Financial year 2019-20 is drawing to a close, so is the deadline to meet your financial commitments for the year. From investment and tax planning, ITR filing, linking PAN with Aadhar to reviewing your portfolio amid the market sell-off, we give a lowdown on what all you must wrap up over the next few days:
Compute your tax liability
If you have still not calculated your taxable income and total tax liability for the financial year against your investments, you should immediately do it to avoid paying higher taxes. Make sure that the investments and documents needed to claim income tax deductions and exemptions are well in place for you to identify if last-minute investment is needed to reduce your outgo.
“Investment and tax planning is crucial. A person can avail of deduction under 80C of the Income Tax Act up to Rs 1.50 lakh. Additional deductions such as life or health insurance premium under Section 80D is available, but only if the payment has been made before March 31. If you plan to make new investments, Equity Linked Savings Scheme (ELSS) funds are ideal,” says Abhinav Angirish- Founder, Investonline.in.
Pay advance tax and TDS
You must pay your advance tax including Tax Deducted at Source (TDS) before March 31 to avoid interest penalty. “If you are a salaried employee, please ensure that you have handed over the relevant proofs to the employer so that TDS can be appropriately deducted and you don’t end up with a higher tax deduction. If you have any other sources of income, like interest on deposits, sale of property etc. please check Form 26AS and declare those incomes to your employer so that tax can be deducted and deposited on the same as well by the employer,” suggests chartered accountant Amitabh Sethi.
“Self-employed earners need to ensure that advance tax is correctly calculated and deposited to avoid paying any late payment interest on the tax dues,” adds Sethi.
Late filing of income tax returns
If you have still not filed the income tax return for the financial year ended March 31, 2019 you can still do that till March 31, 2020 with a late fees of Rs 1,000 if the income is less than Rs 5 lakh and Rs 10,000 if the income is above Rs 5 lakh. If you don’t do it at all, there could be an imprisonment for three to 24 months along with a monetary fine, says Sethi. “If the tax revenue loss in any such case is Rs 25 Lakhs or more, then there is a provision of two-seven years of rigorous imprisonment along with the fine”.
Please note that even if you don’t have outstanding tax liability for the financial year, you should still file the ITR. “If your tax liability has been discharged either in the form of advance tax or TDS, you should still file your ITR on or before the due date else you may have to pay the late filing fee,” Sethi says.
Tax loss harvesting
There has been a sharp fall in the stock market due to coronavirus-led fear. The heavy losses have come after the benchmark indices hit their fresh highs in January. If you had already booked profits on some of your stock or mutual fund holdings before the sell-off happened, you are liable to pay STCG or LTCG as applicable. Since you will also be holding stocks and mutual funds with unrealised losses after the recent sell-off, the difficult time presents you an opportunity to do ‘tax loss harvesting’, that is, offset your losses against realised profits to reduce your effective tax liability on capital gains.
“It is a technique employed by seasoned investors who not only have a long-term view of their investments but have a clear understanding of the role taxes play in their strategy. It gives you an opportunity to rebalance your portfolio by exiting unhealthy investments and entering into stocks/mutual funds trading low due to poor sentiment,” says Archit Gupta. Founder & CEO at ClearTax.
Link your Aadhar with PAN
March 31 is the deadline for linking your permanent account number (PAN) with your 12-digit Aadhaar. If you don’t do it by then, your PAN will become inoperative, that is, you will not be able to use it for financial services where it is mandatory such as opening of a bank account, investing in a fixed deposit and filing of income tax returns etc. You can link PAN with Aadhaar either via SMS or by visiting the income tax department’s e-filing website. If you do it post the deadline, you will have to pay the penalty of Rs 10,000.
If you are unsure if you have linked your PAN with Aadhar, you may check the status on Income Tax Department’s website.
Buy term insurance plans
If you haven’t yet bought a term plan, you should consider doing it in next few days, as the premium on the term plan is likely to go up April onwards. “Price hike could be different across insurers on the basis of their computation of mortality rate. For some insurers the hike could be in the range of 15-20 per cent. It could go as high as 40 per cent for others,” Santosh Agarwal, Chief Business Officer, Life Insurance, Policybazaar.com says. That said, since term plans come with a fixed level premium for the policy period, now is the best time to buy one.
Review your asset mix
Given the recent correction in the equity markets, quality equities are available at fairly attractive valuations. Hence, investors with long term investment horizon can use their surpluses to top up their existing mutual fund investments. “This will average their investment cost and can help them reach their financial goals sooner. The current market correction also provides a good opportunity for getting one’s asset mix right by redeeming some of the fixed income investments to top up their existing equity investments. However, any lump sum investments should be made in a staggered manner as it is very difficult to predict the duration and bottom of any bearish phase,” says Sahil Arora – Director & Group Head, Investments at Paisabazaar.com.
Pension plan for senior citizens
If you are a senior citizen and looking for a secured pension plan, you should consider Pradhan Mantri Vaya Vandana Yojana (PMVYY). The scheme will offer you a monthly payout of up to Rs 10,000 on a maximum investment of Rs 15 lakh. You can also opt for quarterly, half-yearly and yearly payout options. Minimum purchase price is fixed at Rs 1.5 lakh. Additionally, the scheme offers a death benefit in the form of return of purchase price to the nominee. PMVYY was launched in 2017 for a short period and was then extended to 31 March 2020.
