalization), up to Rs. 25,000 for self, spouse and children. Additional deduction up to Rs. 25,000 is available on parents’ Medicclaim. In case the parents are elderly, the deduction would be available up to Rs. 50,000.

Submission of evidence of investment to employers

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Employers are responsible for withholding tax u/s 192 of the IT Act from employees’ wages and for the calculation of this tax, employers take into account the declaration of investment and the proof presented by the employees. These proofs of investment may be rent receipts, interest certificates, holiday travel expenses, etc.

Thus, all employees must make the desired taxable investments, collect the supporting documents and submit them to their employer as soon as possible in order to avoid a higher withholding tax. This will also avoid unnecessary blocking of funds in the form of

TDS, which can be deducted by the employer, if the employee does not submit the documents related to the investment.

Aadhar PAN linkage must be completed by March 31, 2022

All resident taxpayers who have not yet linked their PAN and Aadhar must obligatorily link it before March 31, 2022. Failure to comply with this rule may result in a penalty of up to Rs. 1000 u/s 234H of the computer law. Additionally, failure to link may render the PAN inoperative, which may not only hamper financial transactions involving the PAN, but also result in a penalty of Rs. 10,000 u/s 272A of the IT Act.

Submission of late or revised return no later than March 31, 2022

In accordance with the provisions of Section 139(4) (for late filings) and 139(5) (for revised filings) of the Information Technology Act, a late/revised filing may be filed by a taxpayer either 3 months before the end of the relevant Valuation Year or before the end of the Valuation, whichever comes first.

However, with respect to fiscal year 2020-21 in accordance with tax year 2021-22, the deadline for filing a late/revised return has been extended from December 31, 2021 to March 31, 2022, see Circular No. ° 17 of 2021 of September 9, 2021 due to the pandemic situation in the country. Failure to file the return may result in a computer law u/s 234F penalty of Rs. 1,000 for taxpayers whose total income is less than Rs. 5 lakhs while such penalty would be increased to Rs. 5 000 in other cases. Thus, it is necessary for each taxpayer to file their tax return or revise the returns already filed, if necessary, before March 31, 2022.

Advance tax payments

All taxpayers with a tax liability of Rs. 10,000 or more are liable to pay withholding tax. This anticipated tax liability is not, however, imposed on elderly residents who do not derive any income from a business or profession. The taxpayer is required to determine income from various sources and accordingly pay withholding tax on it.

Taxpayers are required to pay the full amount of withholding tax until March 15, 2022 for the 2021-22 financial year. Failure to pay withholding tax on time would expose taxpayers to interest consequences.

Long term capital gains on sale of shares/listed securities exempt up to Rs. 100,000

Taxpayers are eligible for exemption of up to Rs. 1 lakh on long term capital gains u/s 112A IT Act on listed shares, shares of equity oriented mutual funds , etc Thus, taxpayers may need to consider this fact if they propose to recognize long-term capital gains in order to claim this exemption.