Financial Year 2023-24 is approaching to its end. Therefore, before 31.03.2024, it is crucial for Non-corporate (like Individual, firms, etc) as well as Corporate taxpayers to bear in mind certain important aspects of the Income-tax Act such as making tax saving investments, making payments for claiming deductions for FY 2023, etc. Listed below are some of such aspects:
1. Tax Saving Investments: In order to plan the taxes on income earned in FY 2023-24, it is essential to make tax-saving investments, especially for those who opt for the old tax regime. It is suggested to allocate funds to such tax-saving options that balances the earnings, savings, spending and tax payments. Below are some of the available tax saving investments options: • Section 80C Investments (like Term Insurance, PPF, ELSS Mutual Fund units, etc) • National Pension System (NPS) • Section 80D Health Insurance • Section 80G Donations to charitable institutes
2. Section 43B(h) – Payment to a Micro or Small Enterprise under MSME Act: Finance Act 2023 introduced a new provision to provide that any sum payable to a registered Micro or Small enterprise (manufacturer or service provider) beyond the credit period or 45 days (whichever is lower) shall be allowed as deduction only on actual payment basis. Therefore, if any sum is due and outstanding to a registered Micro or Small enterprise (for which credit has expired or going to expire on or before 31st March), in order to claim deduction of such expenses in FY 2023-24, last date to make payment to such a Micro or Small enterprise is 31st March, 2024.
3. Filing of Updated Return in ITR-U u/s 139(8A): Updated Income Tax Return can be filed if taxpayer wants to rectify any error or omissions in the original Return or where no Return is filed, wherein additional tax liability arises on preparing the revised computation of income. The due date to file such an updated return u/s 139(8A) is 24 months from the end of the relevant Assessment Year. Therefore, it is important to note that the updated return for FY 2020-21 can be filed till 31st March, 2024 by paying 50% of additional tax+interest+late fee, as applicable. Furthermore, for FY 2021-22, an updated return can be filed by 31st March 2024 by paying 25% of additional tax+interest+late fee, as applicable.
4. Withholding tax provisions applicable on year-end provisions provided payees are identifiable; The taxpayers who follow mercantile system of accounting, are required to account for all expenses, even if the bills/invoices have not been received. This is done by making provision for various expenses at year-end. Questions regarding applicability of withholding of taxes on such provision of expenses, is subject matter to litigation, for which various judicial judgments are available. Therefore, it is may be advisable to deduct and pay TDS on the amount credited to “Provision for Expenses account” where the Payee & Liability amount is ascertainable.
5. Investment by Trust/Institution to claim exemption u/s 11 of the Income Tax Act, 1961; For claiming exemption u/s 11 of the IT Act by a 12AA/12AB registered Charitable Trusts, it is provided to mandatorily apply 85% of its income earned during the relevant Financial Year wholly and exclusively towards the charitable and/or religious objects for which it was granted registration. However, where such Trusts/Institutions fails to apply 85% of its income during the relevant FY, they can decide to accumulate its income, either in whole or in part for application towards such objects in subsequent Assessment Years. For this, the Trusts/Institutions are required to invest the income so accumulated or set apart in modes specified u/s 11(5) of the Income-tax Act on or before end of relevant FY i.e. on or before 31st March, 2024. Having said above, in case of any amount is so accumulated or set apart by any Trust/ Institution as per above provision for the FY 2018-19, the last date to utilize such funds for specified purposes is also 31st March, 2024. Accordingly, where the Trust/Institution has not utilized the funds within this date, then it shall be treated as deemed income of Trust/Institution and taxed accordingly.
6. Form 67 – Foreign Tax Credit 31st March 2024 is the extended due date for uploading a statement in Form 67 to claim Foreign Tax Credit in case of any foreign income is offered to tax and on such income, tax was deducted or tax paid in FY 2022-23 [If ITR has been furnished within the time specified under section 139(1) or section 139(4)].
