Salaried taxpayers alert! What is your year-end tax readiness? Check list of important documents & top things to keep in mind

As the financial year draws to a close, millions of salaried taxpayers across India enter a decisive phase. What was once a routine process of submitting investment proofs to the employer has now evolved into something far more strategic. Year-end tax planning today directly affects your take-home salary, refund timelines, and even the likelihood of receiving automated notices from the Income tax department.With March 31, 2026, serving as the definitive cut-off, only those investments and expenditures completed on or before this date qualify for tax benefits for the relevant financial year (FY) 2025-26. These transactions are subsequently reflected in Form No. 16, Form No.26AS, and the Annual Information Statement (AIS). Consequently, any lapse before the deadline: whether an unreported investment, missing documentation, or an unreconciled transaction- can directly affect the taxpayer’s outcome, potentially leading to delayed refunds or automated mismatch notices. In a system that is increasingly digital and data-driven, even minor gaps can have consequences.

Old vs New Personal Tax Regime: The Choice That Shapes Your Tax Bill

India currently offers two parallel tax systems for individuals – Old Personal Tax Regime and New Personal Tax Regime. While the new regime is now the default option, the choice remains with the taxpayer.The old tax regime continues to benefit those individuals who have significant deductible expenses and structured investments that qualify for exemptions. It permits a broad range of deductions and exemptions, including investments such as Life Insurance, Equity Linked Savings Schemes (ELSS), and Public Provident Fund (PPF) contributions; Health Insurance premiums; as well as benefits like House Rent Allowance (HRA), Leave Travel Allowance (LTA), and home loan interest deductions.The old tax regime provides a Rs 50,000 standard deduction and a rebate up to Rs 5 lakhs, but permits a wide array of deductions and exemptions, as outlined earlier. For taxpayers whose total eligible deductions are substantial, the old tax regime may result in greater overall tax savings despite its higher slab rates.However, these advantages come at the cost of higher slab rates and the need for meticulous record-keeping to substantiate each claim.The new regime offers lower slab rates, an increased standard deduction of Rs 75,000, and a full tax rebate for income up to Rs 12 lakh. It removes most exemptions and deductions, making compliance simpler. For individuals, especially those without significant deductible expenses, housing loans, or tax-saving investments -this option appears straightforward and attractive.This simplicity has driven widespread adoption. As per recent Income tax department’s official statement, 88% of individual taxpayers have opted for the new regime. Ultimately, the choice between the two regimes hinges on a careful evaluation of one’s financial profile. For a simplified view and easy reference, the table below provides a consolidated summary of exemptions and deductions permissible under each tax regime:

The key message is simple: there is no universal “better” option. The optimal choice depends entirely on your income level and eligible deductions. The Government’s online tax calculator can help compare both regimes, and every salaried individual should perform this exercise at least once before the FY closes.

Documentation: The Backbone of the Old Regime

For those opting for the old regime, documentation is not optional, it is critical. Every deduction claimed must be backed by valid documentary evidence. Employers rely entirely on proofs submitted by employees, and the Income tax department now cross-verifies claims through third-party reporting.An indicative list of key documents taxpayers should maintain include:

Under the old regime, documentation is your first line of defence. Incomplete records can lead to disallowance of deductions, additional tax, and interest liability.

March Payroll: Why It Matters More Than You Think

Employers play a significant role in the year-end tax outcome. During March, companies conduct the final TDS (Tax Deducted at Source) adjustment based on:

If supporting documents are not submitted within prescribed timelines, employers are required to compute tax without considering exemptions/ deductions. This often leads to a higher TDS deduction in March -resulting in a lower take-home salary for the final month.Importantly, once TDS is deposited with the government, corrections typically happen only when you file your Income tax return (ITR). This means excess tax may remain locked until refund processing -which can take months.Beyond salary-linked deductions, employees may also declare income from other sources—such as bank interest, dividends, Tax Collected at Source (TCS) on foreign remittances, and income arising from Restricted Stock Units or Employee Share Purchase Plans etc. so that these are appropriately factored into the final tax computation.Employers rely entirely on the declarations and supporting documents submitted during the year to compute accurate TDS. Failure to declare such income and furnish valid proof, employers are obligated to recompute taxes without considering those deductions or credits. This often results in a higher/lower TDS deduction in the final month of the FY.

TDS on Rent: A Frequently Missed Compliance

One of the most overlooked obligations by rent paying individuals relates to tax withholding on high value rent payments. If monthly rent exceeds Rs 50,000, the tenant must deduct TDS at 2%, even if the tenant is a salaried individual with no business income.The rule varies depending on the landlord’s residential status:If the landlord is a resident: TDS at 2% should be deducted once in a FY – typically in March or at the time of vacating the property what comes earlier.If the landlord is a non-resident (NR): TDS must be deducted at the time of each rent payment. The rate is significantly higher – 30% plus surcharge and cess, unless a lower deduction certificate is obtained by the landlord.Failure to deduct or deposit TDS can attract interest, late fees, and penalties. With automated systems now identifying such gaps, ignoring this requirement can be costly.Tenants should obtain/ maintain records of the following:

This is an area where many salaried individuals unknowingly slip into non-compliance.

You Can Change the Tax Regime at the Time of Filing

A widespread misconception is that the tax regime chosen with the employer is final. This is not entirely correct. A salaried taxpayer may choose one regime for TDS purposes at the beginning of FY and switch to other regime while filing the ITR – subject to conditions. However, this flexibility is available only if the ITR is filed within the prescribed due date. Filing a belated ITR may restrict this option. This provision offers valuable relief to taxpayers who may have miscalculated their optimal regime at the start of the FY.

Investment Deadlines Are Non-Negotiable

While regime selection offers flexibility, investment deadlines do not. Only investments completed on or before March 31, 2026, qualify for deduction for FY 2025–26. A transaction initiated but not successfully executed before the deadline does not count. Delays due to banking cut-offs, settlement cycles or technical glitches can result in lost deductions.Taxpayers must ensure:

Waiting until the final day increases risk.

The Era of Automated Scrutiny

India’s tax administration has undergone a structural shift. With digitisation and real-time data integration, the Income tax department now cross-verifies income and deductions using:

Any mismatch can trigger automated notices. AIS provides a comprehensive view of reported financial transactions—salary, interest, dividends, securities trades, rent, and other high-value entries while TIS and Form No. 26AS summarises income and tax credits such as TDS, TCS, and advance/self-assessment tax. These records must be carefully reconciled at the year-end along with personal financial documents.Common triggers include:

A practical example: A taxpayer declared Rs 18,000 as interest income, while AIS reflected Rs 42,500 due to fixed deposit interest reported by the bank. This mismatch triggered an automated notice proposing additional tax. The issue was resolved only after filing a revised return.The lesson is clear : disclosures must align fully with digital financial records. Taxpayers should periodically review AIS, TIS and Form No. 26AS on the e-filing portal to reconcile discrepancies before filing their ITR.

The New Reality of Compliance

India’s tax system has moved firmly into a data-driven era. Compliance is no longer about intent -it is about accuracy and documentation.Pre-filled returns now mirror information available with the tax department. Salary details, investments, deductions, and tax credits reflect in the AIS, TIS, Form No. 26AS, and other third-party reporting platforms, compliance has become a continuous, year-round responsibility rather than a last-minute March exercise.Claims are validated through third-party reporting. Automated systems flag inconsistencies instantly. Whether one chooses the simplicity of the new regime or the deduction-driven benefits of the old regime, success depends on:

With the proposed Income-tax Act 2025 and Rules 2026 on the horizon, further refinements may follow. However, one principle is already evident: documentation discipline is no longer optional.For salaried taxpayers, year-end tax planning is not merely about reducing liability – it is about ensuring seamless compliance in a system designed to validate every claim.(Vikas Narang, Director at Vialto Partners and Nathalia Rodrigues, Assistant Manager at Vialto Partners also contributed to the article. Views are personal)