10 simple things to do before March 31st for saving money on your taxes. 

Yahoo! Finance did a great slideshow feature on an article we wrote for them recently. These are things to pay attention to before March 31st for tax savings and tax planning.

March 31st is almost here and you need to ring out the financial year in style. By style, we mean saving on taxes and getting a higher tax refund this year! We’ve compiled a list of 10 points using which you can ensure that you don’t miss anything out.

• Everyone rejoice! The exemption limit has been raised to Rs. 2 lakhs from Rs. 1.8 lakh.

The 30% tax slab now starts from 10 lakh rather than 8 lakh earlier. Men and women now have the same tax slab. No gender bias!

• The Basics: Get a deduction of upto Rs. 1 Lakh on your Taxable Income under section 80C

Under this section, a deduction of upto Rs. 1 Lakh is available for investments made in specified financial instruments. Avail of this deduction by making the investments by March 31, if not already done, to reduce your tax liability.

Read more on ClearTax’s guide on Section 80C instruments.

• Get your annual health checkup before 31st March and get a deduction of Rs. 5000!

Within the existing limit for deduction allowed for health insurance (under Section 80D), a 5000 Rupee deduction for preventive health checkup is allowed.

This means if you are not availing the full exemption limit under Section 80D, you can get your health checkup done and claim the expense under Section 80D.

Read more about limits on Section 80D here.

• Get a deduction of upto Rs. 10,000 for interest from savings bank accounts under a new section 80TTA

This is a fantastic new tax deduction that you can claim this year from interest income that you earn from your Savings Bank Accounts.

Note that interest income from fixed deposit is not deductible under Section 80TTA, so remember to declare it separately. Read more about Section 80TTA here.

• Rajiv Gandhi Equity Savings scheme (Section 80CCG)

This new scheme provides an income tax deduction of 50% for those who first time invest up to Rs.50,000 directly into equities and whose annual income is less than Rs.10 lakh, subject to a three -year lock in.

Exchange-traded funds (ETFs) and mutual funds listed on stock exchange and invested only in BSE 100, CNX 100 and blue chip public sector stocks are also allowed tax deduction under the scheme. Therefore, avail of this tax deduction by investing in the Scheme before the 31st of March 2013.

Basically, Invest Rs. 50,000 in the RGESS and avail a deduction of Rs. 25,000 on your Taxable Income. Read more about Section 80CCG here.

• Donating over Rs. 10,000 to charities? Make sure you use cheques!

Remember, the Section 80G deduction is not applicable in case your donations are made in cash for amounts over Rs 10,000. This step was taken by the Government to avoid tax evasion and black money. 

So, make your large contributions to charitable organizations via cheque and avoid tax filing hassles!

Click here to see the list of permitted organizations on ClearTax’s guide to Section 80G.

• Good News for Senior Citizens

For senior citizens between 60 and 80 years, (those born between April 1, 1933 and March 31, 1953) there is a higher exemption limit of Rs. 2,50,000.

For super citizens who are of 80 years or more, (those born before April 1, 1933), the exemption limit is of Rs. 5 lakhs.

• No more Section 80CCF

Remember, the 80CCF deduction for infrastructure bonds is not available anymore. Tax payers were allowed to invest upto Rs. 20,000 in infrastructure bonds upto last year. However from this year, you may have to think about Rajiv Gandhi Equity Savings scheme as a tax savings measure.

• Pay Advance Tax now (Last date is March 15^th)

Click here to calculate your income tax for Assessment Year 2013-14 using ClearTax’s Tax Calculator.

If you have any tax due to the tax department, remember to pay this tax to avoid paying  interest on tax due (under Section 234B and 234C).

However, senior citizens who do not have any income from business or profession, are exempted from payment of advance tax. This makes compliance easier for senior citizens.

Now they only have to work out their tax liability at the time of filing the income tax return and pay the self assessment tax.

• Did not file Tax Returns for Financial Year 2011-12?

For the Financial Year 2011-12,  if your income is above the exemption limit, file your income tax return by March 31, 2013 even if you do not have any tax liability after deduction of TDS, Advance Tax etc. This is because under section 271F, there is a penalty of Rs. 5000 for failure to file the return of income by March 31.

Read more on whether it is compulsory for you to file your Income Tax Return.

Looking to e-file your Income Tax Return? Use ClearTax for Individuals and ClearTax Business edition for complete peace of mind and expert help.

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Under Income Tax Law if your total income exceeds the basic exemption limit: You have to file the Income Tax Return within the prescribed time, i.e. by the due date.

You can read our previous article on – Whether filing the Income Tax Return compulsory for you or not – To determine whether you need to file the Income Tax Return or not.

The due dates of filing returns for Assessment Year 2012-13 are the following:

What happens if a person does not file the Income Tax Return by the due date

You have to Pay Interest on Income Tax Due if you don’t file on time

If you do not file the Income Tax Return by the due date:

You are liable to pay interest at the rate of one percent for every month after the due date till the date of filing the return.

If No Tax is due: Interest is calculated on the amount of tax payable after adjustment of pre-paid taxes like advance tax, TDS etc. So, if there is no tax payable on the basis of the Income declared in the Tax Return, there is no liability for the payment of interest.

You don’t get the benefit of Carry Forward of Losses if you don’t file on time

Under income tax law, if you have sustained a Business loss or loss under the head “Capital Gains”, you can carry forward the loss ONLY if you file the Income Tax Return by the due date.

Therefore, if you have sustained a loss, you must file your Income Tax Return in time if you want to carry forward the loss for future adjustment with your Income.

Possibility of Penalty or Prosecution by the Income Tax Department

Say you could not file the Income Tax Return by the due date: To avoid any penalty by the Income Tax Department, you must file your Income Tax Return before the end of the relevant assessment year that is 31^st March 2013.

Possibility of Penalty and Prosecution: If you do not file your Income Tax Return by 31^st March 2013, the Income Tax Department may impose a penalty of Rs. 5000, even though the tax payable by you may be Zero.

Further, if a person has failed to file the Income Tax Return by 31^st March 2013 and the tax payable after adjustment of advance tax and TDS exceeds Rs. 3000, he may be prosecuted for imprisonment also. However, this law is used in practice very rarely.

Other reasons for filing the returns of income within time

·         If a refund is due after adjustment of prepaid taxes, it is necessary to file the Income Tax Return to get the refund from the Income Tax Department.

·         Bank Loans: Further, the return is a declaration of your income and it will be extremely helpful when you are applying for a loan from bank. Before granting the loan, banks want to know your financial capacity and your income details as shown by you in income tax returns. 

·         Visas of foreign countries: Many countries want to know if you are financially sound before they issue you a visa and for this purpose they will rely on your income tax returns.

This article written by ClearTax originally appeared on Yahoo! Finance. We have posted again for readers of our blog and an easy reference.

This is applicable for the Assessment Year 2012-13.

As an Individual you are required by law to file your Income Tax Returns, if your total income without allowing deductions (such as Section 80C etc) exceeds the basic exemption limit.

For Assessment Year 2012-13, the basic exemption limits are the following:

•   For Men below the age of 60, the exemption limit is Rs. 1,80,000.

•   For Women, below the age of 60, the exemption limit is Rs. 1,90,000.

•   For Senior Citizens, whose age is between 60 years to 80 years, the exemption limit is Rs. 2,50,000. This is identical for men and women.

•   For Super Senior Citizens, of the age of 80 years or more, the exemption limit is Rs. 5,00,000.

What does Total Income without allowing deductions (such as Section 80C etc) actually mean?

Let’s say, your gross total Income is Rs. 2,00,000. You have paid Rs. 50,000 in LIC premium for claiming deduction under Section 80C. Your Taxable Income is Rs. 1,50,000 (Rs. 2,00,000 - Rs. 50,000). The tax payable on Rs. 1,50,000 is Zero.

However, even in this situation, you are required to file your Income Tax Return as your gross total Income exceeds the basic exemption limit of Rs. 1,80,000. (assuming you are not a senior citizen).

Exemption for filing Income Tax Return for Salaried Employees

For the Assessment Year 2012-13, there is an exemption from filing the Income Tax Return for Salaried employees, subject to the following conditions. 

•   Your Total Income after deductions (such as Section 80C etc) is upto Rs. 5,00,000.

•   Income other than Salary should be only from Saving Bank Interest, upto Rs. 10,000. If you have any other source of Income like House Property, Capital Gain, or even interest from fixed deposits, you will have to file your Income Tax Return.

•   You must declare this Interest Income from the Saving Bank to the Employer. The employer then has to deduct the TDS taking into account your Interest Income.

•   If you have a refund due, you need to your file your Income Tax Return to claim this refund.

This exemption is difficult to get in actual practice. You will most likely have to file your Income Tax Return.

This is because, you must declare your Interest Income to your employer before 31st March of the Financial Year. But in most cases, the Bank issues the Interest statement after 31st March. So it is virtually impossible to report the Bank Interest to the employer in time.

Compulsory filing of Income Tax Returns if you have foreign assets.

For the Assessment 2012-13, it is mandatory to file your Income Tax Return if you have any foreign assets. Even though you may not have any taxable Income.

When is e-filing your Income Tax Return compulsory?

For the Assessment year 2012-13, e-filing of the Income Tax Return has become compulsory for the following cases:

•   If your Total Income exceeds Rs. 10 Lakhs, then you must e-file your Income Tax Return.

•   If you own foreign assets, you must e-file.

I have paid all my taxes, do I still need to file my Income Tax Return?

As explained above, the law has placed an obligation on you to file the Income Tax Return even if you have no tax due.