March is drawing to a close and hopefully, most of us are done with our tax-saving investments and even our advance tax payments, if any. But for those who have been postponing the inevitable financial paper-work for as long as possible, this is the final wake-up call. It's March 24 today and you have just a week to make all the payments that you need to do if you plan to save taxes and avoid hefty penalties.
March is drawing to a close and hopefully, most of us are done with our tax-saving investments and even our advance tax payments, if any. But for those who have been postponing the inevitable financial paper-work for as long as possible, this is the final wake-up call. It's March 24 today and you have just a week to make all the payments that you need to do if you plan to save taxes and avoid hefty penalties.
If a penny saved is a penny earned, then it does make sense to save on your taxes and avoid the penalties by making the due payments before the end of March.
Here is a quick reference guide for those who are wondering where to invest and how to save taxes. Since the exemption limit has been raised to Rs 1.5 lakh in the interim budget announced in July 2014, you have an additional Rs 50,000 to invest this year.
For those of you, who are paying EMIs each month, a sizeable chunk of the Rs 1.5 lakh deduction is most likely covered by the principal payment of the EMI. The contributions to the Employee Provident Fund (EPF) and the Voluntary Provident Fund (VPF) are also eligible for deductions.
Among all the Section 80C investments, the PPF is by far the most popular investment option as it offers an assured tax-free income despite the long 15 year lock-in.
Those who are younger and have a higher risk appetite, the Equity-Linked Savings Schemes (ELSS) floated by mutual funds is a good option as it has the lowest lock-in of three years compared to other tax-saving instruments.
Life insurance policies are also a popular option as they provide life cover along with savings in taxes.
It is unlikely that the Rs 1.5 lakh limit is not exhausted by the time you are done with these investments. But just in case, you still have leg room, do make sure you invest the balance of Rs 1.5 lakh in any of the available tax-saving schemes like the National Savings Certificate (NSC), National Pension Scheme (NPS) or the five-year tax saver fixed deposit, etc to take the maximum advantage of exemptions under Section 80C.
Don't forget to invest in your medical insurance. You can avail of deductions up to Rs 15,000 under Section 80 D and up to Rs 20,000 if you are senior citizen for investments in health insurance policies.
Once you done with your investments, next it is time to tackle your taxes. The last date for payment of the Advance tax was March 15. "The government wants you to pay your taxes immediately as you get the funds, not at the end of the year,'' points out a leading chartered accountant, who refused to be quoted.
If you have not paid 100% of your tax for the year as Advance Tax by March 15, or you may have paid only part of your taxes, in such cases, you attract a penalty of 1% per month till the date of payment of taxes. So pay your tax as early as possible to avoid the penalties.
The good news is that most payments, though not all, can be done online these days. For instance, while you can pay your taxes and insurance premia online, one still needs to go to the post office personally to make the payments for public provident fund (PPF) and other such deposits.
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