Declaration of investment under income tax and proof of investments

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Declaration & Submission of Investment Proofs

  • Every salaried employee must declare tax-saving investments at the beginning of the financial year to help the employer deduct the correct TDS (Tax Deducted at Source).
  • Later, proofs of these investments declared must be submitted to confirm tax benefits.
  • Incorrect declarations or missed deadlines can lead to higher tax deductions in the last few months of the financial year.
  1. Declaring Investments (Form 12BB)

Form 12BB must be submitted to your employer, listing all proposed tax-saving investments and expenses.
This form is not submitted to the Income Tax Department but helps in accurate payroll processing.

Key Declarations in Form 12BB:

House Rent Allowance (HRA) – If annual rent exceeds ₹1,00,000, landlord’s PAN is required.
Leave Travel Allowance (LTA) – Tax-free allowance for travel expenses.
Home Loan Interest – Interest paid on home loans is deductible.
Tax-Saving Investments (80C, 80D, etc.) – Includes PPF, EPF, LIC, ELSS, tuition fees, fixed                                                       deposits, and medical insurance premiums.

  1. Submitting Investment Proofs

Proof submission is usually required by December or January to verify tax-saving investments.
If proofs are not submitted, the employer will deduct extra TDS from the remaining salary.

Accepted Proofs for Tax Deductions:

The list of investments eligible for tax savings along with the required documentation for each investment are given below:

  • Housing Loan: Interest certificate from the bank/financial institution.
  • Completion certificate of the house property from the builder or self-declaration from the employee.
  • ELSS Mutual Fund: Copy of the investment certificate.
  • Public Provident Fund: Stamped deposit receipt or passbook mentioning the PPF account.
  • Life Insurance Policy: Premiums paid towards life insurance
  • HRA (House Rent Allowance): Monthly rent receipts, PAN Card of the landlord. Revenue stamps for cash payments above Rs. 1,00,000.
  • NSC (National Savings Certificate): Copy of NSC Certificate in the name of the employee.
  • Tax-saving FDs: Copy of the deposit receipt.
  • Tuition Fees of Children: Copy of tuition fees paid to educational institutions.
  • Post Office Term Deposit: Copy of the deposit receipt (for deposits over 5 years).
  • Preventive Health Check-ups under section 80D: Copy of the premium receipt, Bills for preventive health check-ups.
  • Medical Expenses under section 80DD (for handicapped dependent): Proof of amount spent on medical treatment, training, and rehabilitation, Form 10-1A.
  • Interest Paid on Higher Education Loan: Copy of the bank certificate mentioning the principal and interest amount paid.
  • House Loan for First-time Buyers under section 80EEA: Deduction on interest paid by first-time buyers for loans taken to purchase a new home.
  • Deduction under section 80U: Medical certificate, Certificate Form 10-1A from a competent medical authority.
  • Donations under section 80G: Valid receipts for qualifying donations in the name of the employee.

Submitting fake documents can lead to penalties upon tax scrutiny. Keep records safe for smooth verification.

  1. Consequences of Missing the Deadline

If investment proofs are not submitted, the employer will not consider those deductions and deduct more tax from your salary.
You can still claim deductions when filing your ITR (Income Tax Return) and get a refund if excess TDS was deducted.

  1. Latest Tax Changes (FY 2024-25)

New Tax Regime is Default: From Assessment Year 2024-25, the new tax regime is the default option. If you want to claim deductions under 80C, 80D, etc., you must opt for the old tax regime.
TDS Adjustments: Some companies allow mid-year updates to tax declarations. Check with HR if changes can be made.

Key points:

Declare investments realistically and keep proofs ready.
Follow the employer’s deadline to avoid excess TDS deductions.

Tips to Keep in Mind Before Submitting Your Investment Proof

  • You must maintain an annual proof submission file with all invoices, statements etc., to make it easy for you to gather all documents.
  • You must ensure that all your documents are self-attested and match your PAN records.
  • If you invest in mutual funds, your statement must include your name, PAN, and portfolio value.
  • Your proof amounts must precisely match your claimed amounts.
  • Keep a copy of all the documents you are submitting, so that you can furnish them wherever necessary.

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