Navigating the Fiscal Landscape: Essential Finance - Tax Tips for 2024

As we step into a new year, understanding the intricacies of the ever-evolving fiscal/tax landscape becomes paramount for individuals and businesses alike. The financial world is dynamic, and staying ahead of the curve can lead to significant savings and strategic financial planning.

Reflecting on the financial landscape of 2023, a myriad of lessons and insights emerges, shaping the way individuals and businesses approach financial planning in India. In this article, we provide an overview on a key set of finance tax tips tailored for 2024, addressing both global considerations and specific insights for the Indian context.

Key Finance Tips for 2023

Emergency Fund Essentials

Whether it's a medical emergency, job loss or a significant reduction in income, car repair, or sudden home repairs, etc. having an emergency fund is a crucial financial safeguard that provides individuals with a financial cushion in times of such unexpected expenses or emergencies.

An emergency fund serves as a financial safety net, providing security to the individuals. Without an emergency fund, individuals may be forced to liquidate investments or withdraw from retirement accounts to cover unexpected expenses, potentially jeopardizing their financial future. Thus, in uncertain times, building and maintaining a robust emergency fund is of paramount importance.

Deciphering the Concessional Tax Regime

The Finance Act 2023 made a significant revision for taxpayers by way of making the concessional tax regime as the default tax regime from Financial Year 2023-24 onwards. As such, the taxpayers would now be filing their tax returns under such default tax regime which provides for concessional tax rates on one hand whereas restricts the taxpayers from availing certain specified deductions and exemptions. However, the taxpayers can opt to pay taxes in accordance with the old tax regime by way of filing Form 10-IE.

Thus, the taxpayers should explore the nuances of India's new tax regime and understand its implications on their personal and business finances. Considering that switching between the tax regimes is subject to certain considerations and restrictions, the taxpayers should compare with the old regime to make informed decisions.

Providing for Medical Emergencies

The COVID pandemic has served as a stark reminder of the importance of being financially prepared for medical emergencies which has led many individuals to reevaluate their financial priorities and recognize the value of having a dedicated fund to address unforeseen health challenges.

Medical emergencies such as accidents, sudden illnesses, or the diagnosis of a medical condition can happen unexpectedly, regardless of age or lifestyle and may require immediate attention and substantial financial resources. Having an adequate Mediclaim or health policy may enable in protecting finances and ensures that one can access the necessary healthcare without depleting their savings or accumulating significant debt.

Moreover, the Mediclaim premium paid by the individuals for themselves as well as in case of certain dependents can be claimed as a tax deduction upto Rs. 25,000 (Upto Rs. 50,000 in case of senior citizens) thus effectively reducing their tax liability.

Holistic Tax-Efficient Investing

Investing in a tax-efficient manner involves strategic tax planning to maximize returns while minimizing the tax liability. Taxpayers should gain an understanding of the tax treatment of dividends, interest, and capital gains for each investment and accordingly choose such investments that align with their tax strategies.

Further taxpayers opting for the old tacx regime should seek to take advantage of available deductions and exemptions, such as those for home loan interest, medical insurance premiums, and contributions to provident funds. Section 80C of the Income Tax Act, 1961 (hereinafter referred to as 'the IT Act') provides for a plethora of options for investments in tax-saving instruments such as Public Provident Fund (PPF), Equity-Linked Savings Schemes (ELSS), and National Pension System (NPS), etc. which would enable to reduce one's taxable income.

Furnishing Tax Returns Timely

Every taxpayer eligible to file their return should furnish the same within the due date u/s 139(1) of the IT Act (i.e. 31st July for individual taxpayers not subject to Tax Audit and 31st October for other individual taxpayers). Taxpayer may file such return alongwith additional interest and late fees within the extended deadline upto 31st December.

Thus, furnishing tax returns in a timely manner in India is crucial for taxpayers as not complying with the same may entail the taxpayers to face consequences as follows:

Late Filing Fees u/s 234F of the IT Act amounting to Rs.5,000 where such return is filed beyond the due date u/s 139(1) of the IT Act. However, if the total income of the taxpayer is upto Rs 5,00,000/, such late fees would be restricted to Rs. 1,000/-.

Additional interest u/s 234A of the IT Act would be applicable @ 1% per month or part of the month for the amount of tax remaining unpaid.

More importantly, the taxpayer would also lose out on certain deductions and/or set off and carry forward of losses (other than house property loss) as a result of filing the return beyond the due date prescribed u/s 139(1) of the IT Act.

Link Aadhaar and PAN

Section 139AA of the IT Act provides that every person who has been allotted PAN as on the 1st day of July, 2017, and who is eligible to obtain Aadhaar number has to link his PAN with Aadhar.

In case of failure to link such Aadhar and PAN by 30th June 2023, the PAN allotted to the person shall be made inoperative w.e.f. 1st July 2023 and further, such persons would face the following consequences:
Income Tax refund including any interest on such refund would not be provided to such persons
In case of applicability of TDS/ TCS, such taxes would be collected at a higher rate

Thus, every person should link their Aadhar and PAN (in case the same is pending) after payment of penalty of Rs. 1,000.

Adjust Withholding Declarations:

Salaried taxpayers are required to submit a tax declaration at the beginning of the financial year which includes details of choice of tax regime, proposed investments, expenses, and other deductions that the employee plans to claim for the purpose of computing TDS.

If there are changes in one's income, such as a salary increase or additional sources of income, adjusting withholding declarations helps ensure that the correct amount of tax is withheld from the paychecks which prevents underpayment or overpayment of taxes. Thus, adjusting the withholding declaration from time to time plays a crucial role in ensuring that the amount of tax withheld from your income aligns with your actual tax liability.

Payment of Advance Taxes

Every person whose estimated tax liability for the year is Rs. 10,000 or more to their tax in advance, would be required to pay advance tax. However, a resident senior citizen aged 60 years or above not deriving any income from business or profession would not liable to pay advance tax.

As such, the taxpayers need to pay such advance tax on or before the following mentioned due dates:

It is pertinent to note that in case of taxpayers opting for presumptive taxation scheme u/s 44AD & section 44ADA, the due date for such taxpayers would be payment of 100% of advance tax liability on or before 15th March of the financial year. As failure to pay advance tax may entail interest implications u/s 234B and 234C of the IT Act, taxpayers should ensure payment of advance tax on or before the aforementioned due dates.

Declarations in Form 15G and 15H

Form 15G is a declaration form to be filed by an individual taxpayers aged less than 60 years whereas Form 15H is applicable in case of senior citizens aged 60 years or more to be furnished to certain tax deductors such as Banks, Co-operative society, etc. for the purpose of non-deduction of TDS by such deductor wherein the total income of such deductee is below the basic exemption limit.

Such declaration ideally should be made before the beginning of any financial year for which TDS is to be deducted and are required to be submitted for each year separately. However, the deductee may also submit such declaration during the year in which case any failure or delay in furnishing such declaration may result in the tax deductor deducting TDS.

Such deduction would lead to unnecessary blockage of funds as the taxpayer can only claim the same as refund (if any) after filling return of income. Thus, taxpayers should submit such declarations at the beginning of the years in order to optimise the cash flows.

Bottom Line

As we embrace the challenges and opportunities that 2024 presents, a proactive approach to financial and tax planning is the key. By incorporating these finance tax tips, individuals can navigate the complexities of the fiscal landscape, ensuring financial well-being and resilience in the years ahead.

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