Do you know about the importance of submitting investment declaration to your employer on time? If not then it is very important in order to avoid excess TDS (Tax Deducted at Source). So, the accounts department of companies would have already begun asking for the investment declaration from their salaried employees at the start of the new financial year 2018-19. Isn’t it?
As an employee, it is necessary to share investment declaration at the start of the year, so that the TDS can be deducted considering the investment the employee wants to make, which will lead to deducting a lower amount of taxes, which as a result will lead to a higher salary in hand every month.
Section 192 of the Income Tax Act, 1961 covers TDS under it making an obligation of the employer to withhold taxes at the time of payment of salaries. So, the investment declaration helps in tax saving investments which the employee wishes to make during the year.
The employer after receiving the declaration from an employee will consider the proposed tax saving deductions from salary income before measuring the estimated tax to be deducted at source. This will help in reducing the total estimated salary income for the employee for the entire year also estimating lower TDS for the year. Out of all the tax saving investments most commonly known one comes under the Section 80 C of the Income Tax Act that has an annual limit of Rs 1.5 lakh. This declaration also covers other deductions like Section 80 D and Section 24 available under the Act which will make the taxpayer less liable.
When the employer asks for the declaration you shouldn’t submit any supporting documents as the proof of tax saving investments as the declaration is only for proposed tax saving investments and expenditures. You will be mostly asked by employers for the supporting documents or also the proof of investments to be submitted only in the month of January or February 2019. But you should make sure that the submissions are realistic. As a declaration of higher proposed tax saving then that is actually done could even result in higher TDS especially in the months of January to March for the relevant financial year.
You should make sure that your PAN is correctly mentioned in order to ensure that the tax amount which is deducted by the employer is correctly reflected against your PAN at the time of employer submitting its quarterly TDS returns to the income tax department.
Let us have a look at some common elements of proposed investment declarations made to employers:
Investments in Equity Linked Savings Schemes (ELSS) of mutual funds (MFs), life insurance, Public Provident Fund (PPF), NSC, Sukanya Samriddhi Scheme and 5-year tax saving fixed deposit qualify for deduction from gross total income under Section 80 C of the Income Tax Act.
By following the above-discussed ideas you can save yourself from paying a high amount of tax, making a good amount of savings and lead a comfortable life with your family.