New Financial year has just begun and April is the month of tax planning for the whole year. Employers ask all their staff to submit Tax saving declarations in this month. However some taxpayers might not be conversant about what exactly is to be shown in such declarations and what is its purpose?
Declaration is nothing but a document showing Tax saving Investments, Expenses to be incurred by taxpayer during a financial year. Taxpayer is required to submit Investment proofs to his employer along with such declaration. Employer considers this declaration at the time of deduction of tax (TDS) from salary of taxpayer.
Investments, Expenses to be included in declaration?
Some important Investments or Expenses included by taxpayers in their declaration are listed below:-
- House rentals: Taxpayers are required to submit to his employer a proof of house rentals (rental slips) paid to his landlord. Even though such slips are to be submitted every month, but in the month of April itself employer asks for details of monthly rent payable during a year for calculation of House Rent Allowance (HRA). So that taxpayer can claim benefit of HRA to save tax.
- Life and Health Insurance premium: Premium paid on Life and Health of taxpayer and his family members is tax deductible. Deduction for Life insurance premium is available U/s. 80C of Income Tax Act whereas for health insurance premium is available U/s. 80D of Act. Taxpayers are required to submit proofs of such premiums paid in the declaration.
- Tax saving Investments: Government has allowed Tax deduction on various Investments made by taxpayers such as Provident Fund, Public Provident Fund, National Pension Scheme, Specified Mutual Funds, Tax saving deposits with banks, Unit Linked Insurance Policy, etc.
All particulars such as type of Investment, date, amount, etc., should be mentioned in the declaration.
- Tax saving expenses: In some cases, Tax deduction is available to taxpayer if he incurs some specific expenses during a year like payment of EMI of housing loan, payment of stamp duty or registration fees of residential house property, tuition fees of self or children, etc.
Taxpayer should consider such expenses too, in the declaration and get maximum tax benefit.
- Other incomes: If taxpayer has income from other sources besides salary, he must provide the details of such income to employer in a declaration. Other income may include Interest received from bank fixed or saving deposits, Dividend from shares or co-operative banks, Gains from sale of shares or mutual fund units, Receipt of rent from his let-out house, etc.
All the above details belong to whole financial year; however taxpayer is required to provide details about Investments, Expenses, and Incomes to be made/ received during year. Employer will deduct TDS every month according the details provided. Hence, if taxpayer invests or incurs lesser amount than declared, amount of TDS in March will be more than other months. On the other hand, if taxpayer invests or incurs more amount than declared, amount of TDS in March will be less than other months.
So keep these things in mind while submitting a declaration to your employer and make the most of tax savings.