An investment declaration or Tax declaration is required to be submitted at the beginning of the year. This is required to be submitted by an employee to their employer for the investment they have done during the year.
Initially, an employee has to submit some estimates of the current and future investments, and later proof will be required to be submitted before 31st March of the ongoing financial year.
As per Section 192 B of the Income Tax Act, 1961, the employer is required to submit TDS on behalf of the employee. And before paying taxes to the government, the employer needs to make sure that all investments are covered and tax is calculated after considering all Investments.
An employee can submit their Investment declaration through form 12BB.
Following are the investments where tax can be reduced:
Section 80C
The very used and common section to reduce Income tax and claim deductions is Section. Using this section, you can claim a deduction of up to 1.5 lacs which can be used by both Salaried and non Salaried Individuals.
Section 80C allows you to claim for investments commutatively up to 1.5 Lacs.
80C allows you to invest in various options which have been mentioned below:
1. Life Insurance Premium:– Payment of Life Insurance premiums for yourself, your Spouse, and your children can be claimed as a deduction under the Income Tax Act, of 1961
2. Public Provident Fund (PPF Account):- Any PPF accounts for 15 years having Lock in Period of 5 years are allowed to claim as an exemption. Apart from the exemption, PPF has a high rate of Interest as compared to other Investment options.
3. Fixed Deposit:- Section 80C also covers Fixed deposits with a tenure of more than 5 years. These Fixed deposits can also be claimed as deductions. All deductions less than 5 years of tenure are not allowed to claim as deductions.
4. Employee Provident Fund (EPF Account):- Salaried employees can claim EPF paid by them as well as a deduction.
5. Repayment of Principal portion of Home Loan:- If you are paying a home loan, then repayment of the principal amount can also be claimed as a deduction.
6. Stamp Duty paid on Purchase of a House:- Any amount paid as Stamp duty on the purchase of the house can be claimed as a deduction in the year of purchase.
7. Payment of Education Fees of Children:- Deduction under Section 80C is also allowed for payment of School Fees of a maximum of 2 Children.
Section 80CCD
Section 80CCD allows you to claim an additional deduction of 50,000 if you are a Subscriber of NPS.
Section 80D Medical Insurance Premium
A deduction of 55,000 can be claimed as a medical insurance premium under section 80D. You can claim Medical Insurance premiums for yourself, your spouse, and dependent children.
For your better understanding, check the below working:
| Persons Covered | Exemption Limit | Health Check-Up Exemption | Total |
| Self and family | Rs.25,000 | Rs.5,000 | Rs.25,000 |
| Self and family + parents | Rs. (25,000 + 25,000) = Rs. 50,000 | Rs.5,000 | Rs.55,000 |
| Self and family + senior citizen parents | Rs. (25,000 + 30,000) = Rs. 55,000 | Rs.5,000 | Rs.60,000 |
| Self (senior citizen) and family + senior citizen parents | Rs. (30,000 + 30,000) = Rs. 60,000 | Rs.5,000 | Rs.65,000 |
Section 80E Interest on Educational Loan
Interest on educational loans taken for your spouse, children, or for a student for whom you are the legal guardian during the financial year is allowable as a deduction from taxable* income.
House rent allowance
A salaried employee can claim a House rent allowance if he lives on a rented property.
How to calculate HRA:-
The deduction available is the least of the following:
- Actual HRA received
- Actual rent paid should be less than 10% of basic salary + DA
- 50% of [basic salary + DA] for those living in metro cities
- 40% of [basic salary + DA] for those living in non-metros
Leave travel concessions
This can be claimed by salary employees only. A salaried employee can claim Traveling expenses to their employer twice in four years.
Section 24 – Interest on Housing Loan
Individuals having a home loan can claim a deduction for Interest on home loans up to 2 lacs.
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