written by Khatabook | November 30, 2021

Guide on Submitting Investment Proof to Your Employer

Employees can reduce taxable income by investing in various options provided by the Government. These proof of investment are then to be submitted to respective companies to avail the benefits. The investment proof is submitted at the end of the financial year. Each claim made by an employee must be verified as per circular 1/2017) of the Income Tax Department. Document verification is strictly done for employers. Employers have the right to set the parameters in compliance with the income tax rules, with additional regulations and restrictions to protect the organisation’s interests. 

The finance and payroll team's primary task is to collect and verify employee receipts and investment evidence. Employees plan their investments on their IT Savings Declaration forms at the beginning of the financial year. Around the end of the year, finance teams gather investment proof to verify their legitimacy and calculate income tax properly. Therefore, let's know the various aspects of income tax proof submission in this article.

Who assesses the investment proof submission?

The Drawing and Disbursing Officers are responsible for assuring the genuineness of the employees' claims. Before permitting the mentioned deductions, the Drawing and Disbursing Officers clarify the employees' actual subscriptions/deposits/payments by requesting such particulars/information as they feel appropriate. If the DDO is convinced that the employee’s claim regarding any subscription/deposit/payment made is genuine, they should allow it. The employee should be free to claim the deduction/rebate on that amount by filing their return of income and providing the necessary proof, etc., to the satisfaction of the Assessing Officer.

Important points to keep in mind when investing in tax savings and other Assets:

  • Compute your tax obligation before investing to see if you qualify for a tax break under Section 80C.
  • Verify to see how much you have already paid to your existing obligations this financial year and how much more you will need to contribute.
  • Do not limit tax savings to solely investing under Section 80C. 
  • Provident funds provide substantial tax savings under Section 80C, but you should also consider alternative investment options. Investing more than 1.5 lakh in tax saving plans under Section 80C is not always a good idea.
  • Align your tax-saving strategies to your financial objectives.
  • Individuals who invest in the National Pension Scheme can deduct an extra 50,000 Rs. under Section 80CCD (1B), on top of the Rs 1.5 lakh allowed under Section 80C.

The investment proof submission provides you with the opportunity to evaluate possibilities under Section 80C and go above and beyond and examine all conceivable tax-saving techniques within the Income Tax rules.

Also Read: Income Tax Rebate Under Section 87A - Claim for FY 2020-21, AY 2021-22

Income Tax Investment Proof Submission Guideline:

The following is the general guideline for submitting proof of investment documents; however, employers can assess additional factors:

Taxation Selection

Guidelines

Rent Payments

  • Monthly rent receipts

The following information is mandatory in the rent receipt.

Name and address of landlord and landlord's signature:

  • PAN card of Landlord or self-declaration if the annual rent amount is greater than Rs 1 Lakh. Revenue stamp to be affixed for the cash payments.

Interest on a Self-Occupied Property’s Housing Loan

  • The financial institution/ bank has an interest certificate with the total interest and due/principal paid for the FY.
  • Self-declaration from the employee with information of occupation or completion certificate of the residential property from the builder

 

Income/Loss from a House Property that is rented out

  • The total interest and principal paid/due for the financial year on an interest certificate from the financial institution/ bank.
  • Self-declaration from the employee with information of occupation or completion certificate of the residential property from the builder.
  • Calculation of rental income and loss in detail.

Premiums, ULIPs, and pension plans & other insurance premiums.

  • Premium receipts in the name of the self, spouse, and children paid during the current FY.

NSC- National Saving Certificate

  • Replicate of National Savings Certificate (NSC) in employee's name.

PPF- Public Provident Fund

  • Duplicate a stamped deposit receipt from the current financial year or a copy of a passbook marked with the PPF account or Public Provident Fund scheme.

Interest earned on NSC deposited in previous financial years.

  • A copy of the NSCs purchased in past financial years
  • Interest will also be counted as additional income.

Mutual Funds that Save Money on Taxes

  • A copy of the investment certificate with the employee's name, the date of the investment, the amount invested, and the type of investment.
  • Only investments made through a Tax Savings Fund or Plan will be taken into account.

Equity Linked Saving Scheme (ELSS)

  • A copy of the investment certificate with the employee's name, the date of the investment, the amount invested, and the type of investment.
  • Only investments made through a Tax Savings Fund or Plan will be taken into account.

Tuition fees of children.

  • A copy of the tuition fees that have been paid to the educational institution.
  • Donations, Capitation fees, Uniform fees, Sports fees, Van fees and other forms of payment are not permitted.

Repayment of the Housing Loan Principal

  • The financial institution/bank has an interest certificate with the total interest and due/principal paid for the FY.
  • Self-declaration from the employee with information of occupation or completion certificate of the residential property from the builder.

Term Deposit at the Post Office with a term of more than 5 years.

  • A photocopy of the deposit receipt.

Fixed Deposits with Scheduled Banks that Save You Money on Taxes

  • Investment of a copy of a deposit receipt during the current financial year qualifies as a qualifying benefit under Section 80C of the Internal Revenue Code.

Deduction u/s 80 D – includes preventive health check-ups.

Employee, spouse, children under the age of 18, and parents.

  • A copy of the premium receipt from the previous financial year.
  • Receipt of payment for the employee's or family's preventative health check-up.

Medical Care for a Handicapped Dependent - Deduction under Section 80 DD

Proof of:

a. Medical treatment, training, and rehabilitation of a disabled dependant., or b. Amount paid or deposited under any scheme designed in this direction by the LIC or UTI or any other insurer and approved by the board to maintain the handicapped dependent.

c. Form 10-IA

Expenses for medical treatment for a certain disease - Deduction U/S 80DDB

  • Medical bills/expenses for medical care for a certain ailment, as well as a certificate from a hospital in the appropriate format.
  • Form 10-I

Deduction for interest paid on a higher education loan under section 80E

  1. A photocopy of bank documentation showing that the loan and interest have been repaid, as well as the amount due for the financial year.

Additional Housing Loan Interest Deduction for the First House Property Purchased in FY 19-20 U/s 80EEA

  • The maximum deduction under section 80EEA  is the interest on a loan, or Rs 1,50,000, whichever is smaller.
  • The deduction is only possible if the following requirements are met:
  • The loan should be approved during the 2019-20 financial year.
  • The residential house property's Stamp duty value does not exceed Rs 45 lakh.
  • On the date the loan was approved, the assessee did not own any residential property.
  • For losses on personal property, all proofs should be presented.

Permanent Disability- Deduction U/s 80 U for Self 

  • On provision of a medical certificate from a Government Hospital in the prescribed form and manner, together with a Return of Income, any individual suffering from a permanent physical handicap (including blindness) or mental retardation is entitled to a deduction of Rs.75000/-. A 125,000/-, deduction can be claimed if the assessee is a person with a serious disability.
  • Photocopy of a certificate (Form – 10 IA) issued by a competent medical authority stating the percentage of disability.)

Donations are eligible under Section 80G of the Internal Revenue Code.

  • The employer must get the donation receipt. Because employers may not include all donations for taxation, employees must consider them when submitting their personal returns and claiming a tax refund.

Deduction U/s 80 U for Self – Permanent Disability

  • Form 10 I-A

80CCD (1B) NPS

 

  • A photocopy of the deposited stamped receipt for the current financial year, as well as a Passbook photocopy with the National Pension Scheme or NPS Account marked.

How to submit proofs while filing returns?

Employees are eligible for various tax-saving investments up to Rs 1.5 lakh per year under Section 80C of the Income Tax Act, 1961. The following are the most common:

PPF: A tax deduction is available for investments in the Public Provident Fund (PPF) up to Rs 1.5 lakh per annum. The current rate of interest on a PPF is 8%. PPF interest is exempt from tax.

Proof of Investment: Your employer should receive a copy of your PPF passbook. If you don't have a passbook, you can provide a printout or photograph of your online PPF statement. Most major banks provide access to this statement through Net Banking or by visiting a bank location.

The Importance of Gathering Investment Proof

  • Employers are required by law to calculate income tax, deduct Tax Deducted at Source (TDS), and remit it every month. 
  • Employees can also save money on taxes by taking advantage of a variety of exclusions and deductions. But, this is allowed only against proper evidence.
  • The employer, according to the Central Board of Direct Taxes (CBDT) circular, is responsible for gathering the following evidence: Copy of PPF passbook or online PPF statement of employees, documents related to House Rent Allowance (HRA), Leave Travel Allowance (LTA), etc.

It is, however, challenging to demand documentary verification from employees at the start of the year. Investments and receipts do not arrive until later in the year. If you insist, you'll end up with a higher tax bill, a smaller take-home pay, and a lot of animosities.

How to Process Investment Proofs for Income Tax in 7 Easy Steps?

There are several procedures and phases to gathering and confirming investment proof:

Step 1: Make a plan

Prior to collecting and confirming proof of investment (POI), map out the entire procedure and determine how long the window for employees to submit POI will be open. As a result, set a deadline for submitting POI and make sure your workers know it.

Step 2: Collect Proofs

During the timeframe, collect proofs from employees in print form (physical documents) or soft copy. Employees can email or upload their investment proof forms and supporting papers through an Employee Portal.

Step 3: Resolve any issues that may have arisen

Make sure your personnel understand the ins and outs of the proof of investment submission procedure. Even a tiny miscalculation can have an impact on your employees' pay and tax calculations, as well as result in an IT department warning. As a result, pay attention to your employees' problems and make your finance team reachable via phone or mail.

Step 4: Double-check the POIs that have been submitted

In this step, the employer compares the employees' declared investment to the real proof of investment. You check the accuracy and completeness of the POIs submitted by employees here. You can accept or reject the investment proof after comparing it to the IT declaration you submitted at the beginning of the fiscal year.

When the proofs do not match the IT declaration, you can refuse proof of investment, and when documents are missing or need to be reconsidered, you can hold POI. You'll need to get the POI from employees and re-verify them for TDS purposes in both circumstances.

Step 5: Collect proof of investment again

Employees' POIs are sometimes incomplete, contain incorrect information, or do not match the declared IT submitted at the start of the year. In such circumstances, recollect the POI from the affected employees with the updated information.

Step 6: Double-check the POI

Just like you did in the previous step,proof of investment documents submitted by the employees should be verified at this point. Based on the POI analysis, you can accept or reject the contribution.

Step 7: Calculation of Payroll and Follow-Ups

After collecting and authenticating investment paperwork, we estimate the employee's income tax and deduct it from their in-hand salary using income tax computations. Change the employees TDS as a result. Following the collection of POIs, there will be repercussions. Responsibilities, such as keeping future proofs used in addition to the calculation. This is accomplished by utilising a well-organised management system that allows for speedy retrieval of documents.

Also Read: How To File ITR (Income Tax Returns) Online – Income Tax E-filing Guide For FY 2020-21

Conclusion

Proof of investment aids in the process of reducing taxable income for employees. Therefore, by submitting necessary proof for income tax, employees can avail themselves of the tax benefits. In this article, follow the process of income tax investment proof submission to submit them on time. Therefore, we hope through this article you have understood how to submit proofs while filing returns.

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FAQs

Q: Is it mandatory to submit investment proof to your company for claiming benefits?

Ans:

Yes, it is mandatory to submit investment proof to your company for claiming benefits.

Q: What investment proof must be submitted to the employer for claiming deduction of PPF under section 80C?

Ans:

Receipt or copy of passbook is required as proof of investment for claiming deduction of PPF under section 80C.

Q: If an employee wants to benefit from housing loan interest, what are the documents that they have to submit to the company?

Ans:

They have to submit an interest certificate along with self-declaration.

Q: What investment proof is used for availing House Rent Allowance (HRA) of more than Rupees 1 Lakh?

Ans:

Rent Receipts along with the PAN of the landlord is required for garnering HRA.

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