We are close to the end of FY23 and FY24 will begin from April 1. Around this time, most of us are busy making new investment plans. However, to avoid problems ahead, here are some important tasks you must complete before the new financial year kicks in.
Link your PAN with Aadhaar
The Income Tax Department has announced March 31, 2023 as the last date to link your PAN card with Aadhaar. PAN and Aadhaar can be linked now along with a penalty of Rs 1000. If you don’t link both ID cards before the final deadline, your PAN will become inoperative. The last date to link PAN and Aadhaar without a penalty was June 30, 2022.
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File your updated ITR
The last date to file an updated ITR for AY21 is March 31, 2023. So, if you have missed out on mentioning any information in the ITR for AY21 (FY20), it’s time to do it now. As per the provision in the I-T Act, you are allowed to file ITR-U if you have made a mistake or missed out on certain income details in the original ITR, revised return or belated return. If you have already filed an updated ITR, you are not eligible to file it again.
Adhil Shetty, CEO, Bankbazaar. com, says, “Tax planning is the process of managing one’s finances to maximise tax efficiency and minimises tax liability. It involves evaluating tax options and taking advantage of tax benefits, credits, and deductions offered by the government.”
Review your tax saving status
In fact, March 31 is the cut-off date for every financial year to determine the size of your tax-saving initiatives that would help you reduce your tax liability while filing the ITR for that financial year. For income earned during FY23, you have to take tax-saving steps during the same financial year to get tax deduction benefit under Sections 80C, 80D or 80E. For example, investments in PPF, ULIP, ELSS, etc., are eligible for tax deduction under Section 80C, subject to a limit of Rs 1.5 lakh in a financial year. If you have not yet exhausted the maximum investment limits, you can still do it by investing in eligible instruments before March 31, 2023.
A premium paid towards the health policy can help you reduce the tax liability u/s 80D. So, if you have not yet got a health policy, you can get it now.
If you have an existing education loan for which interest payment is due, you can make such a payment before 31st March 2023 to get the deduction benefit u/s 80E. Interest on an education loan (without capping) paid during the financial year can be claimed as a deduction. So, don’t miss out on the opportunity to lower your tax liability by clearing the interest without any delay.
Insurance with premium over Rs 5 lakh
As per Budget 2023, proceeds from insurance with a total annual premium of more than Rs 5 lakh in a financial year will become taxable. This will be applicable on traditional insurance (other than ULIP) purchased on or after April 1, 2023. Many investors make a big-ticket investment in insurance as they want to save tax on the maturity proceeds. If you are one of such investors who like insurance as a tax-saving instrument, it’s time to make a move before the financial year ends. However, it’s always advisable to buy insurance as a risk mitigation tool and choose investment in sync with your financial goals. So, you may also give a second thought to big-ticket investment in insurance before you rush for it.
Before the financial year ends, you should try to clean up your financial obligations like payment of credit card bills, EMIs, arranging all the necessary financial documents in one place to file the ITR for FY23 and submit the tax-saving investment and expenses proofs to your employer. Avoid leaving the financial decisions to the last day of the financial year as it often leads to mistakes.
Also Read: ITR Filing: How to set off capital losses to reduce your tax liability
* March 31 is the cut-off date every financial year to determine the size of your tax-saving initiatives
* Proceeds from insurance policies with annual premium above Rs 5 lakh bought on or after April 1, 2023 will become taxable
* The last date to file an updated ITR for AY 2020-21 is March 31, 2023