As the end of the fiscal year on March 31 approaches, taxpayers will need to consider their finances in the end to maximize tax savings and avoid last-minute hassle. A proper tax planning not only helps reduce your tax obligations, but also ensures compliance with the Income Tax Act. Whether you are a paying individual or an employer, reviewing tax saving investments, deductions and declarations can help you optimize your tax. There are a few here Important tax planning tips to consider before the fiscal year ends.
Tips for tax planning before fiscal year (March 31)
#1 – Take advantage of Section 80C Deduction
Section 80C of the Income Tax Act Deductions of up to 1.5 lakh are permitted per fiscal year. If you are not fully utilizing this limit, now is the time to invest in eligible equipment such as:
- Equity-Linked Savings Scheme (ELSS)
- Public Provident Fund (PPF)
- Employees’ Reservation Fund (EPF)
- National Savings Certificate (NSC)
- Life insurance fees
- Sukanya Samriddhi Yojana (SSY)
For example, even if you’ve only invested £1 so far, you can still invest an additional £50,000 in ELSS or PPF to claim a full deduction.
#2 – Maximize the benefits of NPS based on section 80ccd(1b)
Apart from 80C, you can receive an additional deduction of £50,000 under Section 80CCD (1B) by investing in the National Pension Plan (NPS). This is a great way to reduce your taxable income while ensuring retirement benefits. If your account is frozen, you can check this article How to unzip your NPS account.
#3 – Claim health insurance benefits under section 80D
Health insurance premiums paid to yourself, family members and guardians are subject to deductions under Section 80D.
- Up to £25,000 for yourself, spouse and children (£50,000 if the insured is an elderly person)
- Additional £25,000 for parents (£50,000 if the parent is elderly)
For example, if you pay £30,000 for your parents’ health insurance and are older, you can effectively cut your taxable income by charging £30,000 as a deduction for under 80D.
#4 – Submit evidence of HRA and other allowances
If you are a salary employee receiving a Housing Rent Payment (HRA), please submit a rent receipt to claim tax benefits. Also, check if there are other exemptions like leave allowances (LTAs), which require you to submit your invoice before the end of the fiscal year.
#5 – Check capital gains and cause losses
If you have created capital gains from a stock or mutual fund, consider booking losses with some investments to offset your profits. This strategy, known as the harvest of tax losses, helps reduce tax liability for capital gains.
For example, if you earned short-term capital gains for £1 in an equity mutual fund but have a loss of £50,000 from another stock investment, you could book the loss and reduce your taxable profit to £50,000. It will be treated as a fresh investment right now, so you can buy it again in a week.
#6 – Choose fixed tax saving deposits, SSY etc. for safe investments
If you prefer a safer investment option, you can invest in five-year tax cut bonds (FD), PPF, or Sukanya Samriddhi Yojana (SSY) for your daughter by March 31st. These investments are eligible under Section 80C and offer risk-free returns.
#7 – Pay advance tax to avoid penalties
If your total tax liability for the fiscal year exceeds £10,000, make sure you have paid at least 90% as advance tax by March 15 to avoid penalties under Sections 234B and 234C.
For example, if your estimated tax liability is £1 and you are only paying £70,000, you will need to pay an additional £20,000 by March 15th to meet the 90% requirement.
#8 – Check donations under section 80g
If you make a donation to a qualified charity or plan, obtain a receipt and request a deduction under Section 80g. Some donations are eligible for a 50% or 100% deduction, which significantly reduces taxable income.
#9 – Submit evidence of tax-saving investment
Many employers ask employees to provide proof of tax investment by March 31st. If you haven’t done this yet, please submit the necessary documents to avoid a higher TDS deduction from your March salary. If you have a mortgage, you can check it How to download mortgage interest certificate for taxation submission.
#10 – Choose old and new tax systems
The new tax system offers a lower tax rate, but removes most deductions. By March 31st, we will analyze which regimes will benefit you more and plan your tax-saving investments accordingly. This will not be useful for the fiscal year (as companies will not accept employees changing at the end of the fiscal year), but will be over in the future, but will be useful for next year.
For example, if you have fewer deductions to charge, the new tax system may be more beneficial. However, if you have large investments below the benefits of the 80C, 80D and HRA, the older regime may be better.
Conclusion: A proactive tax plan by March 31 will help you save taxes while ensuring a financial future. Take your time to review your deductions, submit the necessary documents, and invest wisely to maximize your tax benefits. You can wait until the last time misses the opportunity and leads to unnecessary tax spills. Start now and make sure your finances are going well before the end of the fiscal year!
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