IT'S TIME FOR TAX SAVING AND CLOSING

[Dr. Sanjiv Agarwal]

Come March of any financial year and it is a common sight in most of the offices, homes, club meets and neighborhood to see people discussing tax saving investment plans so as to save on tax outgo on personal incomes for which tax returns will be filed by July, 2010. Any investment made in eligible tax saving instruments would qualify for deduction from taxable income if such investment is made before 31st March, 2010.

But while you commit yourself to investment, a discipline and planning for future planning is required so that next year also, you may not land up in same problem. You ought to spread your investment to avoid stress on liquidity. There could be investments which are committed for a period of time such as public provident fund (PPF) or Unit linked insurance plan (ULIP) where you can have a scheme spread over  ten years or more. In such cases, you will have to invest every year. So while making such investment, you should look at your future incomes and cash flows too lest you may not have to discontinue such plan which may not be monetarily beneficial. On the other hand, there could be investment options where you can invest as an one time investment. For example, purchasing a national saving certificate (NSC) or an equity linked savings scheme (ELSS). In some cases such as payment of tuition fees of children or repayment of a housing loan, which are necessary payments, become a source for tax saving as these are allowed as deduction from gross total income.

When you invest to save on taxes, it is better to start investing at the beginning of the year but one can always do it now as still ten days are left in this fiscal. While you do your last minute tax planning, keeping liquidity in mind, you should target for maximum utilization of available limit of investments and expenses in section 80 C of Income tax, i.e., Rs. one lakh. In higher tax brackets, 80 C investments may not be sufficient to plan zero tax scenario. It is worth mentioning that deduction can also be claimed on interest paid on educational loans taken for self, spouse or children without any ceiling under section 80 E. This is over and above tuition fee allowed under section 80C.

Its high time you plan your taxes (and investments now). Better late than never is the rule of the game here. Else be ready to pay taxes, of course for nation building. It comes back to us only.

We are now just three days away from the end of yet another financial year (FY 2009-10) on 31st March, 2010. Any fiscal is important as after three days, we will enter into another year 2010-11.

The importance lies in the fact that we prepare accounts and financial statements, close our books of accounts based on financial year, we compute our taxes for the financial year, pay taxes and file returns based on turnover or income of the financial year only. Not only this, we ought to make investments to save on taxes within the financial year to avail tax benefits.

Not only timing is important for tax payers or investors, even for the companies, insurers and mutual funds, many new schemes and products are announced at the fag end of the year. The sales are also more during the busy tax planning season, ie, January- March of any year. However, if one invests at the year end, he loses the opportunity to take benefit of averaging the costs, time planning and choice of products. While many tend to leave annual tax or investment planning for March, it may not be desirable. With just few days now, it is just not possible to plan. As a short cut, one can go in for investing a major chunk in public provident fund or taking a new insurance policy or purchasing National Saving Certificate. You can also pay your insurance premium in advance.

Have you filed your tax return for the financial year 2008-09. It not, here is an opportunity to file it now before 31st March 2010 without any fine or penalty. You should have paid advance tax, if payable, by 15th March 2010. You can even pay it now with interest before 31st March, if not already paid. In case of central excise and service tax, the Government expects the taxpayers to pay duty or service tax for the month or quarter ending 31st March 2010 to be paid on or before 31st March itself. So assessees will have to really work hard to pay taxes for period upto 31st March by 31st itself. E-payment is the way which makes it possible as any payment can be made on line even in late hours.

In case of income tax also, e-payment and e-filing of returns make it easier for taxpayers. However, in case of peak days when the pressure mounts on the system, technical difficulties are faced. While it is expected that the Department would ensure smooth and flawless technology platform, assessees should also not wait for the last date. It may be noted that the date of submission for ITR-V filed after April 2009 was extended up March 2010 or upto 120 days from the date of uploading , which even is later. Income tax Department's messages rightly reads- Better late than never. Let's fall in line ---- on line and on time.