A quick and simple guide on tax compliance ahead of the March 31 deadline

Apart from tax planning, you need to make sure you've paid your advance tax correctly and linked your Aadhaar to your PAN

March is an important month of the year when it comes to money matters. The last month of the financial year also has several income tax-related matters that you must look into, and which go beyond tax planning. Here are a few things you need to complete before March 31 to avoid penalties. 

Advance tax (March 15): The last day of depositing the fourth instalment of advance tax (if you are liable to pay) for FY2020-21 is March 15. Suresh Surana, founder RSM India says, "Non-payment of advance tax would result in an additional interest burden. It is notable that there is no advance tax payment obligation if the estimated tax liability is less than Rs 10,000." The interest burden is applicable u/s section 234C and is levied on the taxpayer for non-payment or deferment of quarterly advance tax instalments in accordance with the due date, that is, March 15, 2021. Interest is levied at the rate of one per cent per month or part thereof, in each quarter of default. 

Further, if the taxpayer fails to pay at least 90 per cent of his liability on or before March 31, 2021, interest u/s 234B would be charged at one per cent per month or part of a month, on the tax dues from 1 April till the date the tax assessment is made.  

Vivek Jalan, partner, Tax Connect Advisory Services, a Chartered accountancy firm, clarifies, "A resident senior citizen (an individual aged 60 years or more during the relevant financial year) not having any income from business or profession is not liable to pay advance tax."

Until Marh 31, 2020, companies had to pay dividend distribution tax (DDT) on the profits they distributed among shareholders. But after April 1, 2020, the onus of paying the tax fell on shareholders. Note, that one must pay advance tax on dividend income only after the dividend has been declared or paid. Surana says, "Since dividend income cannot be predicted in advance, its receipt becomes certain only once it is declared by the company. Once it is finalised and declared, there is certainty with respect to its receipt and the assessee is therefore required to include it in his advance tax computation for the year."  

The Finance Bill 2021 has proposed to relax the requirement of advance tax payment with respect to dividend income, as accurate determination of advance tax liability is not possible due to the intrinsic nature of the income. 

Link Aadhaar with Permanent Account Number (PAN) (March 31): This is the last date of linking PAN with Aadhaar. Non-linking of PAN with Aadhaar will render the PAN inoperative. The due date to link Aadhaar with PAN was extended from June 30, 2020 to March 31, 2021. Archit Gupta, chief executive officer (CEO) Cleartax says, "Failure to link PAN and Aadhaar will make PAN inoperative. It shall be assumed that PAN has not been furnished."  Further, the income tax department will impose a penalty of Rs 10,000. Gupta adds, "PAN must be quoted while depositing a certain amount of cash into a bank account, buying or selling immovable property, opening a bank or demat account, remitting money, etc. Once it is inactive, the PAN will be operative only after linking it with Aadhaar." The deadline to link PAN with Aadhaar was initially extended from August 31, 2017 to December 31, 2017, and subsequently to March 31, 2018, then June 30, 2018 and later to March 31, 2019. The last extension is till March 31, 2021, and this deadline is unlikely to be extended further. Jalan says, "The tax department will not process the returns until PAN and Aadhaar are linked. Hence it is important that the same is done."

Tax returns (March 31): The last date for filing belated or revised returns for FY2019-20 is March 31. Gopal Bohra, partner, NA Shah Associates, says, "Belated or revised return for FY 2019-20 cannot be filed after March 31. Therefore, all taxpayers who have not filed their returns yet should file their them at the earliest with applicable interest and late fees." 

If you miss the returns filing deadline for FY2019-20, you will not be able to file a revised ITR for FY 2019-20. Bohra adds, "Further, any corrections required to be made in returns that have already been filed should also be done before March 31."

The tax department has wide authority under section 119(2)(b) of the Income Tax Act to admit an application or claim for any exemption, deduction, refund or other relief after the expiry of the period specified under the I-T Act. Surana adds, "As such, the taxpayer may consider filing an application requesting the Tax Authority for condonation of delay. The Department may permit the filing of such return based on the merits of the case." Experts suggest that it's better not wait any longer. Gupta adds, "For financial year 2019-20, one can file a belated return by March 31, 2021,  However, the taxpayer shall be liable to pay a late filing penalty. For taxpayers having taxable income below Rs 5 lakh, the penalty payable is Rs 1,000. Otherwise, the penalty may extend up to Rs 10,000." 

Tax Deducted at Source/Tax Collected at Source (March 31): To provide relief to taxpayers and tax collectors during the Covid-19 outbreak, the department extended due dates for filing of TDS/TCS returns/statements for the first and second quarters of FY21. Vikash Mittal partner, Vikash Mittal and Associates says, "In case the tax deductors or collectors fail to furnish returns/statements on or before the extended timeline, late fees for default in filing the same will be levied. Penalty may go up to Rs 1 lakh. It is advisable to furnish returns/statements on or before the extended timelines to avoid late fees and penalty."

Vivad Se Vishwas Scheme (March 31): The deadline to submit a declaration under this scheme has been extended to March 31, 2021. The Direct Tax 'Vivad se Vishwas' was launched in Budget 2020 with the aim of reducing pending income tax disputes and providing the blocked revenue to the government. Gupta says, "Individuals who have taxed under dispute and wish to avoid protracted litigation can declare under the scheme on or before March 31, 2021. Any payment made after the deadline will suffer an additional 10 per cent on the disputed tax amount."

Tax savings is an important activity done in the month of March by millions, but don't forget the above-mentioned things to start a stress-free new financial year on April 1.  

Submit form 15G and 15H

Form 15G and Form 15H are valid for one financial year

Submit these forms every year at the beginning of the financial year

This will ensure that the bank does not deduct any Tax Deducted at Source (TDS) on your interest income

For FY 2020-21, due to the COVID-19 pandemic tax authorities had extended the validity of the Form 15G and Form 15H up to 30th June 2020

If you have forgotten to submit the form FY 20-21 the bank might have already deducted the TDS

In such a case you can file your income tax return to claim a refund of TDS

Don't forget to submit the form 15G and 15H for FY 2021-22 in the bank soon as the new financial year is just around the corner 

Footnote: Form 15H is for senior citizens, those who are 60 years or older, while Form 15G is for everybody else

Source: tax websites and Bankbazaar