Navigating income tax and declarations can be complex. In this blog, Fintoo – your partner in optimizing fiscal decisions – has simplified Income Tax Declaration (ITD); from understanding Form 12BB to strategic tax savings. Read on to discover how to make tax planning savvy and rewarding!
Essential Guide to Income Tax Declaration – ITD
An income Tax Declaration (ITD) is a crucial document that employees submit to their employers, serving as a comprehensive record of their total income and expenses.
In the document, employees provide proof of investments (PPF, life insurance, annuity plans) and details for claiming allowances (LTA, HRA, interest on home/education loans).
The primary goal of an Income Tax Declaration (ITD) is to accurately calculate the TDS amount linked to an employee’s taxable income.
Providing this information to the employer allows employees to claim tax benefits, reducing their overall tax burden.
Reports indicate that approximately 39% of Direct Taxes come from TDS collections, underscoring the significant role this mechanism plays in the overall tax revenue landscape.
Typically, salaried employees need to submit their income tax declaration to the employer responsible for TDS deduction at the end of the financial year.
This submission usually takes place in January or February, or according to the specific timeline set by the employer.
To streamline this process, employees can utilize tools such as Income Tax Declaration and Form 12BB to effectively estimate and plan their investments.
Navigating Your Financial Responsibility
Per the Income Tax Act, employers are mandated to deduct taxes at the source, considering estimated income, expenses, and investments for the fiscal year.
The submission of a Tax Declaration by employees is crucial in this process.
Failure to submit the declaration means that employees will have to seek a refund when filing their Income Tax returns.
However, this route may lead to heightened scrutiny by the Income Tax Department regarding the tax deductions claimed.
Furthermore, the Union Budget 2020 has ushered in a new tax regime featuring fewer deductions for expenses and investments.
Employees now have the opportunity to compare the old and new tax regimes, making it essential for them to calculate their tax liabilities.
This calculation is facilitated through the submission of an Income Tax Declaration – ITD, allowing individuals to make informed decisions about their tax obligations.
Tax Declaration for Salaried Professionals
After each financial year, salaried individuals are required to complete a tax declaration form. This document serves as a comprehensive record of all tax-saving investments made by the employee throughout the fiscal year.
The details furnished in the tax declaration form play a pivotal role in determining Tax Deduction at Source (TDS) from the employee’s income.
Various Investment Declarations Open to Salaried individuals
- House Rent Allowances (HRA): When it comes to House Rent Allowance (HRA), individuals can claim the rent paid to their landlord. To make this declaration, employees must furnish details such as the landlord’s name, PAN details, and address.
- Leave Travel Concession:
Declaration of Leave Travel Concession is permissible only if it is part of the employee’s salary package, as specified by the employer. - Home Loans:
For those with home loans, the interest paid annually can be declared by filling out Form 12BB. Providing name and PAN card details is essential, along with a provisional interest certificate obtainable from a bank or financial institution. - Mediclaim Premiums:
Premiums paid for medical insurance policies qualify for tax benefits under Section 80D of the Income Tax Act. Employees or policyholders can claim these benefits by declaring the premiums paid.
Step-by-Step Guide On Income Tax Declaration – ITD
Navigating the realm of tax declarations can be a breeze when you know the ropes. Let’s break down the process of filling out a Tax Declaration Form.
- Accessing the Income Tax e-Filing Portal: Begin your journey by opening the Income Tax website – incometaxindia.gov.in. This is your gateway to seamless tax filing.
- Downloading Form 12BB: Once on the portal, navigate to the ‘Forms’ section and download Form 12BB. This document is your key to detailing various aspects of your financial profile.
- Entering Personal Details: Kick off the form-filling process by providing essential personal details. This includes your name, employee code, date of birth, gender, and other pertinent information.
- Detailing Allowances and Deductions: Dive deeper into the form by specifying details such as house rent allowances, home loans, and deductions for insurance premiums and leave travel concessions. This step is crucial for a comprehensive tax picture.
- Finalizing with Signatures: Seal the deal by signing the completed form. Once signed, hand it over to your employer, marking the completion of your income tax declaration – ITD process.
Form 12BB: Unveiling its Role in TDS
As the financial year draws to an end, salaried individuals are required to submit Form 12BB to their employers, aiming to leverage tax benefits.
This mandatory form applies to all salaried employees contributing to government taxes, allowing them to declare their investments and claim associated tax benefits.
Within this process, salaried employees can make declarations for the various expenses they have incurred. Now, let’s explore the diverse categories of investment declarations available to them.
Also Read: What Is TDS?
Other declarations to be made to the current employer:
- Salary from the previous employer:
It is essential to declare your salary from your previous employer to ensure that the correct TDS has been deducted. Most of the time assesses fail to disclose this information and end up paying additional tax at the time of filing, along with interest. - Income from House Property:
Any income from House Property or loss thereon, such as interest on a home loan, plays a crucial part in determining the TDS to be deducted. - Choosing the correct regime:
We need to select the regime according to which our TDS will be deducted. It is important to note that you can change the regime at the time of filing the return if you realize that the other regime is more beneficial to you.
Tax-Efficient Investments for Salaried Individuals in India
Salaried individuals in India have a plethora of tax-saving investment avenues to curtail their tax liabilities. Explore the diverse options available:
- Public Provident Fund (PPF):
PPF contributions are eligible for Section 80C deductions, with a maximum limit of Rs. 1.5 lakh per annum. Interest and maturity proceeds are tax-free. - Employee Provident Fund (EPF):
Contributions to EPF qualify for tax deductions under Section 80C, capped at Rs. 1.5 lakh annually. - Equity-Linked Savings Scheme (ELSS):
ELSS, a mutual fund investing in equities, provides tax benefits under Section 80C, with a maximum limit of Rs. 1.5 lakh annually. - National Pension System (NPS):
NPS contributions offer tax deductions under Section 80CCD(1), up to Rs. 1.5 lakh per annum, with an additional Rs. 50,000 available under Section 80CCD(1B). - Sukanya Samriddhi Yojana (SSY):
Aimed at securing the financial future of the girl child, SSY contributions qualify for Section 80C deductions, with a maximum limit of Rs. 1.5 lakh per annum. - Tax-Saving Fixed Deposits (FDs):
Banks’ Tax-Saving FDs offer deductions under Section 80C, up to Rs. 1.5 lakh per annum, with a mandatory five-year lock-in period. - Life Insurance Premiums:
Premiums paid for life insurance policies are eligible for Section 80C deductions, up to Rs. 1.5 lakh per annum.
Summary:
As we draw the curtains on this enlightening article through tax declarations and efficient investments, remember that financial empowerment is within your grasp.
By embracing the nuances of the Income Tax Declaration, you not only safeguard your income but also strategically plan for a prosperous financial future.
For personalized guidance tailored to your financial aspirations, consider consulting with Fintoo, a leading financial advisory firm. With their expertise and insights, you can navigate the complex landscape of income tax planning with confidence.
Here’s to a future where your fiscal decisions are as savvy as they are rewarding. Happy tax planning!
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.
