Income Tax Savings: March 31 Deadline Is Only One Day Away, Here’s What Experts Say

On March 31, the fiscal year 2023–24 will come to a conclusion. This is the final chance for taxpayers to save their taxes for the fiscal year. Taxpayers hurry at the last minute and make errors out of fear. A senior income tax specialist offers important points to think about with the March 31 deadline rapidly approaching.

“This is a busy time for investment advisors, tax consultants, and taxpayers in India as we are only a few days away from March 31,” said Aarti Raote, a partner at Deloitte India. This mania is to invest money in assets that save taxes in order to take advantage of tax deductions, which will save money on taxes.

According to Raote, there are ways to reduce taxes on investments made in certain securities such as PPF, LIC premiums, term deposits, ULIP, NSC, and so on under the Income Tax Act of 1961.

But when it comes to investing, one needs to take a comprehensive, long-term approach and choose the best option based on factors like return on investment, lock-in period, future payment reciprocity, minimum investment needed, tax impact at maturity, and the taxpayer’s future plans. For instance, it’s important to realize that PPF offers competitive returns that are tax-free as well, but there is a 15-year lock-in and an annual contribution requirement of Rs 500, the speaker said.

In a similar vein, tax-saving fixed deposits feature a five-year lock-in period and a reduced interest rate. As a result, Raote said, in order to maximize your advantages and make the best decision, you must take into account every facet of a given investment.

Experts advise taxpayers to steer clear of typical blunders in order to maximize their tax savings.

A Few Typical Errors

Disregarding Section 80C: The Income Tax Act’s Section 80C offers a number of ways to invest tax-efficiently, including the Equity Linked Savings Scheme (ELSS), Public Provident Fund (PPF), National Savings Certificate (NSC), and others. Many taxpayers do not take advantage of the full Rs 1.5 lakh Section 80C limit. To maximize tax savings under this section, consider all of your alternatives and make prudent investments.

Inadequate Documentation: Make sure tax-saving investments have all the required paperwork in place. Investment receipts, certificates of premium payment, loan certificates, etc. fall under this category. Tax deductions may be rejected due to incomplete paperwork. Maintain accurate records of your deductions and investments. If the IT department needs proof of your tax filings, they could ask for documents.

Ignoring Tax Planning Tools: In addition to Section 80C, additional tax-benefitting provisions include 80D (health insurance premiums), 80E (education loan interest), and 80G (donations to designated funds). Missed chances to save taxes may arise from ignoring these sources.

Ignoring Long-Term Financial Goals: Tax-saving investments have to be in line with your long-term financial objectives. Don’t make investments only to save taxes; instead, think about if they fit your financial goals and are appropriate.