Impact of Tax Saving Deadline Extension on Taxpayers

2024-08-02

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The Central Board of Direct Taxes (CBDT) has announced an extension of the deadline for making tax-saving investments for the Financial Year (FY) 2019-20. The deadline has been moved from 30 June to 31 July 2020, in order to provide relief to taxpayers amid the corona-virus pandemic. So, tax-payers now have more time for making investments in tax savings instruments to claim tax relief under various sections of the Income tax Act. In another notification, the government extended a few other tax compliance-related deadlines, including the extension of the last date for filing the ITR for FY 2019-20 till 30 November 2020. The deadline for linking of PAN card with Aadhaar has been extended further till 31 March 2021.

How does this extension benefit tax-payers?

A lot of tax-saving activity happens at the end of the financial year, mostly in March, which is exactly when the country went into a lockdown. Therefore, this deadline extension is a big relief to tax payers who were anxious about missing the due date for making tax saving investments. In addition, it will definitely benefit those senior citizens and individuals who are not comfortable using online facilities to transact and are yet to complete their tax-savings for FY 2019-20.

While the extension is a means to relieve tax-payers, you can make the most of this extra time by investing in insurance policies for tax-saving and other saving schemes before the opportunity of earning higher interests slip out of hand, since the quarterly revision is expected to take place at the end of this period.

Where can you invest to save tax?

There are many tax-saving avenues, from investments to saving plans, for claiming deduction under the IT Act which includes sections 80C (LIC, PPF, NSC etc.), 80D (Mediclaim), and 80G (Donations) among others. It’s best to plan your investments depending on your lifestyle. Whether you are a single, happily married, or planning for kids, there are some great investments and insurance switches that you can make to ensure your life-goals are met. Therefore, while investing your money, keep the following points in mind:

1) Ensure everyone in your family has health insurance coverage. If they don’t, this is the right time to buy a base policy. You can buy a health insurance plan for parents that cover your dependants. And if you do have a health plan, consider top-up coverage to fully protect your finances against future medical expenses and hospitalizations. The premiums paid towards your health insurance policies will avail you deductions under Section 80D of Income Tax Act, 1961.

2) With the ongoing pandemic situation, there’s great uncertainty to life and it is a good idea to buy adequate term insurance. This would keep your dependents protected in case of an unfortunate happening. A comprehensive insurance policy like the iSelect Smart360 Term Plan can offer tax benefits as per the prevailing Income Tax laws.

3) You can look at investments eligible for deductions under Section 80C with a Unit-Linked Insurance Plan. If you have a high appetite for risks, Invest 4G makes a great option that offers a dual benefit of an insurance cover and savings. Under the Invest 4G plan, tax benefits are available on premium paid under Section 80C and benefit received during Policy term under Section 10(10D) subject to conditions provided therein, as per the Income Tax Act,1961.

4) If you’re adverse to market risks, it would be best to invest in government-guaranteed schemes like Public Provident Fund or NSC. Plus, a five-year tax-saver Fixed Deposit can be considered if you wish to buy a low-risk lump-sum investment.

Lastly, this is a testing time for everyone, and donations to various charities may be warranted. Any donations made to eligible charities can get you tax benefits under Section 80G of the Income Tax Act,1961.

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