Income Tax Return Filing in India: A Beginner’s Guide

As a salaried employee, every individual has to submit income tax proofs every financial year, to claim income tax benefits.

To start with, every professional has to conduct income tax declarations and allowances in April, which later needs to be validated by submitting proofs in January or February based on deadlines given by employers.

By declaring your allowances at the beginning of the year, every employee is exempted from tax deductions on their CTC. However, this also means that every employee has to validate this, by submitting proof of investments which the employer requires for tax audit purpose, around January or February. It is worthy to note that, investments done for the year would be valid only for that year, i.e. any investments that are dated from 1-Apr to 31-Mar is valid only for that financial year.

If employee declares them at the beginning of the financial year and do not submit them, they need to pay income tax in the last 2-3 months of the financial year, which could be a huge burden. Hence, it is imperative to submit proofs in order to claim income tax benefits for the financial year.

Investment proofs submission are mostly done in January/February based on deadlines provided by the employer. This might change from employer to employer. Here is the quick checklist of documents to be submitted along with respective income tax section.

• Some documents which can be submitted are: Life insurance premium receipts, PPF, Tax Saving mutual funds , national savings certificate , fixed deposits , ulips , Housing Loan principle etc

• Investment Proofs to claim u/s 80C upto Rs 1.5 Lakhs.
• Health Insurance Premiums can be claimed u/s 80D – Maximum of Rs 50,000 (sr. Citizens Rs 60,000)
• Investment Proofs to claim u/s 80CCD for NPS – Maximum of Rs 50,000
• Interest on repayment of educational loan to claim u/s 80E – No limit
• Donations made to claim u/s 80G
• HRA claim u/s 10 (13a) – Limit is as per guidelines
• Interest on home loan u/s 24B – up to Rs 2 Lakhs
• Medical Expenses on handicapped dependent to claim u/s 80DD
• Medical Expenses for specific diseases u/s 80DDB
• Investment Proofs to claim u/s 10(5) – Leave Travel Allowance (LTA) – Limit is as per grade in the company

The income tax returns offer many exemptions and deductions subject to certain conditions. In order to claim these deductions, the taxpayers have to make the investments or meet the criteria. The investment proof needs to be submitted to the income tax department while filing the income tax returns as a document supporting the exemptions or deductions that the taxpayer has claimed to have.Investment proof is a document which contains the details of the investments made, like the time of making the investment and the amount of investment. Most investments or expenses must be related to the year of income tax returns that the taxpayer is filing. Typically, a taxpayer who is a salaried individual has to submit investment proofs to the HR against which the TDS computation will happen. Other companies that have to get their books of accounts audited will have to show the investment proofs to the auditors.

Investment proof submission to the employer of the taxpayer is mandatory in order to ensure that the taxpayer is claiming all the deductions. The employer computes the tax liability of the employee on the basis of these investment proofs and deducts TDS accordingly. Therefore, it is extremely important for the employee taxpayer to submit the investment proof when the employer requests them.Taxpayers can download Form 12BB from the income tax website and fill it in with their investment details. This can be submitted to the employer along with the investment proof.

For salaried individual taxpayers, without submitting investment proof, the employer will not factor in the deductions and exemptions that could reduce the tax liability of the employee. They will then deduct TDS based on the investment proof submitted.For investments in mutual funds, taxpayers can get a statement from the distributor. It can also be obtained from the Registrar and Transfer Agent(RTA). A consolidated email statement of all mutual fund investments, including ELSS Funds, can be mailed to you. This would act as proof of investment while filing the ITR. EPF(Employee Provident Fund) proof is submitted by the employer. However, if asked to submit, then a printout of the EPF passbook can be submitted.Investments are shown in ITRs to ensure that the taxpayer claims the deductions available against the investments and reduces the burden of the tax.

Non-submission of investment proofs to the employer will lead to the employer deducting high TDS because the computed income tax will not factor in the deductions appropriately. For example, let’s assume a salaried individual taxpayer has a net taxable income of Rs. 12,00,000. The taxpayer does not submit the investment proof of home loan interest. This resulted in the taxpayer losing deductions under Section 80C of Rs. 1,50,000 (maximum deduction allowed against the principal portion of home loan) and under Section 24 of Rs. 2,00,000 (maximum deduction allowed against interest portion of home loan). This would have reduced the net taxable income to Rs. 8,50,000. Now, because of this, the difference in the amount of tax that the taxpayer will end up paying is as follows:

The difference is a massive amount of Rs. 90,000 (Rs. 1,72,500 – Rs. 82,500). Hence, all taxpayers must be careful with their investment proof submissions.

The last date for submission of investment proof is typically decided by the employer. It typically takes place in January of every year. However, this deadline has to be March 31 of the financial year. It is also recommended to maintain the income tax proof of investment for at least 6 years in case the income tax department launches an assessment and requests for submission of proof. In case the taxpayer failed to provide proof of investments to the employer, the deductions can be claimed while filing income tax returns.

While most of the deductions can be claimed at the time of filing returns in case the taxpayer failed to submit the proof of investments to the employer, there are some investments that will not be permitted unless the proof of investment is submitted to the employer. Once such deduction is LTA (Leave Travel Allowance). LTA is allowed to a taxpayer only twice in four years. It is availed on domestic travel of the employee and family. The maximum deduction available under LTA will be the actual price of travel tickets or the LTA component in the salary, whichever is lower.

There are many expenses and investments that may take place after the submission of investment proof to the employer. The investments and expenses like contributions to PF, children’s tuition fees, principal or interest payments on home loans, stamp duty charges, life insurance premiums, bills for preventative health check-ups, etc., can all be claimed as deductions while filing income tax returns, even if they have been incurred after submission of investment proofs.Ready to make the most of your money? Start your tax planning journey now!

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.