CBDT notified new ITR Forms for AY 2021-22
The financial year 2020-21 is over and the central board of direct tax (CBDT) has already notified income tax return (ITR) forms for the assessment year 2021-22. Similar to last year, this year also there are seven ITR forms, with minimal changes, for filing of returns. Applicability of ITR forms varies based on source of income, level of income, profile of return filers such as individual, businessman, company, trust and so on. However, mainly four ITR forms are for use of individuals to file their returns. Selecting a wrong ITR form to file your return can make your return invalid. So choose wisely and carefully, or take the help of a tax expert or chartered accountant if you are doubtful.
While the last date to file the ITR return is 31 July, unless it gets extended, you are free to file it now provided your all TDS have been uploaded and are up to date in your Form 26AS. Assessing your income and clearing your tax dues, if any, and filing a return as early as possible is a good practice.
Make investment and expenses declaration to your employer
There are few tax related tasks that you must complete in the first month of the new financial year. One of those includes making investments and expenses declarations, which qualify for tax deductions, to your employer. For instance; make declaration of investment you are planning in equity linked savings schemes (ELSS), Public Provident Fund (PPF), National Savings Certificates (NCS), Sukanya Samriddhi Yojana (SSY), 5-years FD in banks or term deposit in post office, all these avenues qualify for deduction in 80C. Similarly, expenses such as children education fees, home loan interest, house rent and so on qualify for deduction in different sections.
Making a declaration is important, so that your employer can take these investments and expenses in consideration while calculating your tax liability and accordingly adjust TDS from your monthly salary. However, make sure you incur the expenses declared or investments committed to the employer, to avoid huge TDS against the last few months’ salary.
In line with this, do also plan your tax savings. If you have not planned so, ELSS (Equity Linked Tax Saving) option of Mutual Funds is a very powerful option with the least lock-in of just 3 years while also giving you the possibility of good tax-efficient returns from the stock markets.
Do you know what is IDCW option in mutual funds?
Old wine in new bottle, IDCW stands for ‘Income Distribution cum Capital Withdrawal Option,’ and it is the new name of dividend option in mutual funds scheme. Securities and Exchange Board of India (SEBI) has renamed the earlier dividend payout option in mutual funds as ‘Payout of IDCW Option’.
Dividend Reinvestment option has also been renamed as ‘Reinvestment of IDCW Option’ and dividend transfer plan to ‘Transfer of IDCW Plan’ by the market regulator.
According to SEBI, renaming of options has been done considering the need to clearly communicate to the investor that a certain portion of his or her capital (equalization reserve or distributable reserve) can be distributed as dividend under such option of a mutual fund scheme. These changes come into effect from April 1, 2021.
Frankly, even with the changed names (!), please avoid any kind of dividend option in mutual funds – that is our sincere advice to you. There are better ways to take out money from mutual funds than resort to the uncertain, tax-inefficient option of taking dividends.