Typically employers provide time till February for submission of investment proof to ensure that shortfall of taxes if any are covered in the next two months
New Delhi: As per income tax laws in India employers deduct tax at source from employee’s salary based on his/her estimated taxable salary. In order to arrive at the net tax liability, the employer asks its employees to declare their investment, rent payable during the financial year, interest payable on loan and other investments eligible for tax deduction under various sections of Income Tax Act including Section 80C. Based on the declaration made by the employee, the employer calculates the income tax liability of the employee and deducts taxes from the salary payable.
Typically employers provide time till February for submission of investment proof to ensure that shortfall of taxes if any are covered in the next two months — February, March. So it is important to take care that the amount declared is realistic else you may take home a drastically-reduced salary after tax deduction in February and March.
Here are the details employees need to declare to their employer:
Employees are required to mention the amount of deduction to be claimed and also the actual amount invested in various products as per the documentary evidence available. Employees can make the following claims in the declaration form.
1) House Rent Allowance (HRA) – If you receive House Rent Allowance (HRA) from your employer then you can claim HRA exemption by providing the details of rent paid, name of landlord, address of landlord and PAN of landlord. This is applicable if rent paid in a financial year is more than Rs 1 lakh. One can also pay rent to his parents for staying in their house.
2) Deduction of interest on home, education loan – Interest paid on housing loan, education loan etc. as per tax laws are eligible for deduction on submission of the interest paid certificates along with the details of interest paid and payable in the remaining months of the financial year, name, address and PAN of lender.
3) Investment under Section 80C, NPS – Details of investments in eligible securities, ELSS schemes, life insurance premiums, principal amount of loan repayment, mediclaim payments, investment in NPS tier-1 account, school tuition fee paid for two children etc can be shown to avail deduction.
4) Leave travel assistance (LTA) – An employee can claim the leave travel assistance (as per rules given in the tax laws) by submitting the proof for travel expenses (air ticket and boarding pass).
Worth mentioning here is that all the above claims have to be substantiated with documentary evidence such as a statement of investment account, premium receipts, interest certificate of loan account etc. The employee has to give a declaration that all information provided is complete and correct.