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Every year, as the tax season beckons, your employer would ask you to declare your investments in various tax-saving instruments for the year so that they can deduct the tax accordingly from your salary. Declaring your investments is vital as it allows you to reduce your tax liability and get a higher in-hand salary.At the start of the financial year, you only have to make an estimate of the investments you wish to make during the year. You need not submit the actual investment proof until the end of the financial year. You can invest more or less than the declaration made as per your choice.
What is form 12BB?
Form 12BB is a statement of the various claims you have made for getting tax benefits. If you are a salaried employee, as per the Income Tax rules, you must compulsorily submit this form to your employer to get the tax rebate. You must submit the Form 12BB at the end of the financial year.
What investment declaration can you make in Form 12BB?
House Rent Allowance
HRA is usually a part of the employee structure. If you live in a rented house, the rent you pay to the landlord is eligible for tax deduction. You must furnish details of the rent amount, name of the landlord, house address and PAN and Aadhaar number of the landlord in Form 12BB.
Home loan interest
The interest you pay for home loan is eligible for tax deduction up to Rs. 2 lakhs in a financial year under Section 24 of the IT Act. To claim the tax benefit, you must provide details like the interest amount you pay, name and address of the lender and PAN or Aadhaar number of the lender.
Deductions under Section 80C, 80CCC, and 80CCD
Section 80C – This section covers the premium paid for life insurance , the repayment of home loan principal amount and investments made in ELSS ( Equity-linked Savings Scheme ), funds, NPS (National Pension System), PPF (Public Provident Fund), etc. Section 80CCC – The premium paid for an annuity plan. Section 80CCD – If you make any additional contribution over and above the minimal contribution to your NPS account, you can claim tax benefit under this section.
Deductions under Section 80D, 80E, 80G, 80TTA
Section 80D – This section covers the premium you pay for health insurance policy. You can get a tax deduction up to Rs. 25, 000 in a financial year for a policy that covers you, your spouse and dependent children. If you have a policy for senior-citizen parents, you can claim an additional tax benefit up to Rs. 25,000. Section 80E – This includes the interest paid on the student’s loan or education loan. Section 80G – Donations made to specific charitable organisations or NGO. Section 80TTA – The interest earned from the deposits held in savings bank accounts.
Should employees submit Form 12BB to the Income Tax Department?
No, as an employee, you need not submit Form 12BB to the IT department, but you must submit it to your employer to get tax benefits.
FAQS - FREQUENTLY ASKED QUESTIONS
How can an investment declaration be saved on taxes ?
An investment declaration is a statement that lists the investments and expenses made by an individual during the financial year. To save taxes using an investment declaration, an individual can claim deductions on the investments made under various sections of the Income Tax Act.
Here are some ways to save taxes using an investment declaration:
Section 80C Deductions: An individual can claim deductions up to Rs. 1.5 lakhs on investments made under Section 80C of the Income Tax Act. Some popular investment options under this section include Employee Provident Fund (EPF), Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Savings Scheme (ELSS), and Life Insurance Premiums.
Health Insurance Premiums: An individual can claim deductions up to Rs. 25,000 (for individuals below 60 years) and Rs. 50,000 (for senior citizens) on health insurance premiums paid under Section 80D of the Income Tax Act.
Home Loan Interest: An individual can claim deductions up to Rs. 2 lakhs on the interest paid on a home loan under Section 24 of the Income Tax Act.
Donations: An individual can claim deductions on donations made to charitable organizations under Section 80G of the Income Tax Act.
Education Loans: An individual can claim deductions on interest paid on education loans under Section 80E of the Income Tax Act.
To claim these deductions, one needs to submit proof of investment declarations to their employer. It is important to note that the total deductions claimed under various sections cannot exceed the taxable income of the individual.
Is it necessary to submit investment proof ?
Annually, salaried professionals and employees must provide evidence of their investments to their employers in order to ensure that the appropriate amount of Tax Deducted at Source (TDS) is deducted. Employers in India are obligated to deduct TDS each year and failing to provide accurate investment proofs may result in either excessive or insufficient tax deduction.
What happens if I don't submit an investment declaration ?
If you fail to provide the necessary documents to your employer before the deadline, you may face a higher deduction of Tax Deducted at Source (TDS). However, even if you miss the deadline, you may still be able to claim some of the deductions while filing your income tax return.
TDS is a tax collected by the government on income earned by individuals or entities. Your employer deducts TDS from your salary and deposits it with the government on your behalf. The amount of TDS deducted depends on various factors such as your income, investments, and tax-saving deductions.
To ensure that the correct amount of TDS is deducted from your salary, you need to furnish proof of your investments and other eligible deductions to your employer before the deadline. If you fail to do so, your employer may deduct a higher amount of TDS from your salary.
What is an investment declaration for salaried employees ?
An investment declaration is a document that salaried employees provide to their employers at the beginning of a financial year, usually in the month of April, declaring their investments and expenses that are eligible for tax deductions under various sections of the Income Tax Act, 1961.
The declaration helps the employer to calculate the employee's tax liability and deduct the appropriate amount of tax from their salary. The employee is required to provide details of investments made during the financial year, such as life insurance premiums, public provident fund contributions, equity-linked saving scheme investments, National Pension System (NPS) contributions, tuition fees for children, etc.
The declaration should be supported by relevant documentary proof of investments and expenses incurred during the financial year. The employee can update their declaration at any time during the financial year, but the revised declaration should be submitted to the employer well before the end of the financial year to avoid any delay in tax deduction.
Who is eligible for investment proof ?
Investment proof is typically required by employers for their employees to claim tax exemptions on investments made under Section 80C of the Indian Income Tax Act.
In India, any individual who is a salaried employee and receives a fixed monthly income is eligible to provide investment proof to their employer. This includes individuals who work in private companies, government organizations, or any other organization that provides a fixed monthly salary to its employees.
The types of investment proofs that can be submitted vary depending on the employer's policies, but generally include investment in schemes such as Public Provident Fund (PPF), National Savings Certificate (NSC), Equity Linked Savings Scheme (ELSS), Tax Saving Fixed Deposits, and others.
It's important to note that investment proof is not required for all taxpayers, but only for those who want to claim deductions on investments made under Section 80C of the Income Tax Act.
What is the difference between investment declaration and proof submission ?
Investment declaration and proof submission are two terms commonly used in the context of tax-saving investments.
An investment declaration is a statement made by an employee at the beginning of a financial year to his/her employer about the tax-saving investments he/she plans to make during that year. This declaration is made on a prescribed form provided by the employer. The purpose of this declaration is to inform the employer about the employee's investment plans so that the employer can calculate the employee's tax liability accordingly and deduct the appropriate amount of tax from the employee's salary.
On the other hand, proof submission refers to the submission of actual evidence of the tax-saving investments made by the employee during the financial year. This proof is submitted to the employer at the end of the financial year, typically in the month of February or March. The purpose of proof submission is to claim the tax benefits available on the investments made by the employee.
What is the difference between investment proof and ITR ?
Investment proof and Income Tax Return (ITR) are both related to taxes and investments, but they serve different purposes.
Investment proof refers to the documents or receipts that are submitted by a taxpayer to their employer or the tax authorities to claim deductions on their taxable income. These documents may include payment receipts for investments such as Public Provident Fund (PPF), National Savings Certificate (NSC), equity-linked savings schemes (ELSS), life insurance policies, and health insurance policies. These investment proofs are usually submitted to the employer during the financial year for the purpose of tax deduction at source (TDS).
On the other hand, ITR is a document that is filed by taxpayers with the Income Tax department at the end of each financial year. It is a statement of the taxpayer's income and tax liability for a particular financial year. The ITR provides details of the taxpayer's income from various sources such as salary, business income, capital gains, interest income, etc. and deductions claimed under various sections of the Income Tax Act.
In short, investment proof is a document submitted to claim tax deductions, while ITR is a document that is filed to declare the taxpayer's income and tax liability.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
