Mastering IT Declaration: Key Insights and Tips for Tax Compliance
Updated: Apr 12
Depending on your income, you as a taxpayer must pay the government a specific amount of tax. In accordance with regulations, a portion of your monthly income is withheld by your employer or firm and sent to the government as taxes. After a financial year, employees must notify their employers of their income tax. All of the tax-saving investments a worker intends to make for the year are listed in an income tax statement. The employer calculates and deducts TDS from the employees' monthly income using the information provided in the tax declaration. The Income Tax Act's Section 192 governs TDS on salary payments. We will share a comprehensive guide to tax declarations, including definitions, forms to fill out, types of investment declarations, and Form 12 BB's function.
Table of content
What is an Income Tax Declaration?
An employee's paperwork submitted to their employer is an income tax declaration. The paper details the employee's overall earnings and out-of-pocket costs. To claim exemption from some allowances, such as LTA and HRA, the employee must additionally furnish proof of investments in plans like PPF, life insurance, annuity plans, and interest paid on housing or education loans, among other things.
To determine the accurate TDS amount based on the employee's taxable income, an income tax declaration is required. The employee can lower their tax liability and receive tax benefits by providing the company with this information. For salaried workers, the employer should receive the income tax declaration. Next, after the financial year, in January or February, or in accordance with the employer's needs, the employer deducts TDS. Workers can estimate their projected investment using Form 12BB and the Income Tax Declaration.
Importance of IT Declaration
As mandated by the Income Tax Act, employers are required to compute projected expenses and investments for the upcoming financial year, and then deduct tax at source based on that income. Employees will have to request a reimbursement when they provide the income tax return if they fail to submit the declaration. The Income Tax Department will, however, be scrutinising the tax deduction with anxiety. Additionally, a new tax regime with fewer deductions for investments and expenses was established by the Union Budget 2020, and employees are permitted to compare the old and new tax regimes. They must determine their tax obligations based on it and file an Income Tax Declaration in order to select the best course of action.
What is the IT Declaration Form?
By signing the declaration form, you certify that the information in the document is accurate to the best of your knowledge while being sworn in. Another name for it is an affidavit. One typical method of confirming someone's identity or signature on a legal document is for them to swear or affirm under oath before a notary public. You affirm that you will tell the truth, the whole truth, and nothing but the truth by signing the declaration form. If you do this, you will be held accountable for any lies contained in the paper.
Steps to File IT Declaration
You can utilize several features meant to make the process of filing taxes easier by using the recently created Income Tax portal. A step-by-step guidance to the income tax filing declaration process is provided below
Step 1: Go to the Income Tax e-filing Portal's official website.
Step 2: Look for and download the Income Tax Declaration Form 12BB from the Income Tax Forms area.
Step 3: After downloading, complete the form with all of your personal information. Name, address, gender, and date of birth are a few examples of this.
Step 4: After completing the personal information, don't forget to include the tax declaration information on any loans for housing, rental income, life insurance premiums paid (if any), personal investments, and other financial matters.
Step 5: After reviewing all the pertinent information, sign the document and provide it to your employer.
What is Form 12BB?
Employees must complete Form 12BB to be eligible for tax benefits, tax deductions, and/or rebates on investments and costs paid within a fiscal year. At the end of the year, the paperwork must be turned in. At the end of the year, employees must also present documentation of these investments and costs. Form 12BB includes the following:
Employee Name
Employee PAN
Employee Address
Financial year
Eligible expense
Eligible investments
Investments & Expenses to be Declared in IT Declaration
Investments (under Section 80C)
Insurance Premium (under Section 80CCC)
Pension Contribution (under Section 80CCD)
Medical Insurance (under Section 80D)
Interest on Education Loan (under Section 80E)
Interest on Home Loan (under Section 80EE)
House Rent (under Section 80GG)
Interest on Savings Account (under Section 80TTA)
Interest Income (under Section 80TTB)
Other details
Investment Instances for Employees when Filing IT Declaration
Scenario 1: Investment is less than the amount declared
Your company will recalculate the amount of tax liability before the end of the financial year if the amount invested is less than what the taxpayer or employee disclosed. If you invested on the day your company specifies for the submission of investment proof, you may request an income tax. Additionally, if you qualify, you can request a Tax Deduction at Source (TDS).
Scenario 2: Investment is equal to the amount declared
In situations where a taxpayer's or employee's investment equals the amount the person claims for that specific financial year, he or she won't likely be qualified to file any tax returns.
Scenario 3: Investment is more than the amount declared
You can file an Income Tax Return (ITR) in situations where a taxpayer or employee's investment exceeds the amount they declared for that specific financial year.
Deadline for Submitting IT Declaration
ITD must be submitted by the employee within the deadline that the company designates. The employee must present documentation after submitting the ITD attesting to the costs and investments. Document proof submission deadlines often fall in January or February. An employee may encounter difficulties when attempting to claim a deduction on their income tax return if they fail to submit the income tax declaration on time. The employee's taxable income would rise and the employer will be required to deduct a larger amount of TDS if the employee fails to file an Income Tax Declaration of Expenses and Investments.
Conclusion
When you provide the appropriate tax authorities with all of your income details, it's called an income tax declaration. All of the information regarding your gross income, profits, expenses, and assets is included in the declaration. A list of the exceptions and deductions that one wants to claim must also be provided. The available form on which you can list the items you wish to deduct from your taxes is Form 12BB. For example, you can claim a deduction under Section 80C for the premiums you pay for a life insurance policy you buy for yourself, your spouse, or your children. The best piece of advice when it comes to IT declaration is to seek expert guidance.
FAQ
Q1. Why is tax declaration important?
It's important to declare your income for tax purposes since it helps calculate how much tax should be withheld from your income. You can lower your overall tax burden and obtain tax savings by giving your employer this information.
Q2. What happens after income tax declaration?
Your tax return is processed by the tax department following the verification of your income tax declaration. When the procedure is finished, they send you a notice in accordance with Section 143(1) of the Income Tax Act, 1961. This notification will be sent to your registered email address, mobile number, and message service.
Q3. Do taxpayers need to submit proofs while filing ITR?
Yes, you must provide your investment documentation within the time that your business has set. If you don't, your March salary may have more TDS deducted from it. However, there are always ways to reduce your tax obligations even if you missed the deadline for providing investment documents.
Q4. What should I declare in the investment declaration?
You must fill out an investment declaration form to be eligible for a tax deduction on interest paid on your home loan. Information such as the lender's name, PAN number, and the amount of interest paid or due must be included in this form.
Q5. What should you do if you do not have proof of expenses and investments?
The employee would have to pay a greater TDS on his taxable salary income if the employer refuses to approve the deduction of such investments in the absence of documentation proof.
Q6. Who is eligible for investment proof?
Salaried persons must submit investment proofs annually to guarantee that their employers deduct TDS (Tax Deducted at Source) correctly. Employers are required by law to deduct TDS annually in India; nevertheless, in the absence of appropriate investment proofs, there may be cases of over- or under-deduction of taxes.
Q7. What is the difference between IT declaration and ITR?
For salaried workers, an income tax declaration is a summary of their out-of-pocket costs and investments. They give this statement to their employer, which aids in determining the amount of TDS. The initial stage of taxes is the filing of an income tax declaration, which culminates in the submission of an income tax return.
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