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HomeBusinessThese tax resolutions will save you money and trouble in 2023

These tax resolutions will save you money and trouble in 2023


Making resolutions is a New Year ritual and many of these promises to ourselves never get fulfilled. But resolutions related to tax must not be ignored because the tax department is not very lenient when it comes to deadlines, nor merciful when dealing with unpaid taxes. So, here are a few tax promises you should make to yourself for peace of mind and long term security.
Utilise All Available Deductions
■ Returns filed by taxpayers show many people don’t fully utilise the deduction limit under Sec 80. This leads to unnecessary outgo of tax on hard earned income.
Plan out investments so that you can claim the full benefit of tax-saving options to reduce your taxable income by up to Rs 5 lakh-6 lakh as follows: Section 80C (max Rs 1. 5 lakh), Section 80CCD(1b) (max Rs 50,000), Section 80D (max Rs 75,000-1,00,000) and Section 24 (max Rs 2 lakh).
Harvest Long-Term Gains By March 31
■ Stock markets have done very well after the Covid scare. If your stocks and equity funds have gained during the year, harvest up to Rs 1 lakh of long term capital gains to lower your future tax. Long-term capital gains up to Rs 1 lakh from stocks and equity-oriented funds are tax-free in a financial year, but you need to book profits before March 31 to pocket the tax-free returns. The same stocks and equity funds can be bought back again, but their price of acquisition for tax computation will get reset at a higher level. The same strategy can be used for equity funds. Ask your mutual fund house or CAMS or Karvy for a capital gains statement to know how much of capital gains needs to be harvested.
Pay Advance Tax
■ Many taxpayers don’t report their interest or dividend income because they are under the misconception that if TDS has been deducted, no more tax is due. But TDS is only 10%, while both interest and dividends are taxed at the normal rate applicable to you. If you have invested in bonds, NSCs or bank deposits, or have received dividends, make sure you pay the tax on these incomes by the due date. All these incomes will show up in your annual information statement (AIS), so there is just no way you can escape the liability. Also, keep in mind that unpaid tax attracts a penalty of 1% per month of delay.
Check AIS When Filing Returns
■ The annual information statement (AIS) has details of all your financial transactions during the financial year. It will have details of income (salary, profession, rent, interest and capital gains) as well as expenses(foreign exchange, purchase of gold above Rs 50,000 in cash and Rs 2 lakh by card) and investments (mutual funds, stocks, bonds). It also has details of the tax paid on your behalf by your employer and the TDS deducted by others. Be sure to check your AIS and verify that the details of your financial transactions are correct.
Verify TDS Details In Form 26AS
■ Form 26AS is your tax credit statement and has details of the TDS deducted on your behalf, and the tax collected at source (TCS) paid by you. Access your Form 26AS through the income tax department portal or your netbanking account and check if the TDS and TCS deductions are correctly mentioned in it. If some TDS or TCS has not been credited to you, you must contact the deductor immediately. A periodic check of Form 26AS will ensure you are not running around at the time of tax filing.
Don’t Ignore Foreign Assets, Earnings
■ Tax compliance becomes a little complicated if you have foreign assets. All foreign bank accounts, financial interests, immovable property, accounts in which an individual has signing authority, and any other capital asset held by the individual outside India, must be reported in the tax return, irrespective of the total income of the individual. Many taxpayers omit this, but this is not recommended. Not disclosing foreign assets can invite serious charges under the Black Money (Undisclosed Foreign Income And Assets) and Imposition of Tax Act, 2015. Even if a return for a previous year has been processed, cases can be opened up to 16 years later and penalties levied.
Kaushik is CEO and founder, Taxspanner. com



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