The tax season is just over, and income tax filing is an essential task annually. We Hope everyone filed ITR and even got their refund.  Now that the ITR filing is done, if you are an employee, the other important task is the Submission of Proof of investment that has to be done every year. Employees must submit an investment declaration before the April 01 start of the tax year. Employees must declare their investment plans in an investment declaration document, and at year’s end, they must produce supporting documentation. From April through December, taxes will be calculated and deducted.

Let’s understand what Investment proof is and all the processes, and Try to know how these things will help you to make your tax planning more efficient and save you from unnecessary hassle. In India, companies typically ask employees to declare their investments twice a year: once at the start of the fiscal year and once in December or January.

What is Investment proof? 

Investment proof is the documentation employees must provide to disclose their investments for tax computation purposes in April. Employers must abide by a set of rules established by the Income Tax department to verify investment proof.

Employers are required to deduct taxes from employees’ salaries each month. Employees must file investment declarations to be free from these taxes and qualify for deductions. Based on these declarations, an employer determines the taxable income of their employees before deducting taxes.

What are various tax savings investment and their investment proofs?

1. EPF and PPF: 

Tax deductions are available for Public Provident Fund (PPF) contributions up to Rs 1.5 lakh per year. Under Section 80C, EPF contributions are tax deductible up to Rs 1.5 lakh annually.

Proof: Give your employer a copy of your PPF passbook. Or you can upload a printout or screenshot of your PPF statement from the website. As the employer makes EPF contributions, the employer will already have the proof of it, or you can submit the screenshot or printout of the passbook.

2. ELSS mutual Funds:

Under Section 80C of the Income Tax Act, 1961, investments in ELSS or tax-saving funds are eligible for a tax deduction of up to Rs 1.5 lakh. Taxes on ELSS fund returns exceeding Rs 1 lakh are 10%. (long-term capital gains tax).

Proof: By requesting statements from your broker, you can obtain documentation for your mutual fund investments. Alternatively, you can request an email statement that includes all your mutual fund holdings, including your ELSS funds.

3. HRA: If you are paying rent, you can also claim a deduction. If you receive HRA (House Rent Allowance), you may be able to claim this, however, to a lesser level (by taking the benefit of Section 80GG). 

Proof: You must provide monthly rent receipts. Suppose you and your landlord have a leave-and-license agreement, then you can submit the receipt of payment of license fees.

4. Home loans: Section 80EE provides tax benefits for first-time home buyers, which can be claimed on loan interest, for loans approved between April 01, 2018, and March 31, 2019. This deduction exceeds the Rs 2 lakh limit outlined in Section 24 of the Income-tax Act. From FY 2018–19 onwards, the deduction is permitted up to Rs 50,000 annually until the debt is repaid.

Proof: Every required document must be in hard copy.

5. Tuition Fees: Tuition fees of up to two children can be claimed as a deduction.

Proof: You must submit photocopies of the school receipt with the school’s seal and the receiver’s signature.

6. NPS: This scheme offers between 8% and 10% annualized returns. There is a deduction of up to Rs 1.5 lakh for your contribution and the employer’s contribution to the NPS. Self-contribution is cow1vered by Section 80CCD(1) of the tax code.

Proof: When investing in NPS through the Corporate Model or Employee Model, there is no need to submit proof of actual investments because the funds are collected and deposited by the firm in the PRAN (Permanent Retirement Account Number) account. In case of self-contributions PRAN card, NPS Statement for tier 1 account is needed.

7. Insurance: Under Section 80C, life insurance premiums are tax deductible up to Rs 1.5 lakh annually. As long as the life insurance cover is at least ten times your yearly premium, neither the returns on insurance plans nor the maturity amount on ULIPs are taxed.

Proof: You can send in a copy of your policy agreement and any acknowledgments or receipts the life insurance provider issues after paying your premiums.

The tedious and time-consuming process of submitting investment proofs frequently involves a tonne of paperwork and last-minute verification. But this process can be more straightforward by planning and putting a systematic approach.

How to automate the collection of investment proof?

How to simplify Investment proof submission. The solution is to automate the investment proof collection, Validation & verification process. Connect with Taxblock for this solution.

Employers face some significant problems during Investment proof submission, such as:

  • The manual process of collection of Investment Proofs
  • Submission of proofs over the email
  • The manual process of classifying and categorizing the proofs
  • Lack of user-specific mediums to ease the adaption process
  • The tedious process of Proof verification
  • Downloading and maintaining the proof database

In simple 9 steps, The application automates the Proof of investment (POI), From submission to report generation.

1. The employee Profile creation.

2. Employee orientation to ease the adoption process.

3. Providing application access to the Employees

4. White collar employees access the application using a Laptop/Desktop.

5. Blue collar employees scan the QR code to initiate POI Submission over WhatsApp.

6. The employer receives the Proof on a real-time basis.

7. Employer reviews the submitted Proof and takes necessary actions like Accept/Reject.

8. Employees receive Real-time notifications about the activity performed by the employer.

9. The employer can Export the data in Excel sheets per the desired format.

The author Sushant Gangurde is a legal analyst @Taxblock India who aims to educate people about various tax laws and financial planning.

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Qualification: Other
Company: Taxblock
Location: PUNE, Maharashtra, India
Member Since: 24 Jun 2021 | Total Posts: 129
Taxblock, founded in 2019, is a fintech startup located in Pune, Maharashtra. We are enrolled as an E-Return Intermediary with Income Tax Department & have established an In-House team of Technology & Tax Experts to build a “Financial Compliance Ecosystem” for Individual & Corporate View Full Profile

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September 2023