Tax planning for new year

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SummaryStep-by-step guide to ensure that 2013 turns out to be a perfect year in terms of tax benefits & reduced liability.

Every new year, we adopt many resolutions. This year, one of these resolutions could be “I will become a good tax planner in 2013”. Let’s see how we can achieve this.

Making timely investment: Taxpayers are allowed deduction for various expenses and investments like children education, life and health insurance premium, equity linked savings scheme, education loan, etc. For being eligible for tax deduction, all these payments must be made before the financial year ends. Instead of waiting till the last date, timely investment can help increase the interest amount you will receive or reduce interest liability if you have a loan.

Collecting hard copies of investments: It is always safer to keep hard copy of investments and other receipts. Though these proofs are no longer required to be filed with your return, it is advisable to keep them in record as you may need them in case your return is picked for a detailed assessment.

Timely advance tax payments: If you have additional income from interest, rent, etc., then, you are required to pay advance tax on such income. Advance tax is payable if the total tax liability after reducing TDS is more than R10,000. It is advisable to pay advance tax before the due date to avoid interest liability.

Filing return of income: It is important that the tax return for FY13 is filed by the due date, i.e., July 31, 2013. A belated return entails certain disadvantages like foregoing the right to revise the returns or carrying forward the losses. One must also ensure that the TDS certificates are collected from all sources, including Form 16 issued by the employer by the time you file your tax returns.

Reporting your income if you have changed jobs: If you have switched job during 2012, it will be a good idea to report the income and TDS of the previous employer to the new employer. Your new employer can use the details of deductions and tax slabs already considered by the previous employer, and compute the balance taxes to be deposited. This will avoid the hassle of computing your taxes and depositing the differential taxes and interest liability, if any.

Planning for FY14: For FY14, planning should start from the very beginning. Most employers allow employees to declare their tax saving and investment plan for the new financial year. On the basis of this declaration, employers evenly deduct tax from your salary throughout the year.

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