New Year, new goals, a fresh breeze of change blowing through! Well, it is the right time to promptly correct behaviour which is causing harm and replacing them with those which would go a long way in ensuring happiness and well-being.
The year 2016 witnessed a major shift in the Indian Income Tax scenario. Government along with tax department seemed determined to improve direct tax structure and processes involved as well decimate parallel economy and curb tax evasion practices. Therefore, it is an ideal time to leave bad tax practices behind and take some resolutions which help you reduce taxes legally and grab more earnings. We present a list of tax resolutions which can give your taxes a new lease of life.
We always associate tax-declarations to employers with tax-saving investments. However, there are several expenses which can be claimed to save taxes, which we often disregard or aren’t aware of. Examine whether there are expenses that you make during the year, which qualify for tax deductions, thus leaving you with tremendous earnings which need not be locked in tax-saving instruments. Housing loan interest and principal, expenses on purchasing insurance cover, caring and rehabilitation of disabled and those affected with severe diseases are some of the examples of expenses which can be claimed for tax benefits. In fact, super senior citizens (above 80 years) have been permitted to claim medical expenses up to Rs. 30,000 under section 80D as tax deduction.
Locking in your investments for years together to save taxes in instruments that offer abysmal returns would harm your financial goals. Last minute tax decisions always make you forget about the product itself and lead your focus to the quickest and easiest way to invest. So, aim to sit with your financial advisor and start saving for taxes right at the start of the coming financial year. The additional benefit is that your money has 11 more months to grow, if you invest in April 2016, rather than investing in March 2017.
When the stock markets are euphoric and you see your stock scaling heights that have never been seen before, you would tend to jump and make a killing, but this year resolve to look at the tax angle. This would mean assessing the time period for which you remained invested in your stocks. If you have invested more than a year ago, then your profits would be exempted from taxes. But if equity markets haven’t favoured you and you are looking to pare your losses, then always assess whether the investment was made within a year. The reason being that losses booked on equity can be adjusted only if they are short-term – sold within 12 months of investing.
When employers are mandated to give the Form 16, a month after the financial year comes to an end, there is no reason why you should delay filing tax returns immediately after that. This offers you ample time to claim deductions you had forgotten, check your returns for errors and avoid any delay due to technical snags associated with last-minute tax-return filing.
Of course, one can file returns till the end of the financial year without any penalty and a year after that with penalty. However, when you file returns late, you lose out on certain benefits. You aren’t permitted to rectify your returns and if you have losses to carry forward, then you would have to give up on them if you file returns late.
While we aren’t asking you to don the hat of your chartered accountant, keeping track of major changes in taxation structure during Union Budget helps you save more taxes. For instance, the additional deduction available for NPS would help an individual save Rs. 50,000 during a year if he planned for investing it. Those who kept track of the developments were able to save this, while others lost out on the window. Many benefits announced during the budget are short-term in nature and hence need to be traced.
We hope that these resolutions will help you get rid of your tax devils and we wish you a very happy new year.