In a bid to give some relief to taxpayers amid the spread of Coronavirus, the government has extended the various income tax compliance deadlines, including extension in the date for filing ITR (income tax return) for FY19 as well as linking one’s PAN with Aadhaar. The government has also further extended the date for making various investment or payment for claiming deduction under Chapter-VIA-B of the Income Tax Act, which includes section 80C (PPF, LIC, NSC etc.), section 80D (Mediclaim), and section 80G (Donations) among others. With this extension, one will now be able to make investment or payment up to July 31, 2020 for claiming deductions under the various sections for the Financial Year 2019-20.
Commenting on the same, Saraswathi Kasturirangan, Partner, Deloitte India, said, “The time line for investments which are eligible for deduction under Part B of Chapter VIA is further extended to 31 July 2020 from 30 June 2020. However, it is important to note that the tax return forms specifically seek to capture the details of amounts eligible for deduction during FY 2019-20 and the deduction attributable to investment/ expenditure made during the extended period included in the eligible amount. So, the tax return forms will also need to be modified to reflect the extended date.”
Whatever be the case, this deadline extension will surely help those taxpayers who for some reasons are yet to make adequate investments for claiming deductions under the various sections of the Income Tax Act.
Financial planners say that a lot of tax-saving activity happens at the financial year-end, which is exactly when the whole country went into a lockdown. Therefore, “it was no longer possible for many people to make tax-saving investments before the March 31 deadline. Thankfully, that deadline has been extended. This will allow taxpayers to make the investments necessary to save taxes for the previous financial year. Thankfully, there are many tax-saving avenues, including investments as well as insurance,” says Adhil Shetty, CEO, BankBazaar.com.
However, while saving money or making any investment, taxpayers need to keep the following points in mind.
One, ensure everyone in your family has health insurance coverage. If you don’t, buy your base policy. If you do, consider a super top-up coverage to improve your coverage. This will protect your finances against future hospitalisations. The premiums you pay towards your health insurance policies will avail you deductions under Section 80D. You can double your deductions by buying health insurance for dependent parents. If you or your parents are under the age of 60, you can claim deductions of Rs. 25,000 for your respective policies. If you’re above 60, you can deduct Rs. 50,000.
Two, buy adequate life insurance. With an ongoing pandemic, there’s great uncertainty over life expectancy, and you would want your dependents to be okay in case of your untimely demise. A term insurance can help you achieve this goal.
Thirdly, “you can look at investments eligible for deductions under Section 80C and its subsections. If you’re averse to market risks, it would be best to invest in Voluntary Provident Fund, Public Provident Fund or NSC. These are government-guaranteed schemes. If you just want to make one low-risk lump-sum investment, consider buying a five-year tax-saver fixed deposit from any reputed bank or your local post office. If you have a moderate risk appetite, you could invest in a reputed ELSS. You can avail this from your preferred fund house’s website, branch office, or through any online fund aggregators. Be aware of the market risks as well as the lock-ins,” advises Shetty.
Next, you could continue claiming deductions for your contributions to NPS Tier 1 schemes. With this, you can avail deductions up to Rs 50,000 over and above the 80C limit of Rs 1.5 lakh.
Lastly, this being a testing time for society, donations to various charities may be warranted from time to time. Any donations you’ve made to eligible charities can get tax breaks under Section 80G of the Income Tax Act.