The Financial Year of India stretches from April 1st (of present year) to 31st March (of forthcoming year), which is why it is essential that all due monetary obligations are met before the financial year ends. For this, there should be efficient planning, organizing and processing that needs to be done by the end of the year.
Feature-characteristics of the Year-End Activities in India
Each country has its distinctive procedures for year-end activities. In India, a cardinal activity by the year end for every well-based organization is – timely payroll settlements.
By law and ethics, it is mandatory for an employee to collect the evidence of investments in soft/hard copy proofs by the end of the financial year, i.e. in March. To remain at docile levels with the IT (Income Tax) rules, there should be re-checking and re-calculation of the tax liabilities whilst February & March payrolls.
The following are repercussions on the salary of an employee during the months mentioned above:-
- The documents submitted as proof should match the declared investment. Post this, no action will be taken and no additional charges will be implemented as tax – the employees will get the same net pay whilst February and March.
- If the submitted results as higher than the declared investment, yet within legal boundaries – there will be a higher net pay due to lower tax deduction.
- If the submitted results lower than the declared investment, there will be lower net pay due to higher tax deduction.
- Initially, if no declaration was made, then the documents can be submitted and taxes can be deducted.
A Financial year-end, for organizations, has two prominent junctures:
Before the Last Payroll of the organization (according to the calendar year)
- Check wages, taxes & benefits: compute and index the uncollected Social Security and Medicare Taxes for former employees and retirees.
- Verification: remember to verify the employer state, unemployment insurance tax rate and taxable wage limits.
- Check employee and employer indicative data: ensure that deceased employees are coded and updated, etc.
- Update significant procedures: catalog any special bonus payrolls for the current year, etc.
After the Last Payroll, but Prior the First Payroll of the forthcoming calendar year
- Start reviewing: missing addresses, invalid Social Security numbers, etc.
- Check that the EIC (Earned Income Credit) has been acceded properly.
- Analyze the required tip allocations for tipped employees, etc.
- Schedule all special bonuses and keep record.
Following are the target dates for respective events;
- YE Forms or “Form-16” are to be issued to the employee by 31st
- The 4th Quarter return with the IT Dept. (Income Tax Department) should be filed by 31st
- File individual income tax returns with the IT Department by 31st
If you are an individual client, new in the Indian Finance market, a joint call can be arranged with the DKM Online representatives for better applicant understanding. It is essential that you carry out all the usual verification procedures but take the above into consideration. We have tried to cover a few verifications and confirmations required in the year-end procedure but the list is not exhaustive, certain things vary from industry to industry, so if you have a query pertaining to the year end activities as per Indian Payroll system, please feel free to get in touch with us here or you can write to us on, firstname.lastname@example.org