IT Declaration Definition
An Income Tax Declaration is a formal statement provided by an employee to their employer. This document includes details of the employee’s total income, expenses, and evidence of investments made in tax-saving devices such as insurance, PF, annuity plans, etc. In India, the process of taxation commences with the declaration of income and concludes with the filing of the Income Tax Return (ITR).
Every employer seeks a tax declaration from their employees at the beginning of a financial year. This declaration is a list of all tax-saving investments that an employee commits to make in that particular year.
Employees need to submit proof of expenses or investments during the year to support their declaration. If they fail to do so, the employer will have to recover the tax shortfall from the employee’s salary in the remaining months.
Employers managing payroll traditionally using spreadsheets collect investment proofs in physical copies or via email. Then, the concerned team verifies the details and approves the tax declarations. The whole process becomes cumbersome and confusing.
Here, we will discover:
What IT Declaration Means?
An Income Tax Declaration in India entails the submission of comprehensive details regarding one’s income, expenditures, investments, and other financial affairs to the government. It is determined by your earnings, such as your salary, business profits, rental income, and so on.
The primary objective of a tax declaration is to compute and disclose the precise amount of income tax that an individual or company is obligated to pay to the government.
As a general guideline, it is necessary to submit a tax declaration at the beginning of the fiscal year. Additionally, employees must provide substantiation for their spending or investments to validate their claims.
The purpose of Form 12BB is to compute the amount of tax that needs to be deducted at source, commonly referred to as TDS. It was implemented pursuant to Section 192 of the Income-tax Act, 1961. The income tax declaration form is applicable to salaried personnel who are liable to pay income tax to the Government of India.
Form 12BB is a form that employees utilize to officially declare their investments and expenses that qualify for tax deductions. Its purpose is to record the specific details of an employee’s claims for tax declaration payment.
Steps to File a Tax Declaration on Your Income
Utilize the recently developed Income Tax site to access a range of features aimed at simplifying the tax filing procedure. Provided below is a systematic guide outlining the procedure for declaring income tax files.
- Locate the area dedicated to Income Tax Forms and proceed to download the Income Tax Declaration Form 12BB.
- After downloading, complete the form with all of your personal information. This may encompass personal information such as your name, address, date of birth, gender, and other relevant details.
- Upon completing the personal information section, ensure to provide the tax declaration details, including information on home loans, rental allowance, premiums paid for life insurance plans (if applicable), personal investments, and other financial matters.
- Subsequently, affix your signature to the document after thoroughly verifying all pertinent information, and then proceed to deliver it to your workplace.
Common Types of Investments and Expenses
1. Housing Rent Allowances (HRA)
You can report the rent paid to your landlord on Form 12BB as a deductible expense. To accomplish this, you need to furnish the landlord’s name, PAN details, and address for declaration.
2. LTC (Leave Travel Concession)
Employers typically grant employees Leave Travel Concessions to cover domestic travel expenses. An employee is eligible to claim the Leave Travel Concession only if it is part of their remuneration package as given by the company.
3. Home Loans
In order to declare the interest on the home loan, an individual needs to submit basic details such as your name and PAN information. Furthermore, they also need to provide the provisional interest certificate. The bank issues this certificate.
4. Premiums for Life Insurance
Additionally, it is necessary to furnish specific information regarding the premium value of their insurance plans. Life insurance policy premiums paid by individuals are eligible for tax benefits under Section 80C of the Income Tax Act. You, as the policyholder, are eligible to collect this sum.
There you go! That’s everything you must know about IT declaration. Hope you now have a clear understanding and will be able to resolve employee queries effortlessly.