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  7. Income Tax Declaration and Investment Proofs

Income Tax Declaration and Investment Proofs

Updated on: 03 Feb, 2025 07:25 PM

We are on the edge of the financial year 2024-25, and when it ends, employees will be asked to submit “Investment Proofs” for the Income Tax Declaration.

At the beginning of the year or at the time of joining the company, every employee is required to submit an "Income Tax Declaration" to his employer. It's a conditional statement that contains the proposed investment and expense details that the employee is likely to make over the financial year, including investments and expenses that are income tax deductible.

At the year's end, an employee is required to submit supporting "Investment Proofs" for the investments that had been stated in the "Income Tax declaration". This guide will help you learn more about Income Tax declarations and investment proofs.

Contents

Why do Employers ask for an Investment Declaration?

This is because it is mandatory to deduct a consistent amount of TDS from the employee's salary every month and to calculate the TDS amount, they want to know the estimated taxable income. The TDS amount is calculated on the basis of declared investments that are either tax-exempt or taxable under the Income Tax Act.

At the year's end, an employee is required to submit the Investment declaration and investment proofs to the employer, and upon failure to submit, the employer is forced to deduct complete tax without keeping in mind the proposed investments made.

The last date for the submission of investment proofs is set as per the organization's policies. The deadline for submission of investment proofs can be different for every organization. If an employee joins the company in the middle of the year, then he should furnish his previous income details and make a fresh income declaration.

Note: When employers deduct TDS accurately based on the Investment Declaration, it simplifies the tax filing process for both the employer and the employee at the end of the financial year.

List of Investment Proofs Eligible for Tax Deduction

Below is the list of investment proofs that are eligible for tax exemption/ deduction:

Deduction under Deduction in relation to
Section 80 C Life insurance Premium slips( in the name of self/spouse/children), Passbook copy of PPF, Home loan Statement reflecting principal amount, Mutual Fund Statement, Kid's tuition fee receipts, NSC certificate, Tax saving FD receipt, Sukanya Samriddhi Account passbook, etc.
Section 80 D Copy of Premium receipt, Health- Checkup receipts
Section 24 Home Loan statement, Self-Declaration, whether the house is self-occupied or let-out, submit completion certificate or occupancy certificate for claiming interest paid on housing loan.
HRA Monthly rent receipts & rental agreement. In case the annual rent paid is more than Rs 1 Lakh, the landlord's PAN should be quoted.
Section 80 G Receipts of donations
Section 80 E Copy of loan certificate reflecting the interest payments
Leave Travel Allowance Travel tickets. LTA can be claimed twice in a block of four years.
Medical Reimbursement Original medical bills with Doctor's prescription(s) copies, if available.

Things to Keep in Mind While Submitting Investment Proofs

To ensure the smooth processing of your documents, follow these guidelines carefully:

  • All documents must be self-attested, and the signature should match the one on your PAN records.
  • Digital proofs, like demat accounts or mutual fund statements, must clearly display the investor’s name, PAN, and closing portfolio value.
  • Physical documents, such as bank Fixed Deposit (FD) receipts, must have all maturity details clearly highlighted.
  • The amounts shown on your proofs must precisely match the claimed deduction amounts. For assets like gold or property, double-check all indexation calculations.
  • Maintain an annual file containing all proof documents, including purchase invoices and statements. This will significantly expedite any future scrutiny.

What are the Consequences of not Making Investment Declarations?

If an employee fails to submit the investment proofs, the following consequences may arise:

  • You may have to pay a significantly higher income tax if your investments are not reported accurately.
  • To claim your Leave Travel Allowance (LTA), you must submit all travel receipts, including flight boarding passes and train tickets. While other deductions can be claimed at the time of filing ITR, LTA is one such investment that can only be claimed through the employer.
  • If you wish to claim deductions for a home loan, you must provide valid certificates as proof for both principal and interest repayment.

Need help with tax-filing or have a tax-related query? Consult our Online CAs Now!

Frequently Asked Questions

Q- Do we need to submit proofs while filing ITR?

Yes, you need to submit your investment documents by the specified deadline established by your company. Failure to do so may result in higher TDS deductions from your March salary. Nonetheless, if you have missed the deadline for submitting investment proofs, there are still options available to help minimize your tax liabilities.

Q- What should I declare in the investment declaration?

To qualify for a tax deduction on house loan interest payments, you need to complete an investment declaration form. This form requires details like the interest amount paid or due, the lender's name, and their PAN number.

Q- Who is eligible for investment proof?

Each year, salaried individuals are required to provide investment proofs to ensure accurate TDS (Tax Deducted at Source) deductions by their employers. In India, employers are mandated to deduct TDS annually, and without the proper investment proofs, there may be instances of over or under-deduction of taxes.

Q- What do you mean by tax declaration proof?

Tax declaration proof requires specific documents, including:

  • A completion certificate from the builder or a self-declaration from the employee for house property.
  • An investment certificate copy for ELSS mutual funds.
  • A stamped deposit receipt or passbook displaying details for Public Provident Fund (PPF) accounts.
  • Premium receipts for life insurance policies.

Q- For a salary of Rs. 15 lakh and above, which tax regime is more suitable?

Individuals earning over Rs. 15 lakhs often prefer the old tax regime as it allows them to maximize tax savings by utilizing all eligible deductions and exemptions.

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CA Abhishek Soni

CA Abhishek Soni
Founder & CEO at Tax2win

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Abhishek Soni is a Chartered Accountant by profession and an entrepreneur by passion. He has wide industry experience in telecom, retail, manufacturing, and entertainment and has handled various national and international assignments. He is the co-founder and CEO of Tax2win.in. Tax2win, an online tax filing platform, provides the easiest way to e-file your Income Tax Return in India. Through Tax2win.in, Abhishek endeavors to revolutionize how individuals file their income tax returns, offering a seamless and user-friendly experience.