The Government of India made a historic announcement on 24th March 2020 when it declared a national lockdown of 21 days to battle the Coronavirus pandemic. Earlier, a ‘Janata Curfew’ was applied on 22nd March 2020 for a day which was called by many as a trial run. Later on, to prevent the spread of the virus, a 3-week lockdown was announced. While the lockdown has proven to contain the infection, it also overlapped the end of the financial year (31st March) and many taxpayers were finding it difficult to plan their taxes amidst the lockdown situation. Planning last minute taxes has been the practice of many and so the Government extended the tax saving deadline by three months. So, taxpayers now have until the end of June 2020 to invest in tax-saving investment avenues and save taxes for the financial year 2019-20. Did you know about it?
The lockdown has disabled many investors to invest in their preferred mode of investments. This extension in tax planning is like a blessing wherein your clients can easily plan their finances and then invest in avenues which would help them reduce their tax liability. As a financial advisor, you can help your clients plan their taxes in the most effective manner once the lockdown is over. So, here are some facts which you should know so that you help your clients plan their taxes most effectively –
- Deadline extended till the end of the first quarter
The extension in tax planning deadline has been allowed till 30th June 2020. This means that investments, which should be done till 31st March 2020 to be eligible for tax-saving in the financial year 2019-20, can now be done till 30th June 2020. Investments done between 1st April 2020 and 30th June 2020 can be claimed as a deduction, if eligible, in the financial year 2019-20.
- Tax saving deductions can be claimed in either financial year
When claiming tax deduction on the investments done between 1st April 2020 and 30th June 2020, your clients have two choices. They can either claim the tax-saving deduction in the financial year 2019-20 or in the financial year 2020-21. The tax saving deduction can be claimed in either financial year once. Your clients cannot claim the deduction twice in both financial years. Let’s understand with an example –
- Impact of the new tax regime
The new tax regime is available from this financial year, i.e. 2020-21. If your client chooses to file taxes in the new regime, the deductions would not be available. So, if tax-saving investments are done between 1st April 2020 and 30th June 2020, they can be claimed only in financial year 2019-20 and not in the year 2020-21.
Suppose your client has done tax-saving investments twice. One on 30th March 2020 and the other on 10th April 2020. Now, your client can claim deductions on both the investments in the financial year 2019-20 or one deduction (for investment done on 30th March) in financial year 2019-20 and the second one (for investment done on 10th April) in the year 2020-21.
The Government has facilitated tax planning for taxpayers by extending the tax saving deadline by the next three months. So, if your clients have not yet planned their taxes, they can do so during the extended period and claim tax reliefs. You should, therefore, help your clients with their financial planning so that they can maximize their tax savings. Educate them about the extended period and how it would allow them tax benefits. Give them the tax saving options explained above so that they can utilize the period in the best possible way.
