Come February or March and most employees receive a mail in their inbox requesting them to submit their tax declaration to their employer. The tax declaration form requires you to provide details on the specific expenses, investments, insurance policy premium payments, and so on, that you plan to make in the financial year. Usually, employers tend to request the submission of the form a bit earlier than is required so that employees have enough time to gather the relevant details before submission. Tools like the income tax calculator can also be used to understand one’s tax liability and to plan an effective tax-saving strategy before the tax declaration.
Are you wondering what exactly does tax declaration include and how one can submit it? We are here to help.
How is tax declaration submitted and processed?
You can access the tax declaration forms from the website of the Income Tax Department or you can also reach out to the Human Resources team in your organisation. Submitting your tax declaration helps you to plan out your investments and create an effective tax-saving strategy for the financial year. The employer takes all the information provided by you in the declaration into account and then checks the tax to be deducted at the source (TDS) accordingly. The TDS amount is then deducted from your salary as per the applicable income tax rates and is then collected by the Income Tax Department.
Individuals whose tax liability is over Rs 10,000 after the deduction of TDS and TCS are expected to pay advance tax at specific intervals throughout the year.
What does an investment declaration include?
- Information related to health insurance premium
Under Section 80D of the ITA, an individual can claim tax deductions against the premium of their health insurance policy. The maximum deduction for individuals under 60 years is Rs 25,000 and for those aged over 60 years is Rs 50,000. Thus, when submitting your tax declaration, ensure to provide the correct premium amount to enjoy the maximum tax benefits.
- Investments and expenses under Section 80C
The different instruments in which you plan to invest during the year should be mentioned in the tax declaration form. Life insurance products such as ULIPs, tax-saving mutual funds such as ELSS (Equity-Linked Savings Scheme), long-term tax-saving fixed deposits, and so on, should be included. If you are paying tuition fees for your school-going children, then that should be mentioned as well, to increase the deduction benefits.
If you are contributing to the National Pension Scheme, then you can receive an additional deduction of Rs 50,000 over the maximum limit of Rs 1.5 lakhs under Section 80C. Before finalising the information, it is ideal to use the income tax calculator so that you are prepared in case the tax liability turns out to be too high.
- House loan repayment and house rent details
Repayments made towards your home loan can be eligible for tax deductions, given that the construction of the property is completed. While Section 80C deals with the principal aspect of the home loan repayment, Section 24 helps save tax through the interest portion of the home loan repayment.
Those who have rented a place and are receiving HRA in their salary breakup can claim deductions against the rent payable to the landlord.
Instruments and expenses that come under various Sections and sub-sections such as Section 80E, 80G, 80U, and exemptions that come under Section 10, are all listed in the tax declaration form. The employer calculates your tax liability based on details about these instruments. Accordingly, you have to pay advance tax if the liability is over Rs 10,000 on the following dates: 15th June 15th September, 15th December, and 15th March in the ratio of 15%, 30%, 30%, and 40% respectively.
What to do if the investment declared and actual investments do not match?
In case the investment is lesser than the declaration, your tax-savings will be considered inaccurate, and the employer will have to recalculate your liability. After all, the deductions will be made available to you only after you have submitted the proof of investments. Therefore, it is advised to be realistic before submitting the tax declaration.
In the event that the employer has deducted more TDS than is applicable based on your declaration, you can claim it while filing the ITR. Ensure to choose the right one from the several types of ITR available.