With the financial year coming to an end in March, it's time to submit the investment declaration to your respective companies. For those who have not completed their tax planning yet, there could be last minute investment decisions that may impact their tax benefits. Saving tax requires proper planning and periodic reviewing.
Tax-saving investments should be part of the overall portfolio, but if you haven't had the time till now, just concentrate on saving as much tax as possible.
Here are tips for latecomers...
Investment proof: Proof of investments have to be submitted to the employer's finance department during this time of the year. This enables the employer to deduct tax from your salary over few months.
However, just because this declaration required proof of investment, it does not mean that you cannot make any further tax-saving investments in the remaining months. While filling up the investment declaration, the proof of investment is mandatory. If your investments are not supported by the required document, that entry will not be considered. Also, you don't need to give a proof about the provident fund deduction. The employer takes it into consideration while computing your tax liability.
Late payments: There are chances that some of your insurance payment or the systematic investment plans of mutual fund is coming up for renewal in the next two months. This implies that you will not have the proof whether you are continuing with the SIP or stopping it.
But to manage this, you can take help of historical evidence. That is, if these payments have been done regularly then, the payment proof of the last year can be submitted. Only, remember to mention that you intend to continue these insurance and insurance expenses in the coming year as well.
This will ensure that the remaining instalments of SIP or an insurance premium in the next two months are also taken into consideration while calculating the tax benefit.
Last minute dash: There are times when a person has not done the required investments till the submission of declaration. But he may opt for a last-minute scramble. In such a scenario, there are chances that the employer has already started deducting the tax, as per the details provided earlier.
In this case, some extra effort has to be taken to talk to the employer if the late investments can be considered for the required tax benefit. However, remember that once employers have deducted tax from salary and deposited it with the income tax department, little can be done from the employer's end.
So, if this has already happened, you have to claim for a refund when filing your IT returns.
But it is a long-winding process. First, you have to file the returns. Then, there will be a complete assessment from tax authorities. And, finally, you will get the refund. Sometimes, this time span can run into a good six months to a year or even more.
Investment tips: The last minute investments need planning to make your money grow. If you are planning an investment in an equity linked saving scheme, it should be done through an SIP only. The lump sum investments have to go in debt-based tax saving instruments such as long-term bank fixed deposits and national savings certificate.
Also, take your future liabilities into consideration before investments. If you are required to save a big amount in the coming months, avoid instruments that require regular annual payments such as unit linked insurance plans.
The writer is a certified financial planner.
