What is an income tax declaration?
11An income tax declaration is a document that employees submit to their employer, detailing their total income, expenses, and eligible tax-saving investments. It includes proof of investments in schemes like PPF, life insurance, and annuity plans, along with details for claiming exemptions on allowances such as LTA, HRA, and deductions on home or education loan interest.
This declaration helps the employer calculate the correct TDS based on the employee’s taxable income. By submitting it, employees can claim tax benefits and lower their tax liability. Employers typically deduct TDS in January or February or as per their internal schedule. Employees can also use Form 12BB along with the income tax declaration to plan their investments efficiently.
Here is an example for better understanding:
Mithilesh is an employee at a government bank in India. In this tax declaration form, Mithilesh quoted ₹20,000 investments in a tax-saving mutual fund. He has also declared that he would be paying ₹30,000 as a premium towards his life insurance policy. Hence, the bank will calculate the annual tax liability of Mithilesh by deducting ₹50,000. The remaining annual income will be taxable. The tax amount will be divided by 12, and the same will be deducted every month from this salary.
Why is the tax declaration form important?
TDS, or Tax Deducted at Source, is the tax that your employer deducts every month from your salary. Under Section 192 of the Income Tax Act of 1961, employers must collect TDS on the salary paid to their employees. The annual tax liability of an employee is divided by 12, and this TDS is deducted every month from their salary. 1
This is when a tax declaration form comes into use. The purpose of a tax declaration form is to inform the employer about your tax-saving investments. So, while calculating TDS, it becomes easier for your employer to calculate your tax liability and deduct a monthly amount accordingly. Failing to provide a tax declaration form may lead to legal notice to you. Also, a tax declaration form makes it easier to file income tax return at the end of a financial year.
What is Form 12BB?
3To prove the declarations made in a tax declaration form, a salaried employee needs to submit Form 12BB. The employee can claim tax benefits and rebate on expenses and investments by submitting the Form 12BB to their employer. Usually, Form 12BB is submitted at the end of a financial year. Form 12BB supports the investments and expenses made by salaried employees which are eligible for tax deductions . The documentary evidence of the investments must be submitted by the end of the financial year. Therefore , both the documentary evidence and the form 12 BB are essential documents that have to be submitted.
How can you file a tax declaration form?
3A common question that may pop up in your mind is how to file a tax declaration form. This section explains how to fill out an income declaration form.
Step 1: . This can be done online or offline, depending on your company
You need to submit the form to your employer. It can be filled in physically and then submitted online or offline, depending on your company’s internal policies.
Step 2: Download Form 12BB
You can download Form 12BB and take a printout of the same.
Step 3: Fill out the form
Please carefully fill in the required details on the form. It may ask for a house rent allowance, LTA, etc. Understand your CTC structure to check if HRA and LTA are part of your package.
Step 4: Submit to your employer
Please re-check the details entered and sign the document. Then, you need to submit the Form to your employer.
For reference purposes, you may keep a copy of Form 12BB with you. Click here to download the 12BB form and carefully go through the steps on how to fill out the income tax declaration form.
What happens if you invest less than what's mentioned in the tax declaration?
A tax declaration form is financial planning done by an employee. You mention the investments you intend to make in a financial year. However, what if you end up investing less or more than the amount mentioned in the declaration?
If you fail to present investment documents, your tax-saving calculations will be termed as inaccurate. The employer will again calculate your tax liability based on the actual investments made. If you invest more than the declared amount, you can claim the amount while filing the income tax returns (ITR).
What investments can you mention in a tax declaration form?
There are certain investments that you can mention in the tax declaration form. These include:
Interest on the home loan
3If you have an ongoing home loan interest, you may mention the same in Form 12BB. Additionally, you may also have to submit an interest certificate to your employer. The certificate can be collected from the lending bank.
House rent allowance (HRA)
2The house rent you pay can be declared in the tax declaration in form 12 BB. The landlord's name, address, rent paid and PAN or Aadhaar Number of the landlord must be mentioned. The requirement for submission of PAN or Adhaar Number is only if the rent paid in the previous year is more than ₹1,00,000.
Health insurance premium
Premium paid for health insurance policies can be claimed in Form 12BB. 8 Under Section 80D of the Income Tax Act of 1961, health insurance premiums offer tax benefits up to ₹25,000 for premiums paid towards self, spouse and dependent children (₹50,000 if either you or your spouse is more than 60 years old). There is an additional benefit upto ₹25,000 for health insurance premium paid towards dependent parents (₹50,000 if any of your parents are more than 60 years of age). The amount is over and above the ₹1.5 lakh limit of Section 80C of the Income Tax Act of 19619.
Other investments
Some other deductions can be availed under various Sections of the Income Tax Act of 1961, such as:
Section 80C
4Premium paid for life insurance policies or investments in mutual funds are a few examples amongst the others on which deduction is available under 80C section, subject to the provisions of the Income Tax Act, 1961.
Section 80CCD
5Contribution made in the National Pension Scheme (NPS)
Section 80E
6Individuals who have taken a loan for themselves , their spouse , children or a student for whom they are a legal guardian can avail deductions under this section . The deduction is available on the interest of loans taken for higher studies and is subject to other provisions as mentioned under the section.
Section 80G
7Tax benefits against donations to specific relief funds and charitable organisations.
Conclusion
Submitting a tax declaration form on time saves you from unexpected deductions. Planning your financial year in the beginning ensures a hassle-free income. Make sure to keep up with the important dates and submit necessary documents on time.
FAQ
What is the purpose of the tax file declaration form?
A tax declaration form serves to notify your employer about your tax-saving investments. This helps them accurately calculate your tax liability and deduct the appropriate Tax Deducted at Source amount from your monthly salary.
Who is exempted from IT Return?
10If you earn below the taxable income threshold, you are exempt from paying income tax. Under the old tax regime, the exemption limit is ₹2.5 lakh per annum, while under the new tax regime, it is ₹3 lakh per annum.
An ISO 9001:2015 
