Tax Saving Season: What Is Investment Declaration & Why Is It Important To Submit Proof?
Investment declarations are normally done at the start of the financial year. You are asked to declare your tax-saving investments for the coming year so your employer can deduct tax from your monthly salary. By declaring your investments, you can get a higher in-hand salary. You just have to make an estimate of the investments that you intend to make at the beginning of the year. As for the actual proof of investment, it can be submitted at the ...Read More
Every year, we as employees tend to get notifications and reminders from the company's HR department to file investment declarations and proofs, right? But you might be curious as to why this task is important. Why do employees have to make investment declarations and then eventually submit proofs? What importance does the process have?
Let's help you understand its meaning, importance, and impact on your taxes and salary.
What Is Investment Declaration?
What Is Investment Declaration/shutterstock
Typically, an investment declaration is a task required to be done at the beginning of the financial year. For your employer to deduct taxes from your monthly salary (if you fall into the taxable income slab), you need to declare your tax-saving choices for the upcoming financial year to your employer.
Why Is Investment Declaration Important?
As mentioned earlier, your employer needs you to file the investment declaration so that, on the basis of the proposed investments, your monthly tax and therefore your salary can be computed. And, since the proposed investment declaration is what the employer assumes for your tax and salary calculation for that financial year, you need to submit the actual proofs of those investments towards the end of the financial year.
Keep in mind that if you don't declare, then it will be assumed to be zero, and accordingly, income tax will be deducted from your salary every month for that financial year. That is why you can actually increase your take-home salary if you submit the investment declaration timely at the start of the financial year as per your estimated income tax liability.
why investment declaration is important/indianachieversstory
When Do You Need To Submit The Proofs?
As far as the actual proof of investment is concerned, it usually needs to be submitted towards the last quarter (Jan-March) of a financial year. That is also the reason why the tax-saving rush happens in this period, as those lazy folks who did not invest as per the declarations made in earlier months of the financial year need to do so quickly before the financial year ends in March, otherwise a big chunk of their salary can get deducted as tax for the investment declaration that did not have proofs submitted.
Importance of investment declaration and proof submission/istock
What To Keep In Mind When Submitting Investment Proof?
1. Make sure the signature on every document is self-attested and matches the PAN records.
2. The investor's name, PAN, and closing portfolio value should be included in digital proofs such as demat or mutual fund statements.
3. The maturity details of all physical documents, such as bank FDs, must be highlighted.
4. The amounts of the proof and the claimed deductions must match exactly. It is necessary to double-check indexation calculations for gold or real estate.
5. To speed up future inspections, keep an annual proof submission file that includes purchase invoices and statements.
6. Make sure you possess duplicates of every investment document in case it gets required.
Also Read: Why You Should Invest In ELSS For Twin Benefits Of Tax Saving & Wealth Creation
What If You Miss Investment Declaration?
investment declaration missed/shutterstock
If you end up missing the investment declaration task, fret not. You can claim a refund of the excess TDS deducted by filing your income tax return. So, if you missed submitting some investment proofs to your employer in Form 12BB, you may declare them while filing your tax return, for which you may also be eligible to claim a tax refund after that.
For the unversed, an employee's statement of claims for a tax deduction is called Form 12BB. Starting on June 1st, 2016, a salaried employee who wants to claim tax benefits or rebates on investments and expenses must give Form 12BB to their employer. The submission of Form 12BB is required at the conclusion of the financial year. For all salaried taxpayers, Form 12BB is applicable.
Also Read: PPF vs Bank Tax Saver FD-Which One To Choose For Tax Saving?
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