Income Tax is a crucial source of revenue for the government of India. Thus, it is highly essential for citizens to pay their taxes on time. While most people are aware of the significance of paying taxes, few understand the steps to produce our taxes on time. Many are yet to be mindful of their rights and how they can claim exemptions. The jargon like VAT, GST, stamp duty, and self-assessment tax bewilders most of us. You can easily calculate essential information from online tools such as VAT, GST, Stamp duty calculators that are available online.
Are you also confused about the different declarations you are asked to make by your employers at the beginning of every financial year? How is it related to your TDS? Also, what is the difference between the investment made and investment declarations? Well, we are here to clear all your doubts with this article.
As per income tax department regulations, you need to make your investment declarations at the beginning of every financial year. So HR will ask you to make your declarations at the start of the financial year. And it is indeed important for capital gains tax deduction on your monthly salary. It is a good thing as it allows you to get more in-hand compensation every month if done wisely. So you need to be as serious about investment declarations as you are about investing.
The core difference between a declaration of investment and actually making it is that all you need to do is mention the assets you intend to make in declarations. Here, your actual investment may be more or less than this. In addition, you don’t need to present any proof until the end of the financial year.
Deduction
Let’s start with what investment deduction comprise of:
- House Rent Allowance- If you pay any rent for your home, you can claim HRA.
- Leave Travel Allowance- It is available to employees and their salary package and is applicable for domestic travel only.
- Home Loan- You can claim a tax deduction on the interest of your paid or payable home loan by filling in details of interest and other documentation in form 12B. It can be a very significant deduction during income tax e filing as we generally have to pay a lump sum interest on home loans.
- Deduction under Section 80C, 80CCC, 80CCD, 80D- This Section consists of the different deductions allowed to citizens, such as the premium paid on life insurance, medical insurance, education loans, annuity plans. You can also display your donations, contributions to NPS, and even interest on savings accounts in your incometaxindiaefiling. You can plan the deductions you would like to claim using an income tax calculator.
Form 12
When an employee wants to claim deductions, they need to fill out the form, which will act as a statement of claim by an employee for deduction of income tax. For example, a salaried employee must submit form 12 BB to claim tax benefits or rebates on investments and expenses. It applies to all taxpayers and must be submitted at the end of each financial year. Along with this, the employees also need to submit documents and proof to back their claims.
The employees need to submit the exemptions and deductions they wish to claim. The employer can deduct TDS on the salary based on these deductions. If done correctly, employees can enjoy more cash in hand. The form must be submitted to your employers and not directly to the Income Tax Department. Thus, form 12BB is helpful in the TDS calculation for the entire year. It is also possible to claim excess TDS deducted by filing your income tax return. Most of the deductions come under Section 80C of the Income Tax Act, which has an annual limit of Rs 1.5 lakh. Other deductions under 80D and section 124 can also be claimed.
Thus, investment declarations are vital for meeting your financial goals and saving more money as it leads to lower taxes and higher salaries every month.