We all understand the importance of paying taxes, but most of us tend to get nervous during the tax season, and understandably so. From paying our taxes to claiming deductions, tax benefits, and filing for returns, the starting of the financial year often gets the better of us.

However, every single penny counts. Hence one should be aware of the Indian tax system and how, when, and where they can claim deductions and enjoy all the tax benefits they can.

What is an Investment Declaration?

If you are a salaried person, you must know that a portion of your salary is deducted against Income Tax (Tax Deducted at Source, TDS) and remitted to the government. For this, an employer asks you to submit details of your tax-saving instruments and deductions to compute the TDS correctly.

So, investment declaration is a self-declaration form of estimated tax liability submitted by you to your employer at the start of the financial year, aka the tax season. But don’t worry if you don’t remember the date, as many organizations send communications to their employees regarding their investment declaration form submission. Sharing the details with the employer from the very start will help the company compute the correct TDS. This will make you eligible for tax savings. 

However, the declaration is not just restricted to investments. It can be extended to other deductions such as loss from the home property due to interest repayment of home loan, housing loan repayment, tuition fees, first-time home buyers, and more. The last date to file for Investment declaration is before the company starts computing the TDS. 

What is Form 12BB?

Form 12BB, with effect from 1st June 2016, is a statement of claims by an employee for the purpose of a tax deduction, claiming tax benefits, or a rebate on investments and expenses, which has to be submitted by the end of the financial year.

In order to generate Form 12BB, an investment declaration has to be made for these investments and expenses:

  • Home Loan Interest

If your house is financed through a home loan, you need to provide a home loan interest certificate as proof.

  • Leave Travel Concessions or Assistance

If you have received or are receiving LTC for 2018-2021, you can claim the tax exemption without having to travel. As proof, you have to submit bills, vouchers for such expenses.

  • House Rent Allowance (HRA)

As an employee, you might be getting many benefits such as paid leaves, house rent allowance, and more. So, if your employer pays you HRA, you can submit proof of receipt and expense to save tax. All you need to do is submit details of the rent paid, name and address of your landlord to estimate the taxable portion of the house rent allowance to your employer and the rest is carried out by the accounts department. 

  • Other Income

If during the financial year you have earnings through other modes, such as interest from fixed deposits, dividends from the stocks you might hold, capital gains, or gifts, they must be declared to the employer.

Deductions under Section 80C, 80 CCC, 80 CCD, 80D

  • 80C: One of the favorite sections of taxpayers is 80C as it allows taxpayers to reduce their taxable income up to a maximum of Rs 1.5 lakhs every year. It includes investments such as mutual funds, ELSS, life insurance policies, Public Provident Fund, premiums due on ELSS funds, National Pension Scheme, etc.
  • 80CCC: The section allows a deduction for payment towards annuity pension plans, including interest or bonus charged on the annuity.
  • 80CCD: This includes the National Pension Scheme. There is no need to submit proof regarding NPS if the investment is under Rs 50,000, but you have to submit proof of PAN card and NPS transaction statement if exceeding the limit.
  • 80D: This section covers deduction for medical insurance premiums. If the medical insurance towards self, spouse, children and parents (under the age of 60), the maximum deduction that can be availed for paying medical insurance premium is Rs 25,000 a year.

Key Takeaways

  • Investment declaration is a self-declaration form that has to be submitted by an employee to the employer or accounts department for TDS.
  • To claim tax benefits, you have to generate Form 12BB; this is the form that employers ask for at the start of the financial year.
  • There are many provisions to tax deductions, among which you are allowed to seek maximum benefit up to Rs 1,50,000.

Investment Declaration – FAQs

  • When is Form 12BB submitted?

Usually, Form 12BB is submitted at the start of the financial year to estimate the TDS calculations accurately and adequately.

  • Do I need to submit my Form 12BB to the Income Tax Department?

No, your employer will submit the form on your behalf after computing the TDS.

  • Can my actual tax-saving investment be different from the declared?

As an investor, understandably so, your investment decisions can vary. Similarly, the actual tax investments can be different from your proposed plans. However, you should collect and have the actual evidence when applying for tax benefits.

  • Is it essential to keep documentary evidence for claiming tax benefit?

As stated in the above question, yes, you should have actual evidence to attach while applying for tax benefits and TDS to the employer, or your application wouldn’t be accepted.