Avoid higher TDS with timely, accurate submission of investment proof

For investments made after proof has been submitted to the employer, claim refund in ITR

If you are a salaried employee, an email from your accounts department asking for proof of tax-saving investments made during the current financial year must have already reached your inbox. In April 2022, you would have declared to your employer the tax-saving investments you intend to make during the year so that it could deduct tax accordingly. Now is the time to provide documents in support of that declaration.  

From FY 2020–21, employees have been allowed to choose between the old and the new tax regime. Anu Sura, counsel, PSL Advocates & Solicitors, says, “An employee who opts for the new tax regime needn’t submit any proof to the employer.”

Avoid these common errors  

Employees commit a number of mistakes while providing proof of investments.

Sonam Chandwani, managing partner, KS Legal and Associates, says, “Many provide fictitious documentation for house rent allowance (HRA).”

Others provide incomplete proof or incompletely filled-out forms. Srinivas BR, partner, DSK Legal, says, “Provide the appropriate supporting documents. Self-attest them. If you provide incomplete information, or the documents are not scanned properly, they may be rejected.”

Remember that tax benefits are only provided on verified investments.

Many employees leave this task for the last minute. “This at times results in employees missing the deadline. Last-minute submissions also result in errors,” says Pratyush Miglani, managing partner, MVAC Advocates & Consultants.

Sometimes, employees also omit to provide details of the immediate family member in whose name insurance premiums, donations, and tuition fees have been paid.

Provide landlord’s PAN

Employees paying more than Rs 1 lakh in rent annually must provide their landlord’s permanent account number (PAN). Naveen Wadhwa, deputy general manager, Taxmann says, “If the landlord doesn’t have a PAN, submit a declaration from him along with his name and address.”

Employees can avail of tax deduction on HRA even if they have paid rent to a family member. Wadhwa says, “However, the employee must have proof of residence at the family member’s house, in the form of rental agreement, proof of monthly payments of rent, utility bills or maintenance charges, or address in bank statement. Further, ensure that the family member files an income-tax return (ITR) declaring the rental income.”

Home loan-related issues

An employee who has taken a housing loan must submit a certificate obtained from his bank stating the principal and interest repaid. Shilpi Jain, partner, Ved Jain and Associates, says, “In case of joint ownership, declare the share of principal and interest to be claimed by each owner.”

The certificate issued by banks is a provisional certificate since proof of investment is submitted before the year’s end. Wadhwa says, “The repayment figures are likely to be different in the final certificate. Ensure that the correct amount is claimed in the ITR.”

While employers collect proof of investments in January, employees often continue to make tax-saving investments until March 31. Sura adds, “If you make investments or claimable deductions after the deadline for submission of proof, claim a tax refund on them at the time of filing returns.”

Keep copies of the investment proofs submitted to the employer. Miglani says, “This must be done for future exigencies, such as a scrutiny and verification of tax paid.”

If you fail to submit on time

Delays or failure to submit tax proofs result in higher deductions by the employer. Srinivas says, “If you don’t submit the proofs, the employer won’t pass on any tax benefit irrespective of investments made. Higher TDS (tax deduction at source) will also be deducted.”

The employee will then need to claim the exemptions and deductions at the time of filing the ITR and claim a tax refund. Jain adds, “The claims made by the employee in the tax return will not match with the tax deductions provided by the employer in Form 16. This could expose the employee to a detailed assessment by the tax authorities.”

Claiming a refund can be tedious. Srinivas says, “You may not be able to claim certain tax exemptions, like leave travel allowance (LTA) and medical reimbursements, from the I-T Department as a refund.”

Exercise care when filling Form 12BB

• All salaried taxpayers have to declare the investments made during the year in Form 12BB
• Documentary evidence of these investments and expenses has to be provided as well
• Declaration has to be made for house rent allowance, leave travel concession, home loan interest and various other investments under Section 80
• Download the form from the tax department’s website or ask your employer for it
• Form 12BB has to be submitted to your employer, not to the tax department