Change in fiscal year to Jan-Dec may impact your financial planning

While, the government is working on it closely, if the fiscal year changes, it will bring major transition in your tax planning.

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Government is working aggressively to change the financial year to calendar year. Last week, Finance Minister Arun Jaitley in a reply in Lok Sabha said "the government is considering changing financial year to January-December from April-March".

According to a Reuters report, Jaitley said a committee constituted by the government under the chairmanship of Shankar Acharya (former chief economic adviser) has examined the issue. “The report of the committee has been received,” he added.

While, the government is working on it closely, if the fiscal year changes, it will bring major transition in your tax planning.

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Most of the time, taxpayers start tax planning from January considering the financial year will end in March, which is three months before fiscal end.

This time period will take a hit.

Reason being, as the taxpayers are running behind to save tax, 70% of the premium income of insurance companies and 50% of inflows from Equity linked Saving Schemes (ELSS) are generated in these three months. Now, if the financial year changes, all these transactions will be done before December 31 starting from September or October.

However, an investor can extend their systematic investment plans.

Another change which will bring is tax planning as the company may start asking for proof of Section 80C investments from October itself so that tax deducted at source (TDS) is deducted by December. Also, payment of advance tax will have to made before December end. And, if you are staying on rent, the rent agreement will be made for January to December period.

For taxpayers below 60 years of age, the existing exemption is Rs 2,50,000, which may change to Rs 1,87,500. Section 80C deductions currently is 1,50,000 which is likely to decrease to Rs 1,12,000 and for 80CCD deductions is currently Rs 50,000 which can be dropped to Rs 37,500 if financial year changes.