The sword of TDS is hanging. Your employer can deduct a heavy tax. As you did not submit the proof of investment. Naturally, you can’t let it happen. You must be trying hard to collect all the receipts and proofs. But are you aware of the last date of the proof submission? As it is not the 31st March. Do you also know the rules and guidelines for income tax proof submission? This post would tell you all the information related to the income tax declaration and proof submission.
The Last Date of Income Tax Investment Proof Submission
This is your primary concern. Before going into the detail, you would like to know the last date. As you still did not invest enough amount to claim the full tax deduction. Thus, you want to know the remaining time.
Let me tell you upfront that income tax department does not declare the last date for income proof submission. It is your employer who fixes the due date. Why? Because It is the duty of the employer to deduct TDS before the end of the financial year.
But it does not mean that employer would wait up to the 31st March. Rather, an employer would start collecting proofs from the month of January. Most of the employers accept proofs up to 20th February.
Why Not Until the End of Financial Year?
It is an obvious question. Why can’t an employer give you time until the 31st March? You would get more time to plan your investment and collect proof.
Let us understand the problem.
- You would be aware that every employer deducts tax each month. It is called as TDS (Tax Deduction At Source).
- An employer has to factor in this TDS while preparing salary. Thus, An employer has to decide on TDS until the 20th day of the month so that it can pay the correct salary next month.
- So the for TDS deduction from salary of March, the employer has to decide on it until 20th February.
- Now, you can understand that an employer needs correct and authentic information of your investments so that it can deduct correct TDS in the month of March. You know that March is the last month of the financial year hence an employer can’t delay the final calculation of TDS. Sometimes, the TDS of last month may exceed the salary of a whole month, that is why the employers insist proofs from the month of January.
Why Do you need Proof of Investment
Do you know that self-employed people do not submit any investment proof to anyone? It is the only salaried employees who have to give investment proof to their employer. Why is this so?
You might know that a salaried person has more chance to get tax exemption and deduction. The tax exemption on HRA and other allowances are available only to the salaried person. Even an employee can defer his/her TDS towards the last months.
These concession to the employee is given as an employer justifies your allowances and income. Thus, it is the duty of the employer to keep itself satisfied. That is why the income tax department has given obligation of verifying income tax investment proof to the employer. In case of any discrepancy, the department would ask the employer.
Income Tax Declaration
The monthly TDS deduction from your salary is decided on the basis of your income and applicable tax deduction and exemption. Your employer knows your salary but can’t know your investment and expense to fix deduction and exemption. That is why an employer asks about those investments and expenses which can save your tax.
The employer takes this information in a declaration form. It is called as the income tax declaration form. In this form, you tell your proposed tax-deductible investment and expenses. You also tell about those expenses which can give you the tax exemption.
In this declaration form, you can give an estimated amount. Your TDS is deducted on the basis of this declaration form. But, in the month of January, the employers ask proof to substantiate the declaration. The final calculation of applicable tax is done on the basis of given proofs.
Income Tax Proof Guidelines
You know that there are various ways to save tax under section 80C. Also there are methods of tax saving other than 80C. Some methods involves investment in a scheme, while some are the particular expenses. If you are a salaried person, you have to give proof of all of these expenses.
If you are a businessman or professional, you have to keep these proof with you. The income tax department can ask it up to 6 years. Note, all the tax exemptions and deductions are not available to the non-salaried people.
1. House Rent
Your expense on rents can be a big taxsaver. If your employer gives ‘house rent allowance’, you can claim tax exemption. The HRA tax exemption is given on the basis of a formula. You can use HRA calculator to know the exact tax saving because of the HRA.
To claim HRA tax exemption, you have to give rent receipts. You must get these receipts from your landlord. You should note following points while giving the rent receipts.
- There should be landlord’s name, address and signature.
- A rent receipts can’t be of more than 3 months.
- You don’t need to submit rent receipt if rent paid is less than ₹3000/month.
- If the annual rent amount is more than ₹1 lakh, the PAN of landlord is necessary.
- If the payment is in cash of above ₹5000, you must affix the one rupee revenue stamp in each receipts.
2. Home Loan Principle and Interest
If you are claiming deduction on EMI of home loan, you have to submit interest certificate. The bank or lender must give this certificate to you. In this certificate, there should be the payment schedule. In the schedule you can see the principal and interest part separately. For the deduction on interest, you must add up the interest portion and mention it the income tax declaration. The principle part is tax deductible under section 80C.
You have to also give completion certificate from the builder.
As this deduction is only available for self occupied house thus you have to also give a self declaration of this regard.
You get tax deduction on the premium payment of insurance scheme. This scheme may be Term plan, ULIP or pension scheme. The whole amount is tax deductible subject to the upper limit of section 80C.
The insurance scheme can be in the name of self, spouse, children.
To claim the deduction, you must give a copy of premium payment receipt.
National Saving Certificate
The NSC scheme is also eligible for tax deduction. You have to submit the photo copy of the NSC certificate to avail the tax deduction.
Public Provident Fund
PPF is also one of the popular tax saving account. To claim tax deduction, you have to give copy of the passbook along with the statement of the financial year. You can also give the PPF contribution receipt. This receipt should be stamped.
Tax Saving Mutual funds
The investment in tax saving mutual fund (ELSS) is also eligible for tax deduction. To claim this deduction, you have to give the investment certificate. If you are investing online, you can download it from the portal.
Else, your mutual fund distributor would give it to you. The certificate should have following details.
- Investor’s name
- Type of Investment
- It should be mentioned that the mutual fund scheme is an Equity Linked saving scheme.
Children Tuition Fees
Often people are not aware that children tuition fees is also eligible for tax deduction. Whereas, this expense is also eligible for tax deduction. Note, only tuition fees is counted for the deduction. Other fees such as Donations, Capitation fees, Uniform fee, Sports fee, Van Fees, Shoes & Sock etc., are not allowed.
The 5-year term deposit in scheduled bank or post office is considered for tax deduction. You have to submit the copy of deposit receipt.
You get tax deduction in health insurance under section 80D. To get this deduction, you must produce the premium receipt. The receipt of preventive health check also gives extra tax deduction up to ₹5000. This insurance can be of the employee, spouse, parents and children.
The NPS account gives tax benefit under section 80CCD. To avail this benefit you must give a copy of the stamped deposit receipt and copy of the passbook with clear mention of NPS account.
If you don’t submit proofs
The Tax deduction from the month of February depends upon the actual proofs of the investment. Before this, an Employer deducts tax on the basis of your investment declaration. So, if you don’t give the proofs, your employer would recalculate the tax liability on the basis of available proof. It there is no proof, you would not be able to claim the tax deduction. Therefore, your employer would deduct to full tax from your coming coming month’s salary.
However, you can get back the extra TDS deduction. If you have invested in tax saving options and missed the deadline you can get the tax refund. To get refund you have to mention the tax saving investments in the income tax return. Note, you must keep the proof with you as income tax department may ask for the proof, later.
Similarly, you can also claim refund for those investment which is done after the deadline but before the 31st March. Sometimes, employers include it if the payment is recurring in nature. The employer would ask the receipt of previous year.
Proof Submission At the time of filing income tax return
Often people ask the method to attach investment proof while e-filing income tax return. Let me tell you that, income tax department does not ask any proof or attachment during the e-filing. It relies on your return declaration. However, your income tax assessing officer can ask the proof if he/she suspects any tax evasion.
The income tax department can open a case up to 6 years of a financial year. Thus, it is necessary to keep the proof for 7 years.
Points To Note
- The government does not fix a date for income tax proof submission. The employers fix this date. It can go up to 15 March. Most of the employer does not accept proof after 20th February.
- If you invest any amount after the deadline of proof submission. You can use income tax return to claim tax refund.
- You must keep the original or copy of all the proofs up to 7 years.
- There is no need to attach investment proofs with the income tax return.
- LTA and medical reimbursement can be claimed only if you submit proof to the employer. You can’t claim it while filing the return.
- It is better if your start investing early in a financial year. You can avoid many traps and pitfalls.