There are things that you must be aware of pertaining to investment proofs which an individual needs to provide to their employer at the time of tax-saving season. Incase you are not aware of them, read on to get complete details on the same. It will not only help you to save tax but also ensure that you are understand why and how it helps. It can be divided in 5 basic ideas, to help you remember these things.
This helps the employer to deduct appropriate tax from their employers. When you are an employee, your employer deducts appropriate amount of tax from your salary. This is something that we are already aware of. In order to deduct these taxes from the employer’s salary he or she has to calculate exactly how much is an employee’s taxable salary. This can be done when you, as an employee are able to give the exact idea of your income, investments as well as tax saving efforts. All this, ofcourse has to be supported by the appropriate documents. tax saving instruments including the ones that your employee provides generally include your HRA, LTA, along with your Medical reimbursements and other entitlements. Your employer needs to be aware of all these numbers, in details as well documents that prove it.
Employers start collecting their employers proofs and tax related details around the months of December up to January. They do this in order to make the appropriate comparison with the information that is already there with them. Companies require a minimum time of around 2 to 3 months, in order to set these calculations correctly.
Repercussions of Not Making Proper Investment Declarations:
If an employee a.ka. tax payer fails to make these declarations the following repercussions might cause much distress:
- You become liable to pay a much higher amount of income tax, in case the investments are not correctly reported.
- You also might have to pay higher amount of income tax further if you were not honest about your investment. For this, the company will be allowed to take 2 to 3 months to subtract the extra amount of tax from your salary.
In order to claim your LTA, you need to hence provide all the Travel receipts (which includes flight boarding passes and train tickets).
You also have to submit Home loan certificates as documented proof in the case that you wish to claim the deductions under the principal as well as the interest repayment.
You also need to provide the following other investment proofs:
- ELSS investments proofs or any other 80C investments
- Receipts of Life insurance and health insurance premiums
- Donations receipts if you have made any
- Rent receipts for your rented accommodation to claim HRA
Sharing Saving Bank Interest, FD Interest with Employer Helps:
You are also share the following:
- Saving bank interest,
- Any capital gains from shares or mutual fund,
- FD/RD interest earned during year,
- Rental income and other kind of incomes with your employer.
This allows your employer to get a better picture of your taxable salary and hence subtract your income tax with more accuracy. If you fail to share such information, you might then have to make a payment of additional income tax separately and then would have to take these things into your account when you are filing your income tax returns.
This also generally helps to avoid any sort of penalty which may come up because of not paying advance tax before the due date given to you. This also enables you simply avoid the additional tax payment at the end of the fiscal year, since the tax would be distributed almost equally throughout the whole fiscal year.
You Claim Later If Declaration Proofs for Tax Have Not Been Submitted To The Employer:
There is no denying the fact the giving the investment proofs to your employer prior to the the due which helps avoid several hassles much later when you are filing your IT returns. However, being unable to do so will push your employer to subtract the income tax. However at the time of filing your tax returns you can still claim the tax refund, if you have finally managed to make investments in the tax saving products later. Few exemptions are a possibility, but only at employer level which includes LTA as well as medical reimbursements. So incase you fail to provide the LTA as well as the Medical reimbursements proof to your employer on time, then you naturally lose the benefit. This cannot be claimed back at the time of filing returns.
Submitting Proofs while Filing Tax Returns is NOT Mandatory:
An individual needs to simply to furnish the information about their investments. He or she does not have to attach any investment proof. This is only required by the employer. This too too because they are subtracting The TDS as well as being a third party they would hence need the documents for purpose of verification your investment proofs. Declaration is all that is needed otherwise. However, one must keep all the receipts as well as the documents with them for a few years, since it helps to solve hassles later. Again do not lie about your investments which you have not done in reality. Always provide true information.
Provide “Proposed Investment” Proofs for February and March:
For this one has to provide a declaration that he or she is going to make the investments for February and March. Based on the declaration you have made, your employer will process the TDS. All the employers will provide with the declaration form in most cases, available with your Admin or HR. You simply need to notify that you promise to do the investments for the tax saving in the following 2 months and your exemptions should be given to you purely based on your declaration.