Five Income Tax rules to consider at the beginning of the fiscal year

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The new financial year begins on April 1 and it is that time of the year to do your tax planning. One must not procrastinate on this. If you delay planning your taxes till the last day, you will end up making hasty and wrong decisions. Here are five must-do’s for better tax planning.

1) Old Vs New Tax Regime

You have to decide whether you will pay tax under the old tax regime or under the new tax regime. If you are opting for the old regime, it means that you will take advantage of tax-saving investment and deduction and pay tax as per the three tax rates at 5%, 20%, and 30%. And if you opt for the new regime, you will not take any tax exemption and will pay tax according to the low tax rate. Tax rates in the new regime are 5%, 10%, 15%, 20%, 25% and 30%. If you have just started a job and the salary is not enough to invest, then a new regime can be right for you. But, if you are repaying a home loan, your PF is getting deducted, if you have taken insurance, then choose old tax regime. A standard deduction of Rs 50,000 is also available in the old tax regime.

2) Avoid over-flow of 80C

Through Section 80C of Income Tax, you can get a tax rebate by investing up to Rs 1.5 lakh. But, before investing, check how much PF is being deducted from your salary because it is also a part of 80C, so do not ‘over- invest’ just for the sake of 80C.

3) TDS burden can double

A new section has been added to income tax in Budget 2021. TDS/TCS can be deducted at higher rates under sections 206AB and 206CCA if you have not filed income tax return. For those people whose TDS is more than Rs 50,000, and if you are unable to show two years IT return proof, then you will have to pay double the liability of TDS or flat at 5%—whichever is more. However, the onus of seeking IT return proof is on the deductor.

4) If you are over 75 years of age, you can be exempted from filing IT return

Senior citizens above 75 years are exempted from filing IT returns. If you want to take advantage of this, prepare the details of all your earnings because, if your Fixed Deposit interest and pension does not come in the same account, you wont’t benefit. If your pension and your FD are in two different banks, then shift them to the same bank. If you earn from rental income, capital gains and dividend, then you have to file the IT returns.

5) Pre-filled ITR Form

It will be easy to file ITR in the new financial year. The process has been simplified for the convenience of the employees. Individual taxpayers will get a pre-filled ITR form from 1 April 2021 onwards.