Save Income Tax by 31st March: Here Is a Checklist

With careful planning and strategic financial decisions, it is possible to optimize your tax liability and save money. Income tax filing, investing in tax saving schemes, and advance tax payments should be done for saving tax before March 31st.

Key Takeaways

• Many tax-saving investments, including Section 80C instruments like PPF, ELSS, and NPS, have deadlines falling within March.
• You can utilize schemes like PPF, ELSS, NSC, and tax-saving fixed deposits to claim deductions up to ₹1.5 lakh.
• You can also offset capital gains by reinvesting in capital gains bonds or availing benefits under Sections 54 and 54F.
• One can also make donations to eligible charitable institutions to qualify for deductions under Section 80G.

If you are looking for ways to save on income tax before filing your returns, March is the right time. Though last-minute investments are a lousy way to start your new year, you can still secure yourself and make it before 31 March. But why only March?

Importance of March for Taxpayers

If you want to know how to save tax after 31st March in India, you must understand why March is important for taxpayers. Several reasons make March an essential month:

• Income Tax Filing: This is the most crucial point for most taxpayers. March 31st is the last date to file your income tax return for the previous financial year (e.g., for the year ending March 31, 2024, you must file your return by March 31, 2025). Late filing leads to penalties.
• Tax-saving Investments: Many tax-saving investment options have deadlines falling within March. These investments help reduce your taxable income and, consequently, your tax liability. Examples include:

• Section 80C investments: Investments in PPF, ELSS mutual funds, NPS, etc., up to a specific limit qualify for deduction under this section.

• Tax Advance Payments: If you have quarterly tax advance payment (TDS) dues, the last installment for the financial year falls due in March.

Checklist for Saving Income Tax by 31st March

In India, the financial year runs from April 1st to March 31st. As the financial year draws to a close, individuals and businesses should gear up to meet their income tax obligations. Below is a comprehensive checklist to let you know things to do before 31st March:

Invest in Tax-saving Instruments

There are several government-backed schemes and investment options available that allow individuals to save income tax. These schemes encourage savings and investments while allowing taxpayers to reduce their taxable income.

Invest in instruments like the Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), National Savings Certificate (NSC), and tax-saving fixed deposits to claim deductions up to ₹1.5 lakh.

Health Insurance Premiums

Policyholders should pay health insurance premiums before the fiscal year-end to claim deductions under Section 80D. It includes premiums for self, family, and parents.

Home Loan Repayments

If you have a home loan, make the final installment before 31st March to claim principal (Section 80C) and interest (Section 24) components deductions.

Donations for a Cause

Donations to eligible charitable institutions can qualify for deductions under Section 80G. Ensure you contribute to recognized charities and obtain proper receipts for the same.

HRA and Rent Receipts

If you are a salaried individual receiving HRA (House Rent Allowance), ensure you submit rent receipts to your employer to claim tax exemptions under Section 10(13A).

Interest on Education Loans

If you or your dependents have education loans, pay the interest before the end of the financial year to claim deductions under Section 80E.

Tax-saving FDs and Bonds

Consider investing in tax-saving fixed deposits and bonds, such as the Senior Citizens Savings Scheme (SCSS) and the Taxable Bonds of the government. Interest income from these is eligible for exemptions.

Review Capital Gains

If you have earned capital gains during the year, explore options to offset them by reinvesting in capital gains bonds or availing the benefits of Section 54 and 54F.

Maximize Deductions for Professional Expenses

If you are a salaried professional, ensure you claim deductions for professional tax, union fees, and other relevant expenses to reduce your taxable income.

Utilize the Lower TDS Rate

If your total income is below the taxable limit, consider submitting Form 15G or 15H to avoid higher TDS (Tax Deducted at Source) deductions on interest income.

Schemes to Save Income Tax

Tax savings should not be limited to a particular month. You can save taxes annually by investing in suitable investment schemes.

Public Provident Fund (PPF)

PPF is a government scheme with a lock-in period of 15 years, a maximum investment amount of ₹1,50,000, and a minimum amount of ₹500 per year. The money invested gets compounded over the years, giving you handsome returns on maturity. The scheme is popular as the amount received at maturity is fully exempt from taxes. You can get tax benefits under Section 80C, where the maximum amount that can be claimed under this section is capped at ₹1,50,000 per financial year.

Life Insurance Policy

Buying a life insurance plan is the best way to save on income tax as it not only gives tax benefits but also secures your family with a life cover and allows wealth creation. Some insurance policies are term insurance, money back policy, endowment plan,whole life insurance, and many such. These policies enable you to fulfil your long-term savings plan, where you receive a lump sum maturity benefit. You can claim tax deductions under Section 80C and Section 10(10D) of the Income Tax Act, 1961. The maximum amount claimed under Section 80C is capped at ₹1,50,000 per financial year.

Home Loan

If you have taken a home loan, the payments made as EMIs towards repaying the loan can be claimed for an income tax deduction. Under Section 80C, the EMIs for repaying the principal amount can be claimed for deductions, including stamp duty and registration charges. Additional tax benefits can be claimed under Section 24 and Section 80EE.

Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana is a savings scheme for parents having a girl child, making them eligible for tax benefits. The scheme aims to accumulate money for the expense of education and marriage of the girl child. The parent or legal guardian can claim the amount paid towards the scheme under Section 80C. The benefit is available for two girl children and is extended to a third child in the case of twins.

Health Insurance Plan

If you have bought a health insurance plan, you can claim the premiums paid towards securing the policy under Section 80D. It reduces your taxable income and enables you to get your health insured.

Equity-Linked Savings Scheme (ELSS)

ELSS, or Equity-Linked Savings Scheme, is a diversified equity mutual fund with a lock-in period of 3 years. This mutual fund scheme gives you tax benefits along with long-term returns. The compounding benefit of this scheme provides lucrative returns, making them a popular option for many. But as the investment is market-linked, the lock-in period reduces the impact of the lows of the share market.

Way Forward

By taking proactive steps and adhering to this checklist, you can significantly reduce your tax liability before the 31st March deadline. Planning and making informed financial decisions is crucial to maximize tax-saving opportunities. Consult with a financial advisor for personalized guidance and ensure a smooth and tax-efficient closure to the fiscal year.

Remember, saving taxes is about minimizing your liability and making sound financial choices for a secure future.