Year-End Compliances Guide for 2024-25: Critical Income Tax & GST Tasks to be done before 31st March 2025

As we approach the end of the financial year 2024-25, it's crucial to be aware of the essential finance and tax tasks that need to be completed by 31st March 2025. This comprehensive guide will walk you through the necessary steps to ensure compliance, avoid penalties, and maximize your tax savings during this critical period.

Income Tax Year End Compliances Tasks

Income Tax Return (ITR) Filing: Addressing Pending Matters

While the regular ITR filing deadline for AY 2025-26 will fall later in the year, March 31st, 2025 marks the final date for filing belated returns for AY 2023-24 (FY 2022-23). Missing this deadline means permanently losing the ability to file returns for that assessment year, resulting in potential penalties and prosecution risks.

If you've identified errors in your previously filed returns for AY 2023-24, March 31st is also your last opportunity to file a revised return. Additionally, ensure you've reconciled your Form 26AS and Annual Information Statement (AIS) with your actual receipts and payments to identify any discrepancies that require attention.

Remember that belated returns carry a penalty under Section 234F (up to ₹5,000 depending on income level) and lose certain benefits like the ability to carry forward most losses (except house property losses).

Advance Tax Payments: Meeting Your Obligations

If your total tax liability exceeds ₹10,000 and you have income sources beyond salary (like rental income, capital gains, or business profits), you must pay advance tax in installments. The final installment is due by 15th March 2025, and failure to meet this deadline attracts interest penalties under Sections 234B and 234C.

The installment schedule requires:

• 15% of estimated annual tax by June 15, 2024

• 45% of estimated annual tax by September 15, 2024 (cumulative)

• 75% of estimated annual tax by December 15, 2024 (cumulative)

• 100% of estimated annual tax by March 15, 2025 (cumulative)

The interest penalty under Section 234C is calculated at 1% per month for each defaulted installment, while Section 234B imposes interest at 1% per month for deferring the overall tax payment. Calculating your advance tax accurately is essential to avoid these unnecessary charges.

TDS Reconciliation: Ensuring Accuracy

A thorough reconciliation of Tax Deducted at Source (TDS) is essential before the financial year ends. Compare the TDS reflected in your Form 26AS and AIS against your actual receipts to identify discrepancies. Common issues include:

• TDS deducted but not reflected in Form 26AS

• Incorrect PAN details leading to TDS mismatch

• TDS deducted at higher rates due to non-submission of PAN or Aadhaar

• Errors in TDS returns filed by deductors

If you identify any discrepancies, address them promptly by contacting the deductor for correction. For TDS on salary, approach your employer to ensure the TDS details in your Form 16 match with Form 26AS before the year-end processing.

Capital Gains Tax Planning: Reinvestment Strategies

If you've sold any capital assets—property, mutual funds, or stocks—during this financial year, consider reinvestment options to save on capital gains tax:

• Under Section 54, reinvest the proceeds from a residential property sale into another residential property within the specified timelines to claim exemption from long-term capital gains.

• Section 54F allows exemption on long-term capital gains from sale of any asset (other than a residential house) if the proceeds are invested in a residential property.

• Section 54EC permits investment in specified bonds (like REC or NHAI bonds) up to ₹50 lakh within six months of the sale of long-term capital assets to claim exemption.

• For equity investments, consider the impact of the 10% long-term capital gains tax (without indexation) on gains exceeding ₹1 lakh per financial year.

Planning these transactions strategically before the financial year concludes can lead to substantial tax savings.

Tax-Saving Investments: Maximizing Deductions

One of the priorities on your list should be finalizing your tax-saving investments before the deadline. Under the old tax regime, Section 80C allows deductions up to ₹1.5 lakh through various investment avenues such as:

• ELSS (Equity Linked Savings Scheme)

• Public Provident Fund (PPF)

• National Savings Certificate (NSC)

• Tax-saving Fixed Deposits (5-year lock-in)

• Life Insurance Premium payments

Additionally, don't overlook Section 80D deductions for health insurance premiums, which offer up to ₹25,000 for individuals under 60 years and ₹50,000 for senior citizens. The National Pension System (NPS) provides an additional tax benefit under Section 80CCD(1B) up to ₹50,000 over and above the Section 80C limit.

For those who've opted for the new tax regime, while most deductions aren't available, you can still benefit from employer contributions to NPS under Section 80CCD(2), up to 10% of your salary. It's advisable to consult with your employer's finance department to optimize these benefits before the year-end.

Tax Loss Harvesting: Strategic Planning

With market volatility being a prominent feature of the financial landscape, many investors will find themselves with paper losses in their portfolio. This presents an opportunity for tax loss harvesting—booking your losses before March 31st to offset them against taxable capital gains.

Short-term capital losses can be set off against both short-term and long-term capital gains, while long-term capital losses can only be set off against long-term capital gains. Any unadjusted losses can be carried forward for up to eight assessment years, providing substantial tax planning potential.

Ensure proper documentation of these transactions, as they can significantly reduce your tax liability not just in the current year but potentially in future assessment years as well.

Tax Audit and Other Compliance Requirements

If your business turnover exceeds ₹1 crore (or ₹10 crore if digital transactions exceed 95% of total transactions), ensure your books are ready for tax audit under Section 44AB. Similarly, if you claim presumptive taxation under Sections 44AD, 44ADA, or 44AE but your income exceeds the specified threshold or is lower than the deemed percentage, tax audit becomes mandatory.

For businesses with international transactions with associated enterprises, transfer pricing documentation and potential filing of Form 3CEB should be on your radar as the financial year concludes.

GST Compliance Tasks: Comprehensive Checklist

For business owners and professionals registered under GST, several critical tasks need attention before March 31st:

1. Input Tax Credit (ITC) Reconciliation: Although the deadline for claiming missed ITC for FY 2024-25 is 30th November 2025, you should consider claiming it in 2024-25 itself so that no unnecessary reconciliation is required in 2024-25 and 2025-26.

2. Opting Composition Scheme: March 31st, 2025 is the last date for opting into or out of the GST Composition Scheme for FY 2025-26. If your annual turnover is below ₹1.5 crore (₹75 lakhs for special category states), evaluate whether the scheme's simplified quarterly returns and reduced tax rates (1% for manufacturers and traders, 5% for restaurants, and 6% for other service providers) would benefit your business. Remember that composition dealers cannot collect GST from customers or claim input tax credits, making this suitable primarily for B2C businesses with minimal input costs. Submit Form GST CMP-02 before the deadline if you wish to opt in.

3. Letter of Undertaking (LUT): If you're exporting goods or services without payment of tax, ensure your LUT for FY 2025-26 is submitted before April 1st, 2025, to maintain export continuity without GST payment.

4. E-invoicing Compliance: Verify if your business has recently crossed the ₹5 crore turnover threshold that makes e-invoicing mandatory from April 1st, 2025, and prepare your systems accordingly.

5. HSN Code Updates: Ensure your product HSN codes are updated as per the latest notifications, as incorrect classification can lead to tax rate discrepancies and notices.

6. Reconciliation between GSTR-1, GSTR-3B, and e-way bills: This three-way reconciliation is crucial to identify reporting inconsistencies that could trigger departmental scrutiny and to get the data ready for March 2025 returns to be filed in April 2025

7. ITC Reversal Assessment: Review your ITC claims against the provisions of Section 17 and Rule 42/43 for any required reversals, particularly for exempt supplies or non-business usage.

8. GST Amnesty Scheme : The government has introduced a special GST Amnesty Scheme valid until March 31st, 2025, offering substantial relief on interest and penalties for past non-compliance.

Financial Housekeeping: Essential Tasks

Beyond tax compliance, attend to these critical financial tasks:

• MSME Payment Reporting: If you're a company, ensure compliance with MSME payment reporting requirements in your financial statements.

• TDS/TCS Certificate Issuance: If you're a deductor/collector, issue certificates to deductees/collectees for the financial year as required by law.

• Investment Portfolio Review: Assess your investment portfolio's performance against your financial goals and make necessary reallocations.

  
  

Conclusion

As the financial year draws to a close, proactive completion of these tasks before 31st March 2025 is essential for compliance and optimal tax planning. While some deadlines may seem distant, the complexity of these tasks demands early initiation to avoid last-minute pressure and potential errors.

Remember that tax planning is a year-round activity, and these year-end tasks are most effective when they're part of a strategic approach to your overall financial management. For personalized guidance tailored to your specific situation, consulting with a qualified chartered accountant is always advisable.

Start early, stay organized, and approach these tasks methodically to ensure a smooth transition into the new financial year with your financial house in perfect order.