Year-End Tax Planning for a Business: The Checklist to Run in Q3, Not in March
- By 15 December you must have paid 75% of your estimated annual tax — this is the instalment that catches businesses whose festive quarter beat expectations.
- Statutory dues such as bonus, PF, ESI and leave encashment are deductible only when actually paid, so a provision carried past the deadline costs you the deduction for the year.
- Run the MSME ageing in December rather than March — by March the 45-day clock on a January bill has already decided the outcome.
Year-end tax planning in most businesses means a scramble in the third week of March. By then the useful options have closed: the advance-tax instalments have been missed, the statutory dues are unpaid, the MSME clock has run out. Almost everything that genuinely helps has to be done between December and January, which is why this checklist is built for the third quarter.
1. The 15 December advance-tax instalment
Advance tax is payable in four instalments, cumulatively:
| Due date | Cumulative tax to be paid |
|---|---|
| 15 June | 15% |
| 15 September | 45% |
| 15 December | 75% |
| 15 March | 100% |
The December instalment is where festive-season performance shows up. A business that budgeted on a flat year and then had a strong October is already short on the September instalment, and will be short again in December unless it re-estimates. Shortfalls carry interest at 1% a month, which is not catastrophic but is entirely avoidable.
The practical step: close November properly, project the full year on actuals rather than on the budget, and recompute the instalment. Businesses that only estimate in March pay interest for three quarters without noticing.
2. Pay the statutory dues that gate your deduction
A set of expenses is deductible only when actually paid, not when provided — and the deadline is the income-tax return due date for that year. The list includes employer PF and ESI contributions, bonus and commission to employees, gratuity contributions, leave encashment, interest on loans from banks and specified institutions, and amounts owed to registered micro and small enterprises.
So the year-end review is: list everything provided but unpaid, and decide deliberately which to clear. Note the particular trap on interest — interest on a bank loan that is merely accrued and unpaid, or converted into a fresh loan, is not treated as paid.
3. Run the MSME ageing now, not in March
Payment to a registered micro or small supplier beyond the statutory period shifts the deduction to the year of payment. The reason to run this in December is arithmetic: a bill accepted in mid-January has its 45-day period expiring in early March. If you first look at the ledger on 20 March, the outcome for that invoice is already fixed and there is nothing left to manage.
A December review lets you clear the ones approaching the line and plan cash for the rest. It also feeds the MSME-1 return due the following 30 April.
4. Review stock, debtors and fixed assets
- Stock: value at cost or net realisable value, whichever is lower. Obsolete and damaged inventory carried at cost overstates both profit and tax. Write it down on evidence — a physical count and a valuation note — not by a round-figure adjustment in March.
- Debtors: identify genuinely bad debts and write them off in the books before year end. Keep the chase correspondence.
- Fixed assets: an asset bought and put to use for fewer than 180 days in the year gets only half the depreciation for income-tax purposes. If a planned purchase is marginal, buying and commissioning it before early October changes the position materially — and if you are reading this in December, it is next year's lesson, which is exactly why the review belongs in Q3.
5. Check the regime and the structure questions while they are still open
Some decisions can only be made prospectively, which is another reason December beats March. A company weighing the concessional tax regime available to it needs to know the answer before it files, and the choice interacts with deductions and brought-forward losses in ways that take an afternoon to model and five minutes to get wrong.
The same applies to anything involving a change in how the business is held or taxed — a partner's remuneration clause that does not reflect what is actually being paid, a director's salary that has drifted from the board resolution, or related-party transactions priced on habit rather than on anything documented. These are cheap to correct with a quarter still to run and expensive to argue about afterwards.
6. Close the compliance loop
- Reconcile GST books against GSTR-1, 3B and 2B for the year so far, and chase suppliers whose invoices are missing from 2B while they can still be fixed.
- Check TDS: every applicable payment deducted, challans matching the deduction ledger, PANs valid. A short deduction found now is cheap; found in an assessment it is not.
- Confirm whether a tax audit will apply this year, and if it will, start the preparation rather than discovering it in September.
- Reconcile the director and related-party accounts.
Common mistakes
- Estimating advance tax from the budget rather than actuals. A good festive quarter quietly creates a shortfall.
- Carrying provisions for statutory dues past the return due date. The deduction moves to the next year.
- Looking at MSME ageing in March. By then the clock has already run.
- Writing down stock with a round-figure March entry. Without a count and a valuation note it will not hold.
- Buying an asset in February and expecting full depreciation. Under 180 days of use gets half.
- Treating accrued-but-unpaid bank interest as paid. It is specifically not.
- Leaving GST reconciliation to the annual return, by which time missing supplier invoices are difficult to recover.
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Open Virtual CFO →Frequently asked questions
How much advance tax is due by 15 December?
Seventy-five per cent of your estimated tax for the year, on a cumulative basis — 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. Shortfalls attract interest at 1% a month, so re-estimating on November actuals rather than on the original budget is worth the hour it takes.
Which expenses are deductible only when actually paid?
Employer PF and ESI contributions, bonus and commission to employees, gratuity contributions, leave encashment, interest on loans from banks and specified institutions, and amounts owed to registered micro and small enterprises. These are allowed in the year of provision only if actually paid on or before that year's return due date.
Why run the MSME ageing in December rather than March?
Because the 45-day clock on a January invoice expires in early March. By the time you look at the ledger in late March, the outcome for those invoices is already fixed. A December review lets you clear the ones approaching the limit and plan cash for the rest, and it feeds the MSME-1 return due the following 30 April.
Does buying an asset at year end still get full depreciation?
No. For income-tax purposes an asset put to use for fewer than 180 days in the year gets only half the depreciation for that year. If a planned purchase is marginal, commissioning it before early October rather than in February changes the deduction materially.
General information for FY 2026-27, not professional advice for your specific case. Rules change — verify against the latest notification or ask a KyaTax expert.
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