Important Things to do before financial Year End
In India, the financial year is from April 1st to March 31st every year. As a result, the 31st of March is a critical deadline for meeting significant financial obligations.
The mercantile system, also known as the accrual basis of Accounting, requires transactions to be recorded when they occur, regardless of when the cash is exchanged. This means that transactions are recognized when revenue is earned and expenses are incurred, rather than when the cash is received or paid out. For professionals who primarily use the cash system of Accounting, which involves recording transactions based on actual receipts and payments, the financial year-end due date of March 31st is equally important, as explained below.
1) Calculate Payable Advance Tax
The "pay as you earn" (PAYE) principle is a method of income tax collection where employers deduct tax from employees' paychecks and remit it to the government on their behalf. This system ensures that taxes are collected regularly throughout the year rather than in a lump sum at the end. Therefore, during the fiscal year from 1st April 2017 to 31st March 2018, advance income tax was payable on or before 15th June 2017, 15th September 2017, 15th December 2017, and 15th March 2018. If an assessed does not pay at least 90% of his tax payable in advance on or before March 31, 2018, interest will start to accrue from April 1st, 2018 until the month of payment.
As a result, an assessed should estimate his taxable income as accurately as possible, calculate his tax liability, and deduct the Tax Deducted at Source (TDS) to arrive at the total advance tax payable, which must be paid by March 31st. It is necessary that the advance tax paid be credited to the central government's account before March 31st, and that the challan serial number be received by March 31st or earlier. A mere deposit before the 31st of March is insufficient.
2) Make Investments to Save Tax
Investing to save taxes can be a smart financial strategy, but it's essential to consider your individual financial situation, goals, and risk tolerance before making any investment decisions.
Retirement Accounts: Contributing to retirement accounts such as 401(k), Individual Retirement Accounts (IRAs), or similar plans can provide tax benefits. Additionally, earnings within these accounts typically grow tax-deferred until withdrawal, potentially allowing your investments to grow faster.
3) Manage Physical Inventory
Take a physical inventory of raw materials, work in progress, finished goods, stores and spares, loose tools, and consumables as of March 31st. Also, compile information on its market value as of March 31st, which will be required at the time of valuation for inclusion in the Balance Sheet as of March 31st.
4) Purchase Of Fixed Assets For Business
Purchase an asset to claim depreciation (at half the specified rate). If a tangible or intangible fixed asset was purchased for business purposes during the previous year and is used for business or profession for 180 days or more, depreciation will be allowed at the percentage specified for that type of asset.
5) Find out Capital Gains
If an assessed has taxable capital gains during the fiscal year 2017-18, he can try to identify his capital assets, particularly shares, mutual funds, debentures, and so on, that if sold during the fiscal year would result in a capital loss. He can sell such assets on or before March 31, 2018 and book a capital loss, which will help to offset the taxable capital gain and, as a result, reduce or nullify the capital gains tax.
6) Clean-up Your Loan Accounts
Cleaning up your loan accounts involves several steps to ensure that they are well-organized, up-to-date, and manageable.
Review Your Loan Documents: Start by gathering all your loan documents, including statements, contracts, and correspondence from your lenders. Review them carefully to understand the terms, interest rates, repayment schedules, and any other important details.
Credit Report: Review it to ensure that all your loan accounts are accurately reported and there are no errors or discrepancies.
7) Manage Professional Income & Expenses
In professions that use the cash accounting system, business expenses can only be deducted if they are paid on or before March 31st. As a result, all business expenses for the period ending March 31st should be paid on or before that date.
Professional Receipts: For professionals who use cash accounting systems, deposit all professional receipts in a bank account by March 31, 2018, rather than deferring them to the following fiscal year. This is because the payer must have deducted TDS on the same and will file a TDS Return with the amount paid to you and the corresponding TDS.
8 ) File your income tax return
The 31st of March is the deadline for filing pending income tax returns for the previous fiscal year. It is critical to keep your income tax returns up to date.
9) Calculate GST turnover
Businesses that have not yet reached the GST registration limit of Rs.20 lakh should keep track of their turnover. The total turnover up to March 31st is to be calculated in order to determine important aspects such as the applicability of GST registration, eligibility to opt for the Composition Scheme, and the applicability of filing specific returns.
10) Reconcile GST ledgers
GST payments are made either through tax credit or challan payments. Taxpayers must reconcile the Cash Ledger, Credit Ledger, and Liability Ledger on the GSTN portal with their books of account. All entries should be submitted by the end of the year. Furthermore, debit and credit notes, rate differentials, discounts, and so on should all be reconciled.
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What is the deadline for filing pending income tax returns for the previous fiscal year in India?
A) March 15th
B) March 31st
C) April 15th
D) May 1st
Answer: B) March 31st
What is the consequence if an assessed does not pay at least 90% of their tax payable in advance by March 31st?
A) No consequence
B) Interest will start to accrue
C) Tax rates will increase
D) Penalty will be imposed
Answer: B) Interest will start to accrue
When should professionals who use the cash accounting system deposit all professional receipts in a bank account?
A) After March 31st
B) On March 15th
C) By March 31st
D) Before March 1st
Answer: C) By March 31st
What is the turnover limit for GST registration in India?
A) Rs. 10 lakh
B) Rs. 15 lakh
C) Rs. 20 lakh
D) Rs. 25 lakh
Answer: C) Rs. 20 lakh
Which ledger reconciliations are essential for taxpayers regarding GST payments?
A) Credit Ledger and Asset Ledger
B) Cash Ledger and Liability Ledger
C) Expense Ledger and Revenue Ledger
D) Equity Ledger and Liability Ledger
Answer: B) Cash Ledger and Liability Ledger
What is the purpose of making investments to save taxes?
A) To increase personal expenses
B) To minimize taxable income
C) To defer tax payments indefinitely
D) To increase tax liability
Answer: B) To minimize taxable income
How often should advance income tax be paid throughout the fiscal year?
A) Once at the beginning of the year
B) Once at the end of the year
C) Quarterly
D) Semi-annually
Answer: C) Quarterly
What is the benefit of selling capital assets resulting in capital loss before March 31st?
A) Increases taxable income
B) Reduces or nullifies capital gains tax
C) Triggers additional tax liabilities
D) No impact on tax obligations
Answer: B) Reduces or nullifies capital gains tax
When should business expenses for the fiscal year ending March 31st be paid?
A) After March 31st
B) By April 15th
C) On or before March 31st
D) By May 1st
Answer: C) On or before March 31st
What is the method of income tax collection where employers deduct tax from employees' paychecks and remit it to the government on their behalf?
A) PAYE (Pay As You Earn)
B) TDS (Tax Deducted at Source)
C) GST (Goods and Services Tax)
D) VAT (Value Added Tax)
Answer: A) PAYE (Pay As You Earn)