Key Financial Mistakes to Avoid Before March 31 (For Indian Citizens)
As the financial year (FY 2023-24) draws to a close on [March 31, 2024] it’s crucial for Indian taxpayers and investors to review their finances to avoid last-minute mistakes that could lead to unnecessary tax burdens, penalties, or missed opportunities.
Whether you’re a salaried employee, a business owner, or a freelancer, this is the time to take corrective actions to optimize your taxes, investments, and savings. In this blog, we’ll discuss the top financial mistakes to avoid before March 31and how to make the most of the remaining days.
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1. Not Utilizing Section 80C Deductions (₹1.5 Lakh Limit)
One of the most common mistakes taxpayers make is **not fully utilizing the ₹1.5 lakh deduction limit under Section 80C This section allows tax-saving investments and expenses such as:
- EPF (Employee Provident Fund)
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&PPF (Public Provident Fund)**
- **ELSS (Equity-Linked Savings Scheme) Mutual Funds**
- **5-year Tax-Saving Fixed Deposits (FDs)**
- **NSC (National Savings Certificate)**
- **Life Insurance Premiums (for self, spouse, children)**
- **Tuition Fees (for up to 2 children)**
- **Home Loan Principal Repayment**
**Action Plan:**
- Check if you’ve exhausted the ₹1.5 lakh limit.
- If not, invest in **ELSS funds** (quickest way, 3-year lock-in) or **PPF** (long-term).
- Pay **advance tuition fees** for children if applicable.
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## **2. Ignoring Health Insurance (Section 80D)**
Many taxpayers forget to claim deductions under **Section 80D** for health insurance premiums. The limits are:
- **₹25,000** (for self, spouse, children)
- **₹50,000** (for senior citizen parents)
- **₹75,000** (if both you and parents are senior citizens)
**Action Plan:**
- Renew health insurance policies before March 31.
- Pay premiums for parents if not already done.
- Consider **preventive health check-ups** (up to ₹5,000 deductible).
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## **3. Missing NPS Contributions (Section 80CCD)**
The **National Pension System (NPS)** offers additional tax benefits:
- **Section 80CCD(1):** Up to **10% of salary (for salaried) or 20% of gross income (self-employed)** within the ₹1.5 lakh limit.
- **Section 80CCD(1B):** Extra **₹50,000 deduction** (beyond ₹1.5 lakh).
**Action Plan:**
- Invest in NPS Tier-I account before March 31.
- Salaried employees can opt for **corporate NPS** for higher employer contributions.
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## **4. Not Claiming HRA or Home Loan Benefits**
### **A. House Rent Allowance (HRA) Exemption**
If you’re a salaried individual paying rent, ensure you claim HRA exemption by submitting **rent receipts and PAN of landlord** (if rent exceeds ₹1 lakh/year).
**Action Plan:**
- Submit rent proofs to your employer before March 31.
- If living with parents, transfer rent via bank and get a declaration.
### **B. Home Loan Interest Deduction (Section 24 & 80EEA)**
- **Section 24:** Up to **₹2 lakh** deduction on home loan interest.
- **Section 80EEA:** Additional **₹1.5 lakh** for affordable housing (loan up to ₹45 lakh).
**Action Plan:**
- Prepay some home loan interest if possible.
- Ensure all interest certificates are obtained from the bank.
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## **5. Overlooking Tax-Saving Fixed Deposits (5-Year FDs)**
If you haven’t exhausted your **Section 80C limit**, consider **tax-saving FDs** with a **5-year lock-in**. These offer **safe returns** (around 6-7% interest) and tax benefits.
**Action Plan:**
- Open a tax-saving FD before March 31.
- Compare bank rates (SBI, HDFC, ICICI, etc.).
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## **6. Not Filing Capital Gains Properly**
If you sold stocks, mutual funds, or property, ensure you:
- **Calculate short-term vs. long-term capital gains** correctly.
- **Use indexation benefits** for long-term gains.
- **Reinvest in tax-saving instruments** (like **54EC bonds** for property gains).
**Action Plan:**
- Book losses to offset gains (**tax-loss harvesting**).
- Invest capital gains in **ELSS or new property** if applicable.
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## **7. Delaying Tax Payments (Advance Tax & Self-Assessment Tax)**
If you have **additional income** (freelancing, interest, capital gains), you may need to pay:
- **Advance Tax** (if tax liability exceeds ₹10,000).
- **Self-Assessment Tax** (before filing ITR).
**Penalty:**
- **Interest under Section 234B & 234C** for late payments.
**Action Plan:**
- Calculate tax liability and pay before March 31.
- Use the **Income Tax e-filing portal** for payments.
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## **8. Not Reviewing Insurance & Will**
### **A. Life Insurance Review**
- Ensure adequate coverage (at least **10x annual income**).
- Term insurance is better than traditional policies for high coverage at low cost.
### **B. Update Nominees & Will**
- Check nominees in **bank accounts, mutual funds, insurance**.
- Draft a **will** if you haven’t (especially for property).
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## **9. Ignoring Donations (Section 80G)**
Donations to **registered NGOs, PM Relief Fund, etc.** are deductible under **Section 80G**.
**Action Plan:**
- Donate before March 31 and keep receipts.
- Check eligibility (50% or 100% deduction).
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## **10. Not Planning for Next Financial Year (2024-25)**
While wrapping up FY 2023-24, start planning for **FY 2024-25**:
- **Increase SIPs** in mutual funds.
- **Review financial goals** (retirement, child’s education, home purchase).
- **Optimize salary structure** (HRA, LTA, allowances).
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## **Final Checklist Before March 31**
✅ **Exhaust Section 80C (₹1.5L)** – ELSS, PPF, FD, insurance.
✅ **Claim HRA & Home Loan Benefits** – Submit rent receipts, prepay interest.
✅ **Pay Health Insurance Premiums (80D)** – Up to ₹75,000 deduction.
✅ **Invest in NPS (₹50K extra deduction)** – Tier-I account.
✅ **Book Capital Gains/Losses** – Tax-loss harvesting, reinvest gains.
✅ **Pay Advance Tax if applicable** – Avoid interest penalties.
✅ **Review Insurance & Nominees** – Term life, health cover, will.
✅ **Donate for 80G Deduction** – Keep receipts.
✅ **Plan for FY 2024-25** – SIPs, goals, tax structur
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