Each year tax planning begins with what investments to make to save tax. It is essential to know which salary component enjoys tax benefits and what are the tax saving investments. Also you need to know the tax saving tips for salaried employees. Here we dwell on a very routine but important part of your tax planning; which involves the submission of investment proofs. If you employed then your HR department will ask you give an investment declaration at the beginning of the year. The monthly TDS is worked out based on this declaration. But by January of the next year you are also required to submit the actual proofs of the investment. Here are 8 things you may not know but should surely be aware of.
Know the declarations that your employer will accept
Your tax planning begins with the declarations in the standard format. There are some declarations that the employer will accept. For example declarations on home loan interest under Section 24, Exemption under Section 80C and Section 80D; rent receipts etc are accepted as admissible declarations by your employer.
Know the declarations that your employer will not accept
You must also be aware of the declarations that your employer will not accept as part of your tax calculations. For example Section 80G declarations are not accepted unless the contribution is towards a specified government relief fund and is organized by employer. Declarations to other institutions are not normally accepted as part of the declaration. You will have to claim it separately from the IT department.
Give a precise picture of your investments during the year to your HR
When you are giving your declarations to your HR department make it a point to give precise declarations. The declaration is given at the beginning of the year while the actual proofs are to be submitted only in the months of January and February. But your monthly TDS is actually determined by your employer based on the declaration you give. If you overestimate your tax saving investments then you will be required to pay a much bigger tax in the last few months of the year. That is ideally a situation that should be avoided.
If you don’t provide proofs by February, additional tax will be deducted
Different companies have different deadlines for submitting actual proofs of investments, but normally it has to be submitted latest by the first week of February. The HR department will typically refuse to consider any proofs of investment submitted after that date and such amounts will have to be claimed by you as refund while filing your tax returns. Nowadays, you can submit physical statements provided by your bank or you can also download directly from the website and furnish proofs to your HR department.
Of course, you can still claim refund from the IT department
Despite your best efforts, you may still fail to submit proofs on time. Not to worry. You can claim such amounts as refund from the tax department while filing your tax return. There is one thing you have to be cautious about here. You need to keep proofs of these investments not given to your HR department available with you so that in case of any queries from the Income Tax department pertaining to the refund, you can address these queries satisfactorily.
Your capital gains taxes have to be paid by you as must be advance tax
Your HR department will not entertain any tax adjustments pertaining to your capital gains and capital losses. Even if you submit proofs of accumulated capital losses, the HR department will not giving you the benefit of lower taxes. Also, you need to manage your capital gains audit and payment of advance tax on capital gains on your own.
Some special requirements when you claim HRA
There are some special points you need to remember when claiming HRA and providing proofs of rent paid. You must furnish a copy of the registered lease contract to your HR department mentioning the actual amount of rent. The monthly rent receipts with revenue stamp must also be submitted to the HR department. Don’t forget to submit the PAN number of your landlord (now it is mandatory to claim HRA). Above all, when you are paying rent above Rs.50,000 per month, you need to deduct TDS before paying rent and furnish proof to your employer. In the absence of any of these factors, the HRA exemption claim can be rejected.
The onus of your tax payment is on you not on your employer
Last, but not the least, your responsibility does not end with giving the proofs to your HR department. Firstly, ensure that your employer actually pays the TDS that is deducted from your salary and deposits it with the government. This can be checked with Form 26AS, which is available online. Secondly, you need to remember that your employer is only doing its job by deducting TDS from your salary. Ultimately, the full responsibility for your taxes still lies only with you. That is where the buck stops!