Here are the Things You Need to Do Before the Financial Year Ends!

As we are approaching the end of the current financial year 2021-22, it is important to tick off your personal finance checklist and complete all the critical financial tasks pending for the year. Post-March 2022, you may lose the opportunity to make your tax-saving investments for FY 2021-22, and you may have to bear the penalties for missed deadlines. To avoid any of these, you need to ensure that your key finance-related tasks are accomplished before the financial year ends, i.e. on March 31, 2022.

To avoid any financial risks or losses, it is critical to perform your financial year-end tasks in advance and not wait until the last minute. However, if you haven't planned throughout the year and have left important financial obligations until the last minute, here is a checklist of things you need to do.

Let us look at the checklist and the financial tasks you need to complete before the financial year ends on March 31, 2022:

1. Link Your PAN Card with Aadhaar

The deadline for linking Aadhaar with Permanent Account Number (PAN) has been extended to March 31, 2022. In case if it is not done, then your PAN card will become inoperative, and you may not be able to perform financial transactions that require a PAN number. Notably, the PAN is mandatory for opening bank accounts, buying shares or mutual funds, etc. Furthermore, most financial institutions need consumers to provide their PAN for KYC purposes. If the PAN is inactive, it may have an adverse impact on the account.

Under section 272B of the Income Tax Act, 1961, carrying an invalid PAN card may attract Rs 10,000 as a penalty. It would be assumed that the PAN has not been furnished as required by law. All the resident taxpayers who have not yet linked their PAN and Aadhar must mandatorily link it before 31st March 2022. If you have missed this linkage, then you should do it at the earliest. Non-compliance with the same may attract a penalty as a late fee upto Rs 1,000 u/s 234H of the IT Act.

PAN-Aadhaar can be done through the e-filing website - (https://eportal.incometax.gov.in ) or by sending an SMS to 567678 or 56161 by typing UIDPAN<12 digit Aadhaar><10 digit PAN>. There is also an option to do it offline through the various PAN card centers of the National Securities Depository Limited (NSDL) and UTIITSL.

2. Update Your KYC with the Bank

The Reserve Bank of India (RBI) had extended the deadline for updating Know Your Customer (KYC) details in bank accounts to 31st March 2022 from the previous deadline of December 31, 2021.

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You will be required to visit your bank with a set of self-attested documents, such as identification proof and address proof, if your KYC data has not been updated in your respective bank(s). Customers can also submit their documents through mail or email in their respective banks. Your bank account may be frozen if you don't update your KYC information by the given deadline. As a result, account holders should update their KYC before the financial year ends to avoid disrupting their transactions.

3. File Your Delayed or Revised Income Tax Return (ITR filing)

The deadline to file an income tax return (ITR) for the fiscal year 2020-21 was December 31, 2021. But due to the pandemic, taxpayers in India can still file a late or revised return until March 31, 2022, as per Circular No.17 of 2021, dated September 9, 2021. Those earning individuals who missed to file their ITR by the given due date are advised to file their income tax return by the given last date for ITR filing.

Here is your chance if you didn't file or missed your ITR for the fiscal year 2020-21 by December 31, 2021. The late return must be filed by March 31, 2022. Additionally, taxpayers who discover a mistake after completing their income tax return have until March 31, 2022, to file a revised return. An income tax return filed between January 1, 2022, and March 31, 2022, is known as a delayed ITR.

The penalty for late filing/belated filing of an income tax return could be up to Rs.10,000 under Section 234F of the Income Tax Act (Rs 1,000 for taxpayers with a total income of less than Rs.5 lakh in the financial year). Thus, every taxpayer must file their tax returns or revise the already filed returns, if necessary, before the financial year ends.

4. Exercise Your Tax-saving Investments (Deductions u/s 80C)

For the financial year 2021-22, March is the last month to make tax-saving investments to minimise your overall tax burden. You must estimate your annual income and determine how much you will be required to invest in Section 80C tax-saving instruments. Keep in mind that your tax-saving investment should align with your overall investment strategy, i.e., it should aim to maximise your wealth rather than just save you tax.

One of the most popular sections for claiming tax deductions on investments is Section 80C of the Income Tax Act of 1961. Section 80C of the Income Tax Act allows certain investments to be claimed as a deduction up to Rs 150,000 from a taxpayer's Gross Total Income, lowering the total tax burden.

Some of the investments eligible for deduction u/s 80C include payment towards Life Insurance Premium, investments in Public Provident Funds (PPFs), ELSS, Sukanya Samriddhi Yojana, Subscription in National Savings Certificate, principal repayment of housing loan, registration/stamp duty on property, tax-saving fixed deposits, etc.

[Read: Are you a risk-taker looking for tax-saving investments? consider investing in the best ELSS]

If you have already invested in any of these tax-saving schemes, you will need to make a minimum contribution to these accounts before March 31 to keep them active. For instance, you could risk your PPF account becoming dormant if you fail to deposit the minimum amount for the financial year.

Similarly, under section 80D, a deduction of up to Rs 25,000 is available for medical health insurance for self, spouse, and children. An additional deduction up to Rs 25,000 is available on health insurance premiums paid for parents and up to Rs 50,000 if they are senior citizens.

5. Submission of Investment and Expenses Proofs to Your Employer

Suppose you are an individual joining any new organisation in the middle of the financial year. In that case, you need to submit Form 12B, which is an income tax form that needs to be furnished by the salaried individual. If you have changed your job during the financial year 2021-22, you must provide the details of your income using Form 12B.

After the new employee completes Form 12B with all of the required information, the new employer will issue a Consolidated Form 16 at the end of the year based on the information provided by the new employee in Form 12B. Before March 31, 2022, your new employer/organization will be entitled to deduct accurate TDS based on the information provided on Form 12B.

Employers are responsible for withholding tax u/s 192 of the Income Tax Act, 1961 on the salaries of the employees. For the computation of such tax, the employers take into account the investment declaration and proof submitted by the employees. Unless you provide proof of investment, such as rent receipts, interest certificates, House Rent Allowance (HRA), and Leave Travel Assistance (LTA), the employer will treat these allowances as taxable and deduct tax on them. In case you fail to submit the documents, you can still claim these items as exempt and claim the refund for the excess tax while filing your ITR.

To avoid higher tax deductions at source, the employees must make the required tax-saving investments, gather investment proofs and expense data, and submit them to their company as soon as possible. This would also prevent funds from being blocked in the form of TDS, which may be deducted by the employer if the employee fails to submit investment-related documents before the financial year ends on March 31, 2022.

6. Avail the Benefit of PMAY Subsidy (If required)

The Ministry of Housing and Urban Poverty Alleviation (MoHUPA) launched the Credit Linked Subsidy Scheme (CLSS) in June 2015 under the Pradhan Mantri Awas Yojana (PMAY- Urban)- Housing for All initiative.

This initiative provides affordable housing to the Low Income Group (LIG)/Economically Weaker Section (EWS) segments. Beneficiaries can avail of 20-year loans at 6.5% per annum. The PMAY program comprises of three phases, the first two phases have already concluded, and the final phase will end on 31st March 2022. Hence, the last date to avail the PMAY credit-linked subsidy scheme (CLSS) benefits for LIG and EWS categories is 31st March 2022. Thus, if you want to benefit from the PMAY Subsidy register before the financial year-end.

To Conclude...

It is always great to keep such a checklist handy during the financial year-end; it saves you from a hotchpotch, as you need to collate several documents, file ITR, and fulfil the required investment-related activities. Therefore, it is prudent not to wait until the last minute and perform your financial year-end tasks well in time.

In addition, Financial literacy plays a major role. If you are Financially literate, it aims to assist you in better comprehending the intricacies of financial planning, tax-saving, and investing. It is a life skill that you must grasp to maintain sound financial well-being. Financial literacy will help you maintain a secured financial future, prevent financial mistakes, and help you better understand and perform the above-mentioned financial year-end activities, as well as you can avoid the last-minute rush.

Therefore, if you are well equipped with financial knowledge, it will assist you to prepare for the upcoming financial year and make informed financial decisions.

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Warm Regards,
Mitali Dhoke
Jr. Research Analyst