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written by | April 22, 2022

A Guide to Investment Declarations

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Table of Content


As the mastermind, Albert Einstein, said, "The hardest thing to understand in the world is the income tax." Taxes and investments do get quite tricky to understand. Don't worry. We're here to make your life easier.

With the beginning of a new financial year come new responsibilities and new tax declarations. Now, declaring your expenses and investments is not as easy as it sounds. Thus, let's begin the study of investment declaration. Investment declaration refers to an employee estimating their tax-saving investments for a particular year and declaring it to the employer.

The employer can then deduct that amount from your salary. This needs to be done wisely as the proofs for the same need to be submitted by the end of the financial year. It is also essential to make proper calculations as this makes a difference in your in-hand salary.

Did you know?

The last date to declare your investment is 31st March of every fiscal year as the financial year ends on this date. 

What Is Form 12bb?

The statement of claims for tax deduction submitted by the employee is commonly known as form 12bb. Every working individual must submit this if they wish to claim tax benefits or reimburse investments or expenses. In India, this came into effect in June 2016 for all salaried taxpayers.

Why Are Taxes Important in India?

Before we begin to understand the purpose of investment declaration and tax-saving, let us study taxes in this country. Taxes are the means through which the government makes its revenue. The government imposes taxes on health, education, governance etc. The government does this to meet the country's budget for development and progress.

Without taxes, the government would be unable to meet the demands of society. Therefore, it is vital that taxes are imposed and duly paid as this money is collected and used to fund the social projects carried out throughout the year.

Also Read: Meaning of Statutory Compliance in Payroll

The Projects Which Require Taxes

1) Education

This is probably one of the most deserving recipients of tax funds. The government gives a vast amount of importance to developing human capital, and the government puts money into funding and maintaining the public education system.

2) Health

The government's contribution to the health sector is only possible because of taxes, and society requires social healthcare and security, medical research etc.

3) Governance

It is an essential component in the smooth running of the country's affairs. If the governance becomes poor, several people and organisations will suffer the consequences. On the other hand, good governance ensures that it uses the tax money to benefit all the citizens living in India. It is so as the money goes to pay public servants, police officers, the postal system, etc.

Apart from education, health and governance, the government uses the money collected from taxes to fund other sectors. These are the sectors such as security and environmental protection, which are crucial for the well-being of the Indian citizens. The government channels the remaining to fund pensions and unemployment benefits etc. Therefore, taxes are essential for the smooth running and maintenance of a country such as India.

What Exactly Is the Purpose of form 12bb?

Form 12bb consists of all the exemptions and deductions that the employee wants to claim at the end of the year. According to this, the employer deducts TDS from the employee's salary, and that's the primary purpose of form 12bb.

This is mandatory in all business organisations, and that particular office's HR undertakes it. Some offices still prefer to update offline but mostly have updated to digital means. Nowadays, you need to make these investments on the HR Portal. 

When Is the Form 12bb Supposed to Be Filled?

You need to fill out form 12bb at the end of the financial year. It declares all the investments that the employee makes during the year. It is important to remember that an employee cannot fake this as you need to provide documentary evidence of each investment. It is later verified, and the authorities may reject it if false.

Sample Form 12bb:

While filling the same, one must be careful about all details, whether big or small. The proofs you attach must be original and legitimate only as the employer will verify them later, and one may suffer if the proofs are fake or forged. 

How to Download Form 12bb?

The most authentic and widely-used source is the official website of the income tax department of India:

https://www.incometaxindia.gov.in/forms/income-tax%20rules/itrform12bb.pdf

How to Fill the Form 12bb?

After downloading the form from the website mentioned above, you need to fill out the form. Firstly, fill in your personal details. These include :

Usually, employees make the declaration for the below-mentioned tax-saving expenses:

1) House Rent Allowance

To claim HRA, an employee must provide the following:

  • Name, address of the landlord, along with the actual rent paid.
  • If rent paid is above ₹1 lakh, you need ot provide the PAN card of that particular landlord.
  • You also require the stamped receipts of the rent.

2) Leave Travel Concessions or Assistance

  • LTC/LTA is paid according to the employee's salary package.
  • It is applicable for domestic travel only.
  • An employee should mention the number of documents and the total expense in the form 12bb.

3) Home Loan Interest

  • To claim interest, an employee must provide the name of the lender and his PAN. 
  • You can claim brokerage expenses, stamp duty, and fees for the registration.

4) Section 80C, 80CCC, 80CCD

  • 80C: Premium paid for life insurance or investments made in Equity Linked Saving Scheme or ELSS funds, Public Provident Fund or PPF, National Pension System or NPS, school tuition fees for children and so on.
  • 80CCC: Premium paid for annuity plan.
  • 80CCD: Additional contributions made to NPS or National Pension System.

These are the deductions under other sections such as section 80TTA, 80E and 80G, etc.

What Is TDS?

TDS, or Tax Deducted at Source, was a concept introduced to collect tax from the very source of income. A deductor who needs to make a payment of a particular nature to the deductee deducts tax at the source. Now, the deductor gives this money as tax revenue to the Central government. The deductee whose tax is deducted at source is entitled to get the credit of the amount so deducted based on Form 26AS or as per the TDS certificate issued by the deductor.

Also Read: ITR Filing, PAN-Aadhar Linking, KYC: 5 Important Deadlines in March

Rates for Deductions

The government deducts taxes at the rates specified in the provisions of the Act/ The Act, here being the Finance Act. However, in the case of payments to non-residents, the tax rates under the DTAA are also considered.

Why Is Investment Declaration Important?

  • The workers themselves need to pick an ideal choice and estimate their expense liabilities.
  • A business consistently deducts charges at source on the employee's pay, and money is not compromised anywhere.

Conclusion

Therefore, understanding of investment declaration and, most important, the form 12bb is of utmost importance. An employee should declare the investments at the beginning of the financial year. However, you need to fill out the form by the end of the financial year. This is necessary for each salaried worker to claim tax benefits or rebate investments and expenses. The employees need to submit the form at the end of the financial year. An employee should submit the necessary proofs along with that. These documentary pieces of evidence need to be legitimate as the employer verifies them.

According to form 12bb, the employer then deducts TDS from your salary. It is vital to make proper calculations during the entire process as this makes a difference in your in-hand salary.

Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: What can you do if one is unable to declare investments?

Ans:

In such an unfortunate case, the employer will deduct TDS. The refund of the excess TDS can be claimed by filing your income tax return(Form-16).

Q: Can the investments be faked to obtain more in-hand salary?

Ans:

No, the investments cannot, and you must not fake them as you submit documentary proof along with the form 12bb, which the authorities check and verify.

Q: Is the form 12bb submitted at the end of the financial year?

Ans:

No, you need to declare investments only at the start of the financial year. However, form 12bb is submitted at the end with all the documentary evidence. This evidence needs to be original, and the employer usually verifies it.

Q: Do you need to submit form 12bb to the government or the organisation?

Ans:

No.You should submit it to the particular organisation's employer, and there is no need for you to submit it to the government's income tax department.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.