Tax Management February 2019

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Investment Proof submission for the Salaried

For salaried employees, it is the time of the year to submit Income Tax Investment proofs. Your employer is only responsible for TDS deduction based on your Income Tax Investment Proof submission. The employer cannot be held accountable if any wrong information is provided by the employee.

There is no prescribed format for the declaration of investments. Usually, employees are required to submit a declaration at the beginning of the fiscal year estimating the amount of investments they plan to make in that year and are required to submit proofs for these investments around January or February of the following year as per the employer’s policy as no specific timeline is prescribed. However, the onus to submit the proofs regarding the declared investment solely lies on the employee. 

If a company is not satisfied about the correctness of the proof, it will not accept it. In this case, the employee will not able to claim the genuine deduction and exemption, because it is adhered by mandate given by CBDT to all companies to satisfy themselves about the correctness of investments/payments proofs provided by employees.

Income Tax Investment Proof Submission best practices:
1. Maintain a photocopy/soft copy of Income Tax Investment Proof: In the majority of the cases, an employee does not maintain a photocopy of Income Tax Investment Proof. It is one of the biggest mistakes. You may remember for 3-4 months all the details submitted. Not many taxpayers are aware that Income Tax department can open your case within a period of six assessment year from the end of the assessment year in which the return is filed.

2. Financial Planning for Balance Months: An employer takes declaration from employees related to Income Tax Investment at the beginning of FY. At that time, only the declaration is given, and employee gives the undertaking to provide Income Tax Investment Proof at the end of the FY. You need to give “proposed investment” proofs for the month of Feb and March. A lot of people are confused on how will they provide the investment proofs for the month of Feb and Mar in Jan itself, when the employer asks for investment proofs. It might happen that your life insurance premium is due in Mar or if you are doing SIP in ELSS funds, you still don’t have the statements showing the investments.In those cases, you have to provide a declaration that you are going to make the investments for Feb/Mar and based on that declaration, your employer will process the TDS.All the employers provide you with the declaration form. You just need to write there that you promise to do the investments for tax saving in next 2 months and your exemptions should be given to you based on your declaration.

3. Income from other sources: It is important to check whether your employer is providing an option to declare income from other sources or not. If not then you need to calculate and deposit self-assessment tax on income from other sources. In many cases, the employee unknowingly ignored this column and then received notice from income tax declaration for non-declaration of income.

4. Bills for Perquisites and Allowances: For Perquisites and Allowances that an employee enjoys he needs to submit bills for some of these tax saving options. If you do not submit bills at the time of Income Tax Investment Proof, then the entire amount paid in advance will be taxable. Therefore, it is important to clarify from your employer. Though you might be receiving allowance and perquisite on a monthly basis, the bills should be submitted at the time of submission of Income Tax Investment Proof.

What if you fail to submit investment proofs?

  • In case of non-compliance, employers can cut a much higher TDS after lapse of submission dates
  • While you can still make necessary investments before March 31, they will not be reflected in your Form 16 and you will have to file for a TDS refund
  • Note, if you have mentioned certain investments but not really invested, then you have to pay higher income tax
  • Employers generally take 2-3 months to adjust these deductions from your salary or to handle any kind of inconsistency
  • Note, if you have made investments after submitting income-tax proofs to your employer, then you can claim a tax refund when filing returns
  • Tax deductions offered under various sections of the I-T Act can still be claimed, provided you invest before March 31 of the relevant year

Submitting other income proofs apart from salary

  • Any capital gains from MFs, RDs, FDs, shares, rental income can help you avoid penalty
  • Capital gain proofs help get a clear picture of your taxable salary
  • I-T deductions are more accurate if you mention your additional gains
  • Declaring additional income helps you avoid penalty arising out of late payment of advance tax

If you have worked with more than one employer in the financial year, your employer may also ask for details of your income from previous employment. You may also have to resubmit documents for deductions. This helps your current employer calculate tax on your aggregate income and apply proper tax slab & rate.

Do note for deductions that are allowed directly in your tax return, no documents are required to be submitted to the income tax department. However, these must be kept safely in your records should the assessing officer ask for them later.

(Shubham is a Chartered Accountant and MBA (Finance). She is on the forum of “Economic Times” experts on Taxation.   She specialises in Individual Taxation and Taxation of Freelancers & Small businesses. She can be reached on for answering your tax related questions.)

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