45.  Finer Details of Tax Planning as well as Voluntary Tax Compliance Provisions

In this tip, I have outlined some finer details of income tax planning as well as voluntary tax compliance provisions which would enable you to save both a good deal of tax on the one hand and also save money on penalty or penal interest which might become payable if proper compliance is not made with some of the important provisions of the income tax law.

Filing of Income Tax Return

The income tax return has to be filed in the case of every taxpayer having total income in excess of the exemption limit, which is ` 2,00,000  for male as well as for female taxpayers, and ` 2.50 lakh for senior citizens for the A.Y. 2012-2013. For a very senior citizen of 80 years and above the exemption limit would be ` 5,00,000. Even if income tax has been paid either by way of advance tax or by way of deduction of tax at source, or otherwise, if the total income of the individual exceeds the above exemption limits for the fnancial year 2011-2012 relevant for the assessment year 2012-2013, then the income tax return has to be filed. When the return is filed by 31.3.2013, then one can escape penalty, which might otherwise become payable under the provisions of Section 271F of the I.T. Act, amounting to ` 5,000. It is better that a taxpayer claiming the benefit of deduction under Section 80C of the I.T. Act regarding certain investments should, as far as possible, enclose proof for the payment of the same, such as receipt for payment of life insurance premium, deposit of money under the Public Provident Fund, etc.



Make the Balance Investments for Benefit under Section 80C

A maximum of ` 1 lakh is allowable as a deduction in computing the net taxable income of an individual in respect of various stipulated investments and certain expenditure such as life insurance premia, national savings certificates, five-year or more bank fixed deposits, public provident fund contributions, contributions in a recognized or government provident fund, ELSS units, tuition fees up to two children, repayment of certain housing loans, etc. The total amount of deduction under Section 80C, 8OCCC, etc. are limited to ` 1 lakh. As far as possible a taxpayer should try to take full advantage of these deductions. If there is some shortfall remaining to reach the target of ` 1 lakh deduction, then you can do so till 31 March 2011.

SeIf-Assessmemt Tax

Every person who is required to pay any income tax on the basis of the return of income, after adjustment of tax deducted at source and advance tax, is compulsorily required to make payment of tax before filing the return of income under Section 140A of the Income Tax Act. This will be done in time so that no penal interest @ 1 % p.m. becomes payable by the taxpayer.

Advance Tax

One important duty of every taxpayer is to voluntarily pay advance tax, if the net income tax payable exceeds
` 10,000. The last advance tax instalment is due on 15.3.2013 which should be paid on or before that date to escape penal interest by the person concerned.

Investment in Capital Gains Bonds

Where a taxpayer has made some substantial long-term capital gains and is interested in saving income tax thereon, he can invest within six months of the date of sale of the capital asset in any one of the two types of bonds eligible for 100% exemption under Section 54EC of the I.T. Act, namely, bonds of REC or NHAI upto a maximum of ` 50 lakh. The lock-in-period for investment in these bonds is three years and the interest receivable on these bonds is, of course, taxable. But in most cases it is desirable for a person having long-term capital gains and wishing to save tax thereon under Section 112 to invest the net capital gains in these bonds. This should be done as early as possible.

Invest in a Residential House

If a taxpayer sells a residential house and desires to save long-term capital gains thereon, he can invest the net long-term capital gains (after Cost of Inflation Index) in the purchase of a house within two years or in the construction of house within three years as per the provisions of Section 54 of the I.T. Act. Where the long-term capital gains relate to sale of any asset other than the residential house then the full sale proceeds have to be invested in the purchase of a residential house within two years or construction of a house within three years of the sale provided that the assessee does not have more than one residential house in his name on that date. A good deal of income tax can be saved by remembering this provision well and complying with the provisions of Section 54F as early as possible.

BOG Certificate

Where a taxpayer is interested in making some contributions for a genuine charity, then he can contribute up to 10% of his taxable income and get 50% of the donations so paid as a deduction under the provisions of Section 80G of the Income Tax Act in respect of certain trusts. For funds like Prime Minister’s Relief Fund, etc., the deduction is admissible @ 100%. Hence, a taxpayer desiring to make a donation can take advantage of the provisions of Section 80G in the remaining weeks of this financial year.

Claim Mediclaim Deduction

Under the provisions of Section 80D of the IT. Act, a deduction up to
` 15,000, in addition to the sum of ` 1 lakh deductible under Section 80C, is permissible in respect of premium paid on mediclaim policy. For a senior citizen, the maximum amount deductible is ` 20,000. As


per the Finance Act, 2008, w.e.f. the A.Y. 2009-10 an additional sum of as 15,000 can be claimed for medical claim policy for parents. Where the parent is a senior citizen, the deduction could be up to ` 20,000.

Apply for Tax Refund in Time

Where a taxpayer is eligible to get refund due to higher deduction of tax at source, or due to an excess payment of advance tax, or for any other reason, then the application for refund in Fonn No. 30 should be filed as early as possible. The application should be accompanied by the I.T. Return. At the later, the application for refund should be made within one year from the end of the relevant assessment year. For example, for a refund for the FY 2010-2011, i.e., for the relevant assessment year 2011-2012, the last date for filing the application for refund would be 31.3.201 3. If the application is not made in time, then no refund would be granted. Hence, pending applications, if any, particularly for the assessment year 2011-2012 should be filed as early as possible, and latest by 31.3.2013.

Apply for PAN

One of your important duties under the Income Tax Act is to apply for a permanent account number to your assessing officer in Form No. 49A. The failure to apply for a permanent account number entails a penalty of ` 10,000 under the provisions of Section 272B of the I.T. Act. There are many types of financial transactions for which it is now compulsory for every person to quote his PAN, i.e. permanent account number, e.g. sale or purchase of any immovable property valued at ` 5 lakh or more, and sale of shares, securities, bonds, debentures, government securities above stipulated amounts, for opening a bank account, having a demat account, etc. Hence, the application should be made for PAN in time. The authorized agency to allot the permanent PAN account number is, UTI Service Centre where a PAN Card can normally be delivered within the 15 days on payment of a fee of approximately ` 60.


The finer nuance of tax planning as well as the voluntary compliance for the important dates as outlined above would enable a taxpayer to save himself from unnecessary worries, income tax penalty and penal interest and would also help in saving a good deal of tax.
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