What is Income Tax Declaration?
An income tax declaration is a document an employee submits to their employer. The document contains information about the employee's total income and expenses. It also requires the employee to provide proof of investments in schemes such as PPF, life insurance, annuity plans, details for claiming exemption of allowances such as LTA, HRA, and interest paid on home or education loans, etc.
An income Tax Declaration is essential to calculate the correct TDS amount based on the employee's taxable income.
By giving this information to the employer, the employee can claim tax benefits and reduce the tax burden. The income tax declaration for salaried employees should be given to the employer. The employer then deducts TDS at the end of the financial year, in January or February, or as per the employer's requirement. Employees can use the Income Tax Declaration and Form 12BB to estimate their planned investment.
Why is Tax Declaration Important?
According to the Income Tax Act, the employers must deduct tax at source, based on the estimated income, after calculating estimated expenses and investments for that financial year.
If employees do not submit the declaration, they will then be required to claim a refund when they furnish the income tax return. However, claiming large amounts in the ITR can attract detailed scrutiny from the Income Tax Department. Therefore, it is better to submit your tax declaration to your employer to claim the eligible deductions and exemptions.
Form 12BB is a document employees need to submit to avail of tax deductions, tax benefits, and or rebates on the investments and expenses made in a financial year. The document has to be submitted at the year-end. In addition, employees must also provide documentary evidence of such expenses and investments at the year’s end. Form 12BB is applicable to all salaried people.
Employees can Generate & Download the 12BB Form Online.
- Part 1: Personal Details including full name, address, PAN, and financial year.
- Part 2: Details of claims and evidence - HRA, LTA, home loan interest, deductions under sections 80C, 80CCC, 80CCD, and 80D.
- Part 3: Verification
What happens if the Income Tax Declaration is not submitted?
Not submitting the income tax declaration may lead to a hassle for an employee while claiming a deduction when filing an income tax return. When an employee does not submit an Income Tax Declaration of expenses and investments, the employee's taxable income will increase, i.e., the employer turns out to be deducting higher TDS. Also, it can lead to missing out on certain deductions like LTA, as they can be claimed only through the employer.
Which Expenses and Investments are to be Reported in Income Tax Declaration?
- Investments under Section 80C
- Insurance Premium under Section 80CCC
- Pension Contribution under Section 80CCD
- Interest on Savings Account under Section 80TTA
- House Rent under Section 80GG
- Interest on Education Loan under Section 80E
- Interest on Home Loan under Section 80EE
- Medical Insurance under Section 80D
- Interest Income under Section 80TTB
- Other details
What is the Deadline for Submitting the Income Tax Declaration?
The employee needs to submit the income tax declaration on the date specified by the employer. After submitting the income tax declaration, the employee needs to provide documents proof of the expenses and investments. While there is no fixed date for submitting the investment proofs, it is usually submitted before 31st March, i.e., the end of the financial year. The employer can set any deadline for proof submission starting January till March 31st. Therefore, you must confirm the last date with your employer and submit your investment proofs on time.
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