Last minute Tax Filing Tips

Check your liability for the year

The first step in effective tax planning is determining your income tax liability for the year. Your tax planning efforts become relevant only if you owe a net tax at the end of the fiscal year. The amount of income tax you're obligated to pay is contingent upon your earnings during the financial year and the applicable income tax slabs. 

These slabs vary for different types of taxpayers, including individuals, HUF (Hindu undivided family), AOP (Association of Persons), BOI (Body of Individuals), foreign companies, domestic companies, firms, LLPs, and cooperative societies.

When calculating your income tax liability, it's crucial to consider all your earnings and utilize all deductions available under the tax code. Many taxpayers overlook common deductions, including tuition fees, life and medical insurance premiums, house rent allowance, and donations to approved organizations. 

Ensure you have proper documentation to support your claimed deductions, such as lease agreements, gift receipts, premium certificates, etc. This documentation will serve as valuable evidence in case of any future tax assessments.

Compare NEW vs OLD taxation regime

The introduction of an optional new tax framework represents a significant departure from the previous year's Budget.

This new tax regime offers a lower tax rate and reduces the number of deductions available. Individuals now have the flexibility to calculate their taxes and choose the regime that best suits their financial situation. 

For less experienced investors with limited capital for new investments, the new tax system may prove advantageous. However, for seasoned investors accustomed to making tax-saving investments annually and holding current home loans, sticking with the old regime might offer more benefits.

The decision to switch to the new tax regime or remain in the old one should be based on the available tax savings, deductions, and exemptions under each system. Both regimes have their advantages and drawbacks. Understanding the disparities between them is crucial before making a decision.

The old tax regime encourages saving habits among taxpayers, while the new system primarily benefits employees with lower earnings and minimal investments, resulting in reduced deductions and exemptions.

The new tax system offers simplicity and safety, with fewer records and reduced potential for tax evasion. However, since each individual's financial circumstances are unique, a comparison between the two regimes is essential to determine the most beneficial option.

For those unfamiliar with investing and taxation, seeking assistance from tax specialists is advisable for a thorough analysis and informed decision-making process.
 

Fill in your insurance gaps first

Insurance can be your saviour in difficult times and it can also reduce your tax liability. Hence, if you need to make new investments to reduce your tax liability, ensure you have sufficient insurance coverage. Consider the following policies:

• Term Life Insurance: Provides financial protection to your family in the event of your unexpected demise, ensuring they can maintain their lifestyle and meet financial obligations.

• Mediclaim Insurance: Covers medical expenses for yourself, your family, and elderly parents, offering financial security against unexpected healthcare costs.

• Preventive Health Screening: Helps in early detection of potential health issues, enabling timely treatment and reducing long-term healthcare expenses.

For young investors, prioritizing insurance is crucial. In the event of a breadwinner's untimely death or a medical emergency, insurance ensures the family's financial stability. It serves as a solid foundation for building your financial security
 

Analyze the investment holistically before choosing it

Just because you are short on time and you want to save taxes, do not invest in anything that offers a tax exemption. Investing is about building long-term wealth and achieving your financial goals comfortably. Before making tax-saving investments, consider the following factors:

• Financial Goals and Time Horizon: Determine your financial objectives and when you'll need the funds. The longer your investment horizon, the more risk you can afford to take.

• Risk Tolerance: Assess how much risk you're comfortable with. This involves deciding the percentage of your investment you're willing to allocate to equity, considering your risk appetite.

• Holistic View of Investment: Take into account factors such as risk, lock-in period, liquidity, taxation, and alignment with your financial goals. Avoid being solely swayed by potential profits.

Check for Simple Mistakes

Even though online tax preparation software can catch major errors, it's still crucial to meticulously review your return for common typos and inaccuracies. Here's a checklist of essential questions to ensure your return is error-free before filing:

• Name and Aadhar and PAN Number: Double-check that your name is spelled correctly and that your PAN number is accurate.
• Calculations: If you're filing a paper return, ensure all calculations are accurate and error-free.
• Bank Information: Confirm that your bank information, including routing and account numbers, is entered correctly to avoid any issues with direct deposits or refunds.
• Signature and Date: If filing by mail, don't forget to sign and date your return before sending it off.

By thoroughly reviewing these key elements, you can minimize the risk of simple mistakes that could potentially delay your tax refund or trigger an audit.

Track Your Return and Refund Online

After filing your tax return, you can easily track its status, including your refund. If you've overpaid taxes, you can request a refund for the excess amount. The Income Tax Department provides an online facility to track your Income Tax Refund status. Simply enter your PAN (Permanent Account Number) and the applicable Assessment Year to check the progress.
Here's what you need to know:

• Initiation of Refunds: Refunds are initiated by the tax department once you've e-verified your return.

• Expected Timeframe: Typically, it takes 4-5 weeks for the refund to be deposited into your bank account.

• Next Steps if Delayed: If you haven't received the refund within this timeframe, consider these steps:
    
◦ Check for any discrepancies or errors in your ITR by logging in to the e-filing portal and navigating to "e-File" > "Income Tax Returns" > "View filed returns."
◦ Look out for email notifications from the Income Tax department regarding the refund status.
◦ Utilize the provided methods below to check the refund status.

You can also examine your Annual Information Statement (AIS) and review all the incomes listed therein. If you come across any inaccuracies or discrepancies in the reported incomes, it's essential to report them promptly to prevent potential income tax mismatches.

By staying informed about the status of your refund and taking appropriate action if there are delays, you can ensure a smooth tax-filing experience.

Planning ahead before the financial year-end can substantially decrease your tax burden and optimize savings and investment opportunities. By adhering to these straightforward guidelines and utilizing available tax-saving avenues, you can ensure financial prudence and compliance with tax regulations. Stay proactive and make the most of your tax planning efforts for a secure financial future.