What is Income Tax Declaration (ITD)?
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, the Income Tax Department will alarmingly examine the tax deduction.
Also, the Union Budget 2020 introduced a new tax regime with fewer deductions for expenses and investments, and employees are allowed to compare old and new tax regimes. Based on that and to choose the better option, they need to calculate their tax liabilities and are required to make an Income Tax Declaration.
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.
Employees can Generate & Download the 12BB Form Online.
- Employee Name
- Employee Address
- Employee PAN
- Financial year
- Eligible expenses
- Eligible investments
What happens if ITD 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.
Which Expenses and Investments are to be Declared in ITD?
- 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 ITD?
The employee needs to submit ITD on the date specified by the employer. After submitting the ITD, the employee needs to provide documents proof of the expenses and investments. The due date for submission of document proof is usually between January and February.
The deadline for submission of the Income Tax Declaration for FY 2023-24 is approaching. If you need assistance with submitting your Income Tax Declaration, reach out to our tax experts. Get Tax Advisory Services Now!
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