As a salaried employee, he/she must submit a tax declaration form via Form 12BB at the beginning of each financial year or 3 months prior to the close of the particular financial year. The form is statement of claims that and employee gives for deduction of tax to his/her employer to claim exemptions or deductions from the salary depending upon the salary structure.
Often, new employees get confused regarding what needs to be declared in the tax declaration form. The employee has to submit the same in a timely manner because based on the declaration form, the employer calculates the tax deducted at source (TDS) on the employee’s salary.
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Things to be included in Tax Declaration
1. House Rent Allowance (HRA)
Mostly, HRA is a part of salary structure received towards the rent paid on accommodation and a part of it is allowed as a deduction from the taxable salary under Section 10(13A) of the Income Tax Act.
To claim HRA, you need to provide details such as:
1. Name & Address of the Landlord and actual rent paid
2. If the rent paid is more than Rs.1,00,000 PAN of the landlord is also required.
3. Rent Receipts or Rent Agreement with the owner.
2. Leave Travel Concessions or Allowances (LTC/LTA)
LTA is an important component of salary which is provided by the employer to his employee who is travelling on leave from the work to cover his/her travel expenses and the same is allowed as deduction under Section 10(5) of the Income Tax Act. It is applicable for domestic travel only.
To claim LTA, you need to provide details of all proofs of all travel related expenditure.
3. Interest on Home Loan
Section 24 of the Income Tax Act provides for deduction of interest on a home loan of up to Rs. 2,00,000 in a financial year. The loan must be taken to acquire, construct, repair, renew or reconstruct the property. An employee must calculate the total interest paid payable under each EMI and then claim the tax benefit.
To claim the deduction, you need to provide details such as interest paid/payable, lender’s name, lender’s PAN. The employee shall also declare the share of ownership of the property. Stamp duty, registration fees and brokerage expenses paid towards transfer of the property can be claimed as deduction.
4. Deductions under Section 80C, 80CCC, 80CCD and 80D
Here is a quick list of deductions available under Section 80 that can be declared in the form:
80C: Premium to be paid for Life Insurance, premium paid for Unit Linked Insurance Plans(ULIP), and/or investments to be made in Equity Linked Saving Scheme (ELSS) funds, PPF, tax saving fixed deposits, National Savings Certificates(NSCs), contribution to a pension plan or National Pension System (NPS) and/or school tution fees for children, principal repayment on housing loans, any investment in Sukanya Samridhi account etc. The maximum amount of deduction an employee can claim under this section is Rs.1,50,000.
For all of the above, the employee shall keep in hand all the receipts of premium paid, school fees receipts, PPF Account Statement etc.
80CCD: Additional contributions made to NPS is available to an employee in excess of the limit of Rs.1,50,000. The maximum amount eligible for deduction is Rs.50,000.
80D: Premium to be paid (in any mode other than cash) for medical insurance on self, spouse or dependent children upto Rs.25,000 and an additional Rs.25,000 for parents, if they are less than 60 years of age, or Rs. 50,000 if parents are aged above 60. A deduction of Rs. 5,000 may also be claimed by the employee in respect of Preventive Health check-ups where the payment can be made in cash.
80E: Total Interest to be paid on the loan taken from a bank or financial institution for pursuing higher education in India or outside India for spouse, children or for a student for whom you are legal guardian. For claiming deduction, employee shall provide a certificate from the bank where the principal and interest amount of the loan are mentioned separately.
80G: Any amount payable as donation to charitable institutions and specified trusts/certain funds etc registered under 80G of the Income Tax Act can be claimed as deduction by the employee. For availing such exemption, the employee shall provide the PAN, Address of the institution along with the payment receipt and exemption certificate of the institution.
80EEA: The Income Tax Act has provided an opportunity for employees to claim deduction on repayment of housing loan over and above the deductions provide above. An employee who is a first time owner of the property can earn an additional deduction of up to Rs. 1,50,000 subject to fulfilling certain conditions.
Failure to submit the Declaration Form
If employee doesn’t submit the Investment Declaration Form, the benefit of deductions under various sections as enumerated above shall not be taken into account and accordingly, the income shall be fully subjected to tax and employer shall without any information on employees expenses, shall deduct his Tax Deducted at Source (TDS) on the gross salary and hence deducting more amount of TDS than the applicable one.
All is not lost
Now, even if TDS gets deducted, the employee can still get a refund on the excess tax deducted by the employer through disclosing his/her actual investments, expenses and other deductions while filing their Income Tax Return (ITR) anytime between the due date of filing tax return.
However, this process may lead a long time as the excess amount deducted by the employer due to failure of submission of declaration forms shall be claimed/refunded only when the ITR is filed in the next year. Therefore, every employee shall declare his investments, expenses well before time to his/her employer.
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