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If you are working in a company, at the beginning of each financial year, you are required to declare your tax-saving investments to your employer. The declaration that you make is only an estimate, you can change it during the financial year.
It is important to declare the investment because it leads to a higher salary in-hand. The actual proof needs to be submitted only at the end of the financial year. After declaration, if you have a taxable income, then your employer computes the proportionate income tax (TDS) and deducts it every month.
What is Form 12BB?
Earlier, there was no specific format for the investment declaration. Central Board of Direct Taxes (CBDT) came up with a standardized process of investment declaration from 1st June 2016 with the introduction of Form 12BB.
The form applies to all salaried individuals. You can reveal your expenses and investment in this form to claim tax exemptions through your employer. You need to submit Form 12BB in January or February. The form is submitted to your employer and not to the Income Tax Department.
What is the structure of Form 12BB?
The first part of the form contains your name and address. It also has your Permanent Account Number (PAN) and financial year for which you are declaring investment. The second part consists of declarations as below:
House Rent Allowance
If you are paying rent to your landlord, then you can use this section to claim HRA deduction. You need to provide the below details under HRA in Form 12BB:
Leave Travel Allowance
Leave Travel Allowance, also known as Leave Travel Concession (LTC), is given to you by your employer which you can utilize for travel expenses. It is a kind of assistance received by you from your employer for travelling on leave.
This applies to every salaried person and if you want to claim deduction under LTA then you will have to submit travel expenses proofs to your employer. This section just requires the amount you want to claim and proof against it.
Deduction of Interest on Borrowing
Under this section, you can claim a tax deduction on interest paid for a home loan. To do that, you need to provide details like interest paid, lender's name and PAN. Registration fees stamp duty and brokerage charges, if any, can also be claimed as deductions.
Deduction under Chapter VI-A
This is the last section of the form where you include your investment made under chapter VI A of the IT Act. Below is the list of a few deductions available under Section 80:
|Section 80C||This is the most popular section. If you have paid for Life insurance Premium you can include it in this section. Other investments that can be included are ELSS, PPF, NSC, school tuition fees paid for children, etc|
|Section 80CCC||If you have made a payment towards pension plans of LIC or any other insurer, you can provide that information in this section.|
|Section 80CCD||The contributions you made towards the National Pension Scheme (NPS Tier-I account)|
|Section 80D||It covers your medical insurance premiums|
|Section 80DD||It includes the medical treatment of a dependent who us a person with a disability.|
|Section 80E||It covers interest paid on an education loan|
|Section 80EE||Include deductions on loan taken for your residential house property, given you are the first-time homeowner.|
|Section 80G||Includes donation made to specified organizations|
|Section 80GG||If you don't receive HRA from the employer and you still pay rent, you can use 80GG for tax claims.|
|Section GGA||The donations you made for rural development or scientific research will come under 80GGA|
|Section GGC||If you have made non-cash donations to a political party, you can get full tax deduction under 80GGC|
|Section TTA||If you have received interest on your saving bank account, you can enjoy a deduction of Rs. 10,000 on interest received. This deduction is not applicable in the case of fixed or recurring deposit interest.|
|Section 80U||If a person has a disability, they can tax deduction under 80U|
Is It Compulsory To Submit Form 12BB?
With effect from 1st June 2016, if you are a salaried citizen then you are instructed to file Form 12BB to your employer to benefit from tax reductions on explicit investments and expenses. However, if you don't do so, your employer has the right to calculate TDS and deduct it from your monthly salary.
Important Points to Note before Filing Form 12BB
You are accountable and responsible for any wrong data in your Form 12BB. Ensure all your investment proofs are genuine.
In case your form goes under examination and it is found that you have submitted a phoney verification then you will have to go through an unforgiving punishment in the form of penalty.
If you have switched jobs within a particular year, do not claim the maximum benefit of the deductions at both the new and old company.
If you do so, your TDS reasoning would not be right at the time of filing of returns and you may have to pay tax to the IT Department with reformatory interest for late tax payment.
Plan Early for Maximum Deduction
So, enjoy the deductions available to you under the Indian tax regime. Make sure to keep a track of your tax-deductible investments through the year. Also, the best time to plan your tax-saving investments is the beginning of the financial year.
This will even out the tax-saving burden through the year and help you maximize it in the last quarter of Jan-Feb-March. The best part is, you will probably not lose a large chunk of your monthly income in these months to TDS.
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