Missed The December 31 Income Tax Return Deadline? Income Tax Planing TIPS

The Indian income tax regulation permit people to file their return for the previous year, three months later than the end of the relevant AY or before the conclusion of the assessment, whichever comes first. So, someone who hadn’t submitted their income tax return by July 31, 2022, for the fiscal year 2021–2022 (AY 2022-23) had the option to file their belated tax return by December 31, 2022. But what happens if someone also misses this deadline?

In these circumstances, one has the choice to submit an updated tax return (ITR U). This option was made available in the Budget 2022 and is accessible for up to 24 months following the conclusion of the applicable assessment year by paying an additional tax of 25–50% on interest-bearing tax.

Regardless of whether a person filed an original, belated, or revised ITR or altogether missed filing the form in a specific financial year, an updated ITR (ITR-U) can only be submitted if a taxpayer has new income to report. However, there are some circumstances in which a person cannot file an updated ITR. A person can, among other things, file an ITR-U if they missed the deadline to do so or modify their ITR if they neglected to disclose income earlier. ITR-U cannot be used to declare a loss, get an income tax refund, or do other things like that.

If ITR-U for FY 2021-22 (AY 2022-23) is filed within the first relevant assessment year, which is between April 1, 2023, and March 31, 2024, a person will also be responsible for paying 25% more tax on the tax due. ITR-Us must pay an additional 50% of the tax payable if they are submitted between April 1, 2024, and March 31, 2025.

According to a new regulation put forth by The Central Board of Direct Taxes (CBDT), ITRs filed after July 31 must be updated within 30 days, as opposed to the prior 120 days of filing the return. If an individual has submitted a revised or belated ITR in December, they must confirm it in January before the deadline. ITRs must be verified within 30 days, or they end up becoming invalid.

Tips to do it before March 31

  • Estimate the tax liability

Firstly, taxpayers should estimate their tax liability after factoring in unavoidable investments or payments that qualify for a tax deduction, such as contribution towards EPF, repayment of home loan principal and interest repayments, NPS contribution as part of their salary package (if any), term insurance plans, tax deduction on HRA, etc.
This would allow them to avoid over-or under-spending/investing in tax saving options.

  • Invest with a long-term approach

Experts suggest individuals avoid taking a piecemeal approach while making tax-saving investments. Instead, they should align investments with long-term financial goals to derive the dual benefit of tax saving and wealth creation.

  • Identify the tax regime

Salaried people should further identify which tax regime is good for them (the old one or the new one). For better tax management, investors should calculate their tax liability under both tax regimes and opt for one involving the least tax outgo.

Budget 2020 introduced a new tax regime with a lower tax rate in the interest of those unable to avail of benefits under the older tax regime. However, this regime is optional.

  • Invest in voluntary investments eligible for tax deductions

The residual tax liability can be saved through various voluntary investments or payments eligible for tax deduction under various sections of the Income Tax Act. These include investments in ELSS, NPS, ULIPs, VPF, PPF and other small savings schemes qualifying for Section 80C deduction, an additional deduction for investments of up to Rs 50,000 in NPS under Section 80CCD (1B), deduction under Section 80GG for those living on rent but not receiving HRA, availing HRA exemption by paying rent to parents under Section 10(13A), etc.

  • Making investments with proper planning

While making an investment, many people forget to check its rate of return.

The rate of return on investments like PPF and FDs is readily available on websites, advertisements, etc. But the rate of return on investments like ELSS, ULIP, etc., whose values fluctuate daily, is uncertain.

So, while making the investment in these, experts suggest that an individual must check whether their returns are quite enough if they are compared with the return on other investments.

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