While you have time to file your returns for income earned during the FY 21 till July 31, there are a few things that you should complete in April itself to avoid unnecessary complications. On April 1, the Central Board of Direct Taxes notified all the income-tax related forms for assessment year 2020-21.
Make a declaration about Old or new income tax regime now
From the last financial year i.e. 2020-21, taxpayers are required to choose between the new and old income-tax regime.
A Salaried individual must make this declaration to his/her employer in the month of April itself so that the employer can deduct the taxes accordingly, before paying your monthly salaries because the tax rates, exemption and deductions are quite different in both of the tax regimes.
The existing income-tax regime with deductions gains weightage over the new regime
To decide which income-tax regime to select, salaried employees must compute their taxes under existing or the old tax regime after claiming all exemptions and deductions and under the new tax regime without claiming exemptions and deductions. If the employer is not notified duly he will assume that the employee wants to stick to the existing income-tax regime. That’s why it is important to decide in April itself to know the effects better. (Study the effects of section 10(14),Sec 80C and 80 CCD(2) to understand the difference).
Declaration of Investment and expenses
While opting for the existing income-tax regime, a declaration of your investments and expenses made during the current financial year is required to be furnished to your employer because certain investments and expenses qualify for income-tax deductions.
Investment declarations are needed for TDS purposes around this time, failing which may cause higher withholding of tax.
For instance: Equity-linked tax saving mutual funds (ELSS), Public Provident Fund (PPF), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY),5-year tax – saving fixed deposits (FD) or term deposits in post offices qualify for deduction under section 80C. Expenses such as child education fees, interest on home loan, education loan, electric vehicle loan, and house rent etc., qualify for deduction under different sections.
Lesser known income-tax deductions to reduce your taxable income
Furnishing Form 15 G and 15 H
Those who have made investment in FDs should submit form 15G or 15H as applicable to banks, if their income is expected to remain below the taxable limit. Form 15G and Form 15H are self declaration forms for an individual below 60 years of age and those above the age of 60 years, respectively. Some banks also allow you to submit the forms online.
Banks are required to deduct TDS in case your interest income is more than Rs 40,000 in a year. Ideally this should be done at the start of the financial year as the bank adds deposits held in all its branches to calculate this limit.
Vivad se Vishwas scheme
Under the ‘Vivad se Vishwas’ Act 2020, the deadline for the payment of tax without additional interest is 30 April, 2021. The Direct Tax scheme was enacted on March 17, 2020, with the objective to curtail pending income tax litigations, generate timely revenue for the government and to benefit taxpayers. Pay the due tax if you have opted for the scheme by the end of April.
Pay the self-assessment tax
The due date to file the ITR for FY 21 is 31 July 2021, unless the government extends it. If there is any tax due at your end on income earned during the FY21, it will continue to attract interest until you pay the same. Self assess your tax liability and make the payment to avoid panel interest. This is called self-assessment tax-SAT. Once you pay the SAT, you can even file your returns instead of waiting till 31 July.