Here’s what you need to know about Income Tax investment submission proof
By Advocate Kohal Dev Sharma, Punjab and Haryana High Court
Salaried employees get their TDS (Tax Deducted at Source) deducted from their income every year and it is the most dreadful feeling especially when they do not know whether the deducted TDS was of the correct amount or not. It is a requirement for all of the employers to deduct TDS every year from the salaries of their employees. An employer may deduct either more TDS or less than that is required unless and until the correct investment proofs are submitted to them.
Why TDS is deducted in the first place?
Every employer has to deduct TDS from the salary of the employee as per the slab that is applicable to the respective employee. It is duty of the employers to compute the tax liability of the employee and deduct tax accordingly.
What if the employer deducts excessive or less tax?
If an employer has deducts an excessive amount of TDS from the salary then in that case the excess amount can only be claimed by filing a refund in the Income Tax Return. However, if the employer has deducted lesser amount of TDS than that is required then the difference has to be paid by the employee before filing of the Income Tax Return on the due date.
Usually, the employers pay salary to their employees till February or in some cases till March in order for them to make the tax-saving investments that the employees wish to make and the employees have to submit proofs regarding the same. However, if the employees fail to submit proof of their income tax investment, the employer will deduct a hefty amount from the salary of the employee leaving them with a small pay check.
What are the options that are available?
Although, standard deductions given in the form of Conveyance Allowance and Medical Expenses reimbursement are available to all employees and no bills are required to be submitted to the employer, every employee needs to submit proofs of other tax-saving investments. Here are a few tax-saving investments that employees can look into and their proofs.
- Tax Saving Fixed Deposit: Investing in a tax saving fixed deposit is a great way to earn interest on your investment but is also a smart way to save tax. However, the interest earned from the investment is taxable.
Proof of investment: A simple printout of the FD receipt would do. Employers will accept the same easily.
- Public Provident Fund (PPF): PPF is a great way to earn higher interest as compared to FD and the interest is also exempt from tax. However, there is a certain limit to the same.
Proof of investment: A copy of the PPF passbook is a valid proof. In case of absence of a passbook one can also provide a print out of the PPF statement that is easily available online or through Net banking of the concerned bank.
- Employees Provident Fund (EPF): Among the tax saving methods, EPF contributions are also important as they are tax deductible up to a certain extent. The EPF interest is also higher and is exempt from tax.
Proof of investment: Contributions are mandatorily made to EPF by the employer and the details are always available with the employer. However, in case an employee needs a proof, they can ask for a copy of the EPF passbook from the employer.
- Insurance Policy: Premiums on Life Insurance Policies are tax-deductible. However, the returns on insurance policies or ULIPs are not taxable. Moreover, the amount of maturity is also not taxable if the insurance cover is 10 times the amount of annual premium.
Proof of investment: Employees can submit the copy of the insurance policy as well as acknowledgement receipts from the insurance companies.
- House Rent Allowance (HRA): An employee can also claim deduction for rent in case they are paying rent. This can be claimed if an employee is receiving HRA and is a great way to save tax apart from the common ways mentioned above.
Proof of investment: Monthly rent receipts can be submitted or a copy of the lease agreement along with the payment receipt of license fee is a valid proof.
The above mentioned ways are the best ones in order to claim tax saving benefits. Employees need to understand that even if TDS has been deducted, they can claim refund from the Income Tax department at the time of filing the Income Tax Returns and all is not lost for them. Tax saving investments can be made till the end of each financial year and are a great way to earn benefits in the form of interest or premium all the while they save their tax.
This is an exercise that every employee must take seriously as a small mistake will make them lose out on a large portion of their hard earned money. Making the investments well within time and readying the documents in time is a great way to save money.
About the Author:
Kohal Dev, is a lawyer by profession and has a penchant for writing and his ability to juggle several tasks at a time, in the most effective and efficient manner is something that allows him to deliver content fresh out of the box. His extensive experience in the field of Law, Finance, Real Estate and Marketing allows him to write some of the most amazing blogs and articles in exactly the way they are required to be done. When not at work, he can be found reading and of course, writing.