10 Things Every Business should Execute Before the Financial Year end

The period of one year for which the financial statements of a government or a company is prepared is referred to as the Financial Year or fiscal year (FY). Just like India, every country in the world has declared a fixed tenure as a ‘Financial Year’.

From 1st of April to 31st March (every year) is considered as the Financial Year of our nation. Thus, every business owner/management/concerning dept. must carry out the following 10 crucial activities right before the 31st March of each FY (last day of the Financial Year).

1. Proper & Timely calculation of Payable Advance Tax

First of all, an assessee should calculate the estimated taxable income, the tax liability and deduct the TDS (Tax Deducted at Source) to arrive at the total advance tax payable and pay the amount before 31st March 2019.

While on the other hand, if doing so is not considered attentively, and a delay occurs, it may cause hefty complications further including unexpected penalty and/or interest.

For example, if a taxpayer does not pay at least 90% of his/her total tax payable in the form of advance tax on or before 31st March 2019, interest shall be levied right from the 1st day of April 2019 till the month of the payment. (Interest u/s 234B)

It is quite important to ensure that the amount paid in the form of advance tax gets credited to the account of the Central Govt. necessarily before 31st March 2019 and the assessee should also obtain the challan serial number along with the stamped date of 31st March 2019 or before. Merely a deposition on/before 31st March 2019 is not sufficient.

2. Making the Right Investment Plans

Making the right Investment plans is a significant and profitable strategy in terms of tax saving.

In accordance with the Govt. notifications, different types of assesses (subject to certain condition) are entitled to the deduction of specified amount from Gross total Income before the final determination of the Taxable Income.

Thus, it must be taken into notice that choosing the right investment plan and at the right hour would be a wise decision that may help you saving money against tax.

3. Purchasing Fixed Assets for Business

With a view to claiming depreciation, it is recommended to go for purchasing of assets, either tangible or intangible. The purpose of this purchase should clearly indicate the futuristic perspectives of growth of the organization and the same has been put in regular use too for more than or up to a period of 180 days.

In the same way, if someone is planning to sell any fixed asset in 2019, it is advised to extend the proposal at least up to the coming 1st April 2019, so as to avail the optimum benefits of deduction of depreciation for the Financial Year 2019-20.

4. Finding out the Capital Gains

If a taxpayer has taxable capital gains during the financial year 2018-19, he should try to list out his capital assets, especially shares, mutual funds, debentures etc., which if sold during the financial year, will result in a capital loss, so it is advised to sell such assets on or before 31st March 2019 and booking a capital loss shall attempt setting off against the taxable capital gain and consequently it will reduce/nullify the capital gains tax. The same capital asset, as a subject of planning, can again be purchased on or before 31st March 2019 and the process shall be continued.

5. Claim for the Additional Depreciation and Incentive

In order to avail the benefits of additional depreciation for manufacturing unit, one should purchase assets for the plant like advanced machinery tools. 

It is always good to keep in mind that if such plant and/or any machinery item is purchased and utilized for not more than 180 days (six months), the additional depreciation becomes applicable merely @ 10% which is subjected to certain specific terms and conditions.

Thus, in order to claim and get the best benefits of Additional Depreciation and Incentive, a manufacturing unit must go for the acquisition of new plant and/or machinery purchase six months (180 days) prior to upcoming 31st March.

6. Cleaning up of the Loan Accounts

If a taxpayer has lent or borrowed any kind of temporary loans, hand loans in Assessment Year 2018 and are still outstanding or if you are trying to repay/recover, it is recommended to do the same on or before 31st March 2018. Doing so will help in improving the balance sheet position of the ratio of assets and liabilities, Debt-Equity Ratio, etc. because just after the 1st day of April 2018, temporary loans or hand loans can be lent or borrowed again.

It is good to know that a healthy balance sheet reflects the position and credibility of the business.

7. Managing the Total Professional Annual Income and Expenses

In terms of professions following cash system of accounting, business expenses are allowed to be deducted only if they are actually paid on or before 31st March. And thus, it is recommendable to pay off all the financial liabilities (for FY 2018-19) like business expenses up to the period of 31st March 2019 on or before the last date i.e. 31 March 2019.

Since, the payer deducts TDS (Tax Deducted at Source) on the amount paid to the taxpayer and will files TDS Return by showing the amount paid to the receiver along with the corresponding TDS; so, it is good to deposit all professional receipts in the bank account on or before 31st March 2019 in respect of professionals following cash systems of accounting.

8. Proper and timely filing of Income Tax Return

Maintaining the given time frame for the proper and timely filing of Income Tax Return is very important for the reputation, credibility, and economic strength of a business. However, filing Income Tax Returns on time offers good options to get instant banking benefits like a loan.

31st March 2019 is the last date for filing Income Tax Returns for the financial year 2017-18. It’s important to keep a good record of your income tax returns.

9. Proper Reconciliation of GST Ledgers & Calculation of GST Turnover

Generally, GST payments are made either through a tax credit or through challan payments. To avoid further complications, taxpayers need to reconcile the Cash Ledger, Credit Ledger and Liability Ledger on GSTN portal with records maintained in their books of accounts. All the entries should be made exactly before the last date of the Financial Year expires. Furthermore, debit notes, credit notes, a difference of rate, discount, etc. also should be properly reconciled.

On the other hand, businesses which are not under the GST registration limit of ₹ 40 lakh and ₹ 20 lakh in special category states (After 32nd GST council meeting but still not notified), needs to keep a soundtrack of their annual turnover. With a clear view of determining the important aspects like applicability of GST Registration, eligibility of choosing the Composition Scheme, and applicability for the filing of specific returns the total turnover up to 31st March needs to be calculated with due importance.

10. Managing Physical Inventory

It is always preferable to take a physical inventory of Raw Materials, Work in Progress, Finished Goods, Stores and Spares, Materials in stock, Loose Tools, and Consumables etc. as on 31st March each year. While compiling information of its market value as on 31st March, which would be essential at the time of valuation to be adopted in the Balance Sheet as on the last day of the FY i.e. 31st March.

Conclusion

It’s always profitable to keep this checklist handy during the financial year last minute activities. In order to remove further complications, maintain the credibility of the business and to ensure the futuristic progress of the organization, these 10 crucial points must be followed by every business before the end of the Financial Year.