A Guide to Investment Proof Submission

 

In this policy, the investment risks in the investment portfolio is borne by the policyholder  

It might appear complicated, but the process of making an investment declaration, submitting proofs to claim deductions and paying the appropriate income tax is no rocket science. It’s rather a simple exercise if you have clarity about the steps you need to follow.

Here’s an easy guide to the process of investment proof submission. 

Understanding the basics

Every salaried employee is liable to pay income tax to the Government once their annual income exceeds the threshold of exemption. The amount of tax is calculated on the taxable income calculated by the employer after taking into account the employee’s total annual income from salary and other sources, expenditures and tax-saving investments. 

To help the employer arrive at the correct tax amount, the employee needs to declare the earnings from other sources, investments and expenditures made in the financial year. This is called the investment declaration which is aimed at claiming the tax deductions allowed under various sections of the Income Tax Act, 1961. Thus, alongside the investment declaration, the employee also needs to submit the supporting investment proofs along with Form 12BB. 

From June 1, 2016, it has become mandatory for salaried individuals looking to claim tax deductions to submit the investment and earning details in Form 12BB and provide supporting documents for the same by the end of the financial year. 

The proofs you need to submit

 Form 12BB along with the following investment proofs need to be furnished to the employer to avail the tax benefits. 

• Investment and Expenditures:

  Premium receipts of insurance policies, , deposit receipts of investments in PPF or NPS scheme, health insurance premium receipts, tax saving fixed deposit documents, educational loan interest certificates etc, can be submitted to avail of tax benefits under sections 80C, 80D, 80CCC, 80CCD.

• House Rent Allowance:

  To claim House Rent Allowance (HRA), one needs to submit the monthly rent receipts and rent agreement. In case the rent exceeds Rs 1 lakh, PAN details of the landlord have to be provided too. 

• Home Loan:

  To avail of the deductions against a home loan, an annual interest certificate specifying the principal and interest, a completion certificate of property and documents for registration, brokerage and stamp duty are to be submitted. 

• Leave Travel Allowance:

  Once in three years, tax deductions can be claimed for Leave Travel Allowance (LTA) or Leave Travel Concession (LTC). For this, the domestic travel documents and vouchers of related expenditures should be submitted. 

• Donations (if any):

  Tax benefits are available for donations made towards social causes as admissible under the Income Tax Provisions. Proofs of the same need to be submitted.

Know the limits

According to the different sections of the Income Tax Act, 1961, tax exemptions are allowed for investments up to a certain annual limit. In most cases, one can claim deductions for annual premium payments or investments up to Rs 1.5 lakh. Hence one must ensureto make tax-saving investments of the total permissible limit to enjoy the tax benefits in full. 

What if you make less investment?

In case of investment of less than Rs 1.5 lakh per year, you end up paying higher income tax. The easiest way out here is to buy an investment plan. You can always buy term insurance or a unit-linked insurance plan to reach the desired level of investment and enjoy the maximum possible tax exemptions. 

Related Articles: 

• Why and When Do I Need to Submit My Tax-Saving Investment Declarations?
• Make Your Wealth Inflation-Proof: The Right Investment Helps
• Investment proofs you need show in January to save TDS
• Are You Getting Tax Benefits from Your Life Insurance?
• Income Tax Return Guide - Details You Should Know
• Five mistakes you must avoid while investing to save income tax

ARN -   INT/ED/11/23/6407