TAX-SAVING DEADLINE EXTENDED: WILL INVESTMENTS MADE NOW BE CONSIDERED FOR FY20 OR FY21?
The financial year 2019-20 terminated with the beginning of the nationwide lockdown to contain the spread of the deadly virus Covid-19 pandemic. As the deadline for tax-saving investments was 31st March for the FY 2019-20, taxpayers faced difficulty in making last-minute tax-saving investments, including ELSS, commonly known as equity-linked savings scheme. To worsen the situation, since then government offices are either are working below strength or are closed. As a result, they have not been able to function as required. Considering all these factors, the government decided to extend the cut-off date twice for making investments in tax-saving instruments. The dates got extended from 31st March 2020 to 31st July 2020, keeping in view the difficulty faced by investors, as well as government offices.
Following the extension of the deadline, there has been confusion among investors whether the investments made until 31st July would be considered under the financial year (FY) 2019-20 or FY 2020-21. The confusion is because the financial year 2019-20 ended on 31st March 2020 and the next financial year 2020-21 started on 1st April 2020. However, with the extension of the deadline from 1st April 2020 to 31st June 2020, is a common period for both financial year. To solve the dilemma of the investors, it can be made for any fiscal year. Further, it can be claimed as desired in a particular financial year by the investor. Suppose you are making tax-saving investments for both FY 2019-20 and FY 2020-21. In that case, it is up to you to decide which investment to allocate to which financial year and then claim tax benefits.
However, it would be best if you kept in mind that your tax-saving investments cannot be claimed twice. The tax benefits for both the financial years against the same investment cannot be claimed. This is not allowed as there are specific provisions in the income tax act, 1961, which forbid claiming the same amount in more than one financial year. Experts warn that doing this might come with penal consequences. They further add that disclosures should be properly reported, i.e. schedule Details of Investments (DI) is required to be occupied.
Even with the extension, some investments are accompanied with a fixed due date crossing, which might attract interest or might even lead to lapse. For example, during the extension period for FY 2019-20 monthly SIP investments, the monthly insurance policy premium payouts would also continue to be deducted for 2020-21. However, a further delay might attract interest or in the worst case, cancellation of the policy.
Having said this, you should not wait until the last moment to invest in ELSS mutual funds. There are numerous advantages of ELSS funds, the primary one being the dual advantages of capital appreciation and tax-saving attributes. What are you waiting for? Invest in ELSS funds today and avail the benefits. Happy investing!