Making March Meaningful- Tax Angle


Making March Meaningful- Tax Angle





Making March Meaningful- Tax Angle

Be it salaried taxpayer or businessmen, firms or companies, March is the most crucial and important month. Time has an important role to play in the determination of the tax liability. End of the financial year is the time to review the financial transaction during the year & manage its tax impact. Few of the instances which could help in managing the tax impact could be as under:

  1. Review the estimated income of the FY 2018-19. There are few incomes where taxpayers can legally plan the quantum of taxable income.For example, Mr. Ram has earned Long Term Capital Gain (LTCG) of Rs. 15 Lakh till 1stMarch 2019 from sale of few shares. He has shares of few other companies which he is not selling as he will incur the loss of Rs. 10 Lakh on such shares and so he wants to hold it for long term. In such scenario, it is advisable that Mr. Ram should sale the share of Rs. 10 Lakh and may re-purchase it on the next day for holding it on long term again as per his original wish. As a result of this, his taxable LTCG in the current FY would be reduced to Rs. 5 Lakh only as against 15 Lakh earlier. By selling such loss making shares & re-purchasing it on the next day, he is able to book the loss & liable to pay the tax on income of Rs. 5 Lakh only as against Rs. 15 Lakh earlier.

[It may be noted that LTCG on sale of shares & equity oriented mutual funds which was earlier exempt from tax is now taxable @ 10% if the amount exceeds Rs. 1 Lakh. However, in case of old shares of the taxpayer income accruing till 01.02.2018 are exempt from LTCG tax due to specific grandfathering clause. FY 2018-19 is the first year after LTCG exemption has been withdrawn. Taxpayer will be required to work out gain accruing till 01.02.2018 & gain arising after 01.02.2018.]

  1. Ensure the optimum tax benefit by doing investment in all the tax saving instruments. Review the investment eligible for deduction u/s 80C (LIC/PPF/ELSS etc), U/s 80D (Mediclaim). Investment in National Pension Scheme (NPS) provides deduction u/s 80CCD(1B) of Rs. 50,000/- which is over and above the deduction of Rs. 1.50 Lakh u/s 80C.
  1. The last date for payment of advance tax on income in the FY 2018-19 for all categories of taxpayer is 15th March. Non-payment of advance tax attracts interest u/s 234C & 234B. Pay advance tax by 15th March to avoid the interest.
  1. One can plan the timing of various incomes so as to suit the individual requirements. For example, LTCG on sale of capital assets can be postponed by few days. For example, if Mr. Arun is proposing to execute the sale deed of the property in March-2019. If he defers it to April-2019 then he will be able to get the indexation benefit for one more year. Further, he will have more financial liberty of fund as he will not be required to invest the amount in Capital Gain Deposit Scheme (CGDAS) on or before 31st July 2019 for investment in another property for exemption either u/s 54 or 54F
  1. Any assets like computer, car, machinery, etc purchased and put to use by businessmen enables them to claim the benefit of depreciation. The depreciation available is @ 50% of the normal rate even if asset is put to use on the last day of the financial year. It means that if any businessmen purchase a car on the last day of the financial year then also the depreciation can be claimed by such person. If income is high in the FY 2018-19, taxpayer can plan the benefit of depreciation accordingly but if the income is low then the decision can be deferred to next FY so that higher benefit can be claimed in next FY. Commencement of commercial production in case of new unit can also be planned keeping this provision is mind.

Above are just few of the illustrative examples highlighting the importance of March. The list is exhaustive and unending. Every taxpayers needs to view it from individual angel for optimum tax benefit.

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CA. Naresh Jakhotia

Chartered Accountants

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CA Naresh Jakhotia
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