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Tax Time: What if you have missed the BUS?

Most of the HR/Finance (depending on company) departments would have closed accepting proofs for tax saving investment as they need to process the payroll before the end of the month. But if you were lazy enough to not to make your investments on time or worst still made the investments but did not submit the proof to the HR department then what alternatives do you have.
Well the world has not ended and legally any tax saving investment that you do till 31st march 2010 will be counted for your Tax calculations for the financial year 2009-2010.

First let us identify which category you are:

A) Did not make the investment
B) Made the investment but did not give the proof to HR/Finance department

Let us look at each of the scenario one by one:

Did not make the investment: Now if your CTC is less than the taxable limit for the current financial year i.e. less than 190000 for women and 160000/.for men then you do not have to worry about any tax saving investments since you do not have to pay any taxes. Although it is still a good habit to save 20% of your carry home pay for future needs. Only thing is that you need not make the investments for the purpose of saving tax.

But if your CTC is above the taxable limit then you can still make the investment before 31st March 2010 and collect the proof of investment in a tax saving instrument. (Will tell you why in a moment) Your payroll department must have circulated a tax calculation sheet to you showing your tax liability, you can use that as a ready reckoner to find you tax
Made the investment but did not give the proof to the HR department: Well so you are in the category that did make the investment but failed to give it to the HR team to consider for giving you the benefit while deducting the TDS. Nothing to worry while the HR/Finance department may not be willing to give you the benefit of the same the Income tax department of government of India will be still willing to consider the same, just have a little patience.

There is also a possible scenario where you may have done only partial investment and want to do more if possible. In such cases also you can go ahead and still make the investment in the Tax savings instrument and save the receipts.

Now once you have made these investments and have go the receipts for the same you can sit tight till the time of filing the Income tax return comes. ( In case you have not filed the return ever then you can file it for this year and make a beginning.)

For the current financial year the IT department will be releasing a new IT form called Saral-2 and this will be used by most of the tax payers.
When filling this new IT Return form you can mention the tax saving investment made by you in this form and take benefit of less tax. At the end of the form once you have done calculations will be a column that will mention TAX to be paid or refunded. If you have paid more tax than you are supposed to pay the form will show a refund and the IT department will send a check to your address mentioned in the form or if you are giving your bank account no in the form you will receive a direct deposit through ECS in your bank account directly. Although it may take some time but you will still get the benefit of the tax saving investment you have done.

One frequently asked question by some of my team members to me is that they do not have money to invest but want to save on tax so should they go ahead and take a personal loan or cash advance against their credit cards to make investments? My answer to them is always a big NO as the tax that you are going to save will be less than the amount you will pay on the interest that you will pay the bank for taking the loan so it will not be a wise thing to do.

So to recapture :

1. You can make investment in tax saving instrument till 31st of March 2010.
2. These investments ( PPF, LIC, Mediclaim etc.) can be taking in consideration at the time of filing of your Income tax return and if any TDS refund is there you will get it directly in your bank account.
3. Never take a loan to make an investment in a tax saving instrument. Remember cost of a personal loan is around 18% and credit card typically start at around 40% per annum. So you will end up paying more in interest than you will save in form of tax. If you do not have money to invest in tax saving instrument let there be tax outflow rather than taking a loan to control the same.

Hopefully we will do better planning next year.

Thanks for reading, do share your comments.

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