Form 12BB is a document that needs to be submitted by an employee to their employer for the purpose of claiming tax deductions and exemptions on their salary income. This form contains details of various investments, expenses, and allowances that are eligible for tax benefits. The employer uses this form to calculate the correct amount of tax to be deducted from the employee's salary.
Generally, you fill out a form 12BB when you start a new job or at the beginning of the financial year. However, at the year's end, you are supposed to submit the actual proofs/evidence against the tax exemptions, investments, and expenses already claimed by you in the form 12BB.
Previously there was no standard format for declaring your tax-deductible expenses and investments. With effect from 1st June 2016, the Income tax department has introduced a standard format of Form 12BB.
Form 12BB contains the following information:
Filling out tax forms can be a nightmare for many of us. However, filing Form 12BB isn’t as scary as it might look. So, let’s just get down with it!
Just follow these instructions to understand and fill out the complete form to claim the maximum tax benefit. Now Let's Discuss each part one by one in detail:
This is the first section of Form 12BB, you need to mention your:
To claim HRA tax exemption, you need to submit the following details to your employer -
In addition, you must also submit proof for claiming an HRA tax exemption.
The proof for claiming HRA tax exemption is the monthly rent receipts. In many organizations, employers also ask for a rent agreement to allow HRA tax exemption.
This is the best tax saving avenue. Calculate your HRA tax exemption with our free HRA exemption calculator tool.
Read our complete guide on rent receipts to know in detail how you can claim HRA tax exemption to save maximum tax
This allowance is the only allowance that helps save tax only when you take a holiday.
Employees need to submit travel bills like boarding passes, flight tickets, invoices from travel agents, boarding passes, etc., to the employer.
This tax exemption is allowed only on actual travel costs to the extent specified in CTC. The fare is exempt as per the following conditions:
|Airfare of economy class in the National Carrier (Indian airlines or Air India) by the shortest route or the amount spent, whichever is less
|Air-conditioned first class rail fare by the shortest route or the amount spent, whichever is less
|First Class or deluxe class fare by the shortest route or the amount spent, whichever is less
|Unrecognised public transport system
|Air conditioned first class rail fare by shortest route or the amount spent, whichever is less
Deduction of interest on borrowings on a home loan is allowed under section 24 of the income tax laws. You can claim a deduction for interest on your home loan taken for construction, reconstruction, repair, purchase, or renovation.
The information that needs to be filled in Form 12BB is
Documents required to claim deduction u/s 24B on interest payment of home loan are:
If you are paying interest on a home loan, then the quantum of deduction will depend on the type of house property. Let’s discuss the same in detail.
Tip: Claiming deduction on interest payment shall result in a loss under head house property. This loss can be adjusted against income from other heads in the current year, subject to the limit of Rs. 2 lakh.
Maximum interest of Rs. 2 00, 000 is allowable in case a loan is taken for the purchase or construction of your house. Such benefit shall be reduced to Rs. 30, 000 in case a loan is taken for repair/ reconstruction. Further, construction or purchase must be completed within 5 years from the end of F.Y. in which the loan is taken.
The entire interest amount that you pay towards the loan is available as a deduction in case of the rented property. Such amount shall be deducted from the rental income for the year
Note : However, from 1 April 2017 onwards, i.e., F.Y. 2017-18, the maximum tax exemption of Rs.200,000/- can be taken for all types of houses(let-out/self-occupied). In case of let out a property, you have paid more than Rs.2,00,000 as interest on a home loan taken for construction/purchase, then the remaining amount shall be allowed to be carried forward for set-off in subsequent years.
In both cases, whether there is self-occupied or rented property, principal amount repayment is eligible to be claimed under Sec 80C of the income tax act. A maximum of Rs. 1.5 lakh can be claimed under Sec. 80C for the principal amount.(Max. limit of claiming all deductions under 80c is 1.5 lakh. So, plan accordingly.)
A maximum of up to Rs. 50,000 additional deductions is allowed for first-time buyers under this section. Section 80EE is valid for loans sanctioned till 31st March 2017 only. To claim the home loan tax benefit under this section, the following conditions need to be met:-
An additional deduction was made for home buyers for a maximum of up to Rs. 1,50,000 under Section 80 EEA.
To claim the tax benefits under a home loan, the following conditions should be met:-
This part of the form may take longer to finish if you claim maximum tax benefits. If you do not have any deductions to make, you can then move on to the last section.
Chapter VI-A covers income tax deduction under various sections like 80C, 80D (Medical insurance) 80G (Donation) etc. To claim deduction, evidence of investment made or expenditure incurred is required. You might be wondering what kind of proof is required to be submitted to claim these deductions. Don’t Worry, we are here to help you.
The last section of Form 12BB is the “verification” of the information submitted in Form 12BB. You need to just enter your name along with the name of your father/mother and the place(the city in which you are filling the form) and date of filing the form and then sign the form.
"To avoid tax deduction altogether, you’ll declare investments to reduce your income to the basic exemption limit so that no taxes are leviable and no TDS deduction is required."
From June 1, 2016, it became mandatory for every salaried individual to submit Form 12BB to their employer for claiming tax deductions and exemptions. This form helps the employer to compute the correct amount of tax to be deducted from the employee's salary.
By submitting Form 12BB, an employee can ensure that they claim the maximum tax benefits of deductions and other tax exemptions that they are eligible for. This can help reduce their overall tax liability and increase their take-home pay.
Form 16 contains the detail of the entire salary breakup, tax deduction, and deposition details with the government. At the same time, Form 12 BB informs the employer about all the investments and expenses made by you. These are not the same.
The details required to be reported in Form 12BB are:
The Income Tax law gives powers to your employer to give you the benefit of all the tax-deductible expenses and investments made by you during the year at the time of deducting your income tax from your monthly paycheck.
However, just one condition is there; this benefit is provided to only those employees who submit their declaration/proofs of income tax deductions in Form 12BB are eligible for this benefit. Thus, Employees must complete this form so that their employers can know how much income tax needs to be deducted from their monthly paycheck and, in turn, how much money they will take home with each paycheck.
The Income Tax Department has made a standard format of Form 12BB. It must be prepared per Rule 26C of the Income Tax Rules. You can download form 12BB online in pdf or Word format, print, fill and submit it to your employer along with the required proofs.
Alternatively, you can fill out Form 12BB online and either mail it to your HR directly or print, sign, and submit it to your employer along with necessary proofs
If you have changed jobs during a particular year, then do not claim the maximum benefit of all the deductions with both employers; otherwise, your TDS deduction will not be correct, and ultimately, at the time of filing your Income Tax Return, you will have to end up with paying tax to the Income Tax Department with applicable penal interest for late payment of taxes.
In case you forgot to submit form 12BB to your employer within the prescribed time, the employer will not be able to give you the benefit of deductions and other tax exemptions. As a result, excess TDS will be deducted from your monthly salary. However, you can claim a refund of such excess TDS while filing your income tax return.
Perquisites are claimed in Form 12BA and not Form 12BB. Form 12BA is a statement showing particulars of perquisites, other fringe benefits or amenities, and profits in lieu of salary with value thereof.
The additional investments which an individual had missed and not declared in Form 12BB can be claimed while filing the return. Although excess TDS will be deducted from his salary during the year, he can claim a refund of the same in his ITR.
If you have not submitted proof of some investments which you have declared in Form 12BB then those would not be considered by your employer. Resultantly, TDS would be calculated ignoring those proofless investments, and it will reduce your take-home salary.
Tax season can be a confusing and overwhelming time. With the number of different tax forms and sections, it’s difficult to keep track of them all. One way to ensure a stress-free tax season is by correctly filling out your form 12BB when you start a new job or at the beginning of the year. In addition, it’s a good idea to start your tax preparation early and stay on top of the process.
If you’re unsure whether you need to file your taxes, there’s an income threshold and some other conditions that help determine whether you should file or not. This threshold is determined by factors like age, earned income, and residential status.
If you’re struggling with income tax sections and provisions, do not worry. There are a lot of calculators out there to make the process clearer. You can use our income tax calculator to estimate the taxes you owe.
And keep in mind that there are tax changes every year, so this year’s tax season may be different than last year’s. If this is hard to track, you can always seek a CA for help.