It is around December when organisations, typically, ask employees to submit proofs of their tax-saving investments. Most employees declare their planned investments at the beginning of the financial year. That is also the ideal time to plan one’s investment. But December is when one can actually take stock of one’s investments and fill the gaps, if any, in a timely manner.
Says Anita Basrur, partner, direct tax, Sudit K Parekh & Co. LLP: “In case of employment, tax is deductible on total salary after taking into consideration the various allowances and deductions. For this purpose, employees are required to submit declarations at the start of the year. Come December, the employers call for all the proofs in respect of the deductions/claims so as to compute the correct tax liability, as declared at the start of the year/start of employment during the year based on estimates.”
This exercise is relevant for those under the old tax regime. Those under the new tax regime cannot avail of any deductions and exemptions.
It can help employees reduce the last-minute burden. Adds Basrur: “Based on the proofs submitted, taxes are re-computed and shortfall/excess is adjusted in the remaining months. The reason for calling for the proof in December is to enable recovery of due taxes in a timely manner so that the employee is not burdened at a single point in time.”
Don’t Miss Out Any Documents
It is not just investments, but also expenses, such as children’s tuition fees, that can help you save taxes.
Says Archit Gupta, founder and CEO, Clear, a tax portal: “The due date of submission is usually set by the organisation itself. But it is generally seen that employees get a month to submit the proof.”
To ensure that you don’t miss out anything, here’s a list of deductions and exemptions for which you may need to attach documentary proof.
Investment Proofs: For PPF or NPS, you need to submit the passbook showing the date of investment in the relevant financial year.
For investment in an equity-linked savings scheme (ELSS), you need to attach a copy of receipts issued by the respective mutual fund.
For tax-saving fixed deposits (FDs), submit a copy of the FD certificate. For life and health insurance premiums, furnish copies of receipts of premiums paid to the respective insurance company.
House Rent Allowance (HRA) Claim: You need to present the rent receipts and/or rental agreement showing the amount of rent paid and the name of the landlord as well as the tenant. You may also need to furnish the Permanent Account Number (PAN) of the landlord.
Leave Travel Allowance (LTA) Claim: You need to submit a copy of the train ticket/flight ticket and boarding pass, along with details of the dates when you undertook such travel.
Children’s Tuition Fees: You need to get a copy of the receipt of tuition fees paid to the school or institute where your children are studying.
Home Loan Principal And Interest: Your home loan provider will issue you with a home loan certificate showing the interest and principal components separately. In this case, provisional certificates may also work.
How To Submit Proofs Of Pending Investments?
This could happen in cases such as when you have a systematic investment plan (SIP) in your ELSS investment or when the due date for the insurance premium comes after December, and so on.
“Where the investment is recurring in nature and is to be made at the end of the year by the employee, the deduction benefit can be given by taking an undertaking from the employee along with previous years’ proof of investment,” adds Basrur.
It is a good idea to keep records of all your investment proofs and revisit them at the time of filing your returns to ensure payments and investments in the last quarter are factored in.
For instance, in case of home loans where provisional certificates are usually submitted in December, the actual home loan certificate should be used at the time of filing the income tax return. Also, specific donations are eligible for deduction under Section 80G but may not be taken into account by the employer.