Income Tax Declaration & List of Investment Proofs

The Financial Year end is round the corner. Your employer may soon ask you to submit the investment proofs for the Financial Year 2018-19.

If you are an employee of a company, at the beginning of every financial year (or) while joining the company you have to submit ‘Income Tax Declaration’ to your employer. This is a provisional statement that has details about your proposed investments and expenses that are Income Tax deductible.

At the financial year end, you need to provide supporting Investment Proofs for these investments that you have specified in IT declaration. (Generally most of the employers ask for investment proofs during Jan to Feb)

Based on your proposed investments and expenses, your employer deducts TDS (Tax Deduction at Source, if any) from your monthly salary and deposits it to the government account. To calculate TDS, your employer considers the declared investments and expenses that are either Tax Exempted (or) eligible for tax deductions under Income Tax Act.

You need to submit both IT investment declaration and Investment proofs (documents) to your employer (IPSF – Investment Proof Submission Form). If you do not submit the required investment proofs at the year end, your employer will then be forced to deduct complete tax without considering your provisional investments (IT Declaration).

The Income Tax Department has also issued a circular and made it very clear to all the employers to verify the genuineness of each claim made by the employee. So, the verification of investment proofs will be more stringent by the employers.

Income Tax Deductions & Deductible Allowances – Investment Proofs

Below are the document proofs that are generally accepted to claim income tax exemptions and allowances.

• Section 80C : To claim tax deductions under 80c, you can submit below investment documents as proofs;
  • If you have a life insurance policy, you can submit Life insurance Premium paid receipts. These receipts can be in the name of self/spouse/children. (Premiums paid on endowment / money-back / ULIPs / pension / Term insurance policies can be submitted)
  • Passbook copy of PPF (Public Provident Fund) or Copy of the stamped deposit receipt, paid during current financial year.
  • Home loan statement from your banker or provider which reflects principal portion of your EMIs.
  • Mutual Fund statement (Investments in ELSS funds or Retirement funds only, lump sum or SIPs).
  • Kid’s tuition fee receipts. Kindly note that any payments made towards donation, uniform fee, van fee, maintenance fees etc., will not be considered.
  • Copy of NSC certificate in the name of self.
  • Copy of Tax saving Bank deposit receipt (5 year deposit).
  • Copy of Post Office Term deposit receipt with more than 5 year term.
  • Copy of Sukanya Samriddhi Account passbook. (Read : Detailed review on SSA)
  • Stamp duty, registration fees and brokerage expenses paid towards  transfer of the property can be claimed as deduction.  (However, if you transfer the property before the end of 5 years from the year in which you took possession of the property, the deduction claimed will be added back to your income and you’ll have to pay tax on it)
  • You may go through this related article – ‘Tax Saving investment options u/s 80c : In whose name can they be invested?‘

• Section 80 D: Copy of premium receipt paid during the Financial Year can be submitted. You can also submit receipt(s) that are paid towards health-checkups. (Read : Section 80D – Health Insurance premium & Tax benefits)

• Section 24B : To claim the total interest paid on your home loan during the FY, you have to submit;
  • Loan statement or interest certificate from your banker or home loan provider.
  • You also have to submit completion certificate or occupancy certificate.
  • Self-declaration whether the house is self-occupied or let-out one.

• HRA (House Rent Allowance) : Monthly rent receipts & rental agreement have to be submitted. The receipts should contain your landlord’s name, address and signature. If the annual rent paid is more than Rs 1 Lakh, landlord’s PAN should be quoted. In case, if you are paying the rent by cash, you have to affix revenue stamp on the receipts.

• Donations (Section 80G) : Receipts of donations are considered as proofs. Typically the receipt issued by the charitable organization you donate do mentions the eligibility under Section 80G. Kindly note that you may not be able to claim this deduction if your donation is made in cash and exceeds Rs 10,000.

• Education Loan (Section 80E) : Copy of loan certificate reflecting the interest payments.

• Medical Allowance : Do not get confused between your medical reimbursement allowance and mediclaim expenses. Medical allowance is provided by your employer. It is part of your employment agreement (salary structure) between your employer and yourself. To claim this allowance, you need to submit original medical bills with Doctor’s prescription(s) copies. The medical reimbursement allowance is exempted under Section 10 of the Income Tax Act.
  • With effective from FY 2018-19, a standard deduction of Rs 40,000 in lieu of travel (Conveyance / Transport Allowance) and medical allowances has been proposed for salaried employees and pensioners. (Kindly read : ‘Rs 40,000 Standard Deduction from FY 2018-19 | Does it really benefit the Salaried?‘)

• Medical Treatment on handicapped dependent (Section 80DD) : Copies of medical bills and duly completed Form 10-IA have to be submitted.

• Medical treatment expenses for the specified disease (Section 80DDB) : Medical Bills / expenditure incurred by way of medical treatment for a specified disease along with a certificate from a hospital in the prescribed form. (To claim Tax deductions under Section 80DDB, it is mandatory for an individual to obtain ‘Doctor Certificate’ or ‘Prescription’ from a specialist working in a Govt hospital only. This condition causes undue hardship to the persons intending to claim tax deduction. Now, CBDT (Central Board of Direct Taxes) has issued a notification relaxing this condition. Specialist Doctors working in Private hospitals also can issue a ‘certificate / prescription’ now). Download Form 10I.

• NPS Contributions (Section 80CCD) : Copy of the stamped deposit receipt, paid during current financial year and copy of the Passbook with clear mention as NPS (National Pension System) Account. (Read : ‘NPS – Why it is not a great Investment Option?‘)

• LTA (Leave Travel Allowance) : The bills (travel tickets) for your travel against LTA can only be claimed via your employer. LTA is allowed to be claimed twice in a block of four years. The current block is 2014 to 2018. You are allowed to carry forward your unclaimed LTA to the next year, so you can request your employer to not deduct tax on it and allow you to claim it next year.

Important points 

• The last date to submit Investment proofs will be intimated to you by your employer.
• To safeguard the interest of the organization, your employer has the right to define the verification guidelines and more controls in addition to the income tax rules.
• Kindly note that there is no need to submit copies or originals of your investment proofs to the IT department.
• It is advisable to keep copies of all your original documents for your future reference.
• If you join a new company during the middle of the Financial Year, do inform them about your previous income details and also submit fresh Income Tax declaration.
• If your SIP or life insurance premium due date is say in the month of March and the last date to submit investment proofs is say in January, you can provide a declaration that you are going to make these investments in March. You can also submit previous year’s documents that are related to these investments.
• In case, if your declared investment amount is more than your actual investments, you have to pay additional taxes while filing your Income Tax Return (or) your company may re-calculate your tax liability and can deduct taxes accordingly for the months of January to March.
• In case, if your declared amount is less than your actual investments, your company might have deducted higher TDS. So, you can claim this as ‘refund‘ while filing your taxes.
• If you are falling short of your projected declared amount, you can plan your investments in the next 3 months or so.
• Even if you miss the deadline for submitting the investment proofs, you can still claim all the tax deductions (except few allowances like LTA or Medical allowance) while filing your Income Tax Return.
• It is prudent to avoid last minute tax planning. Do not invest in unwanted life insurance polices or in any other financial products just to save taxes. It is better you plan your taxes based on your financial goals at the beginning of the Financial Year itself.

Do not miss the income tax proof submission deadline set by your employer. Do submit your investment proofs to your employer on time and make sure you have a pleasant financial year end 🙂

Continue reading :

• Income Tax Deduction Limits under various Sections of IT Act for FY 2018-19 or AY 2019-20
• Form 12BB – New Form to claim Income Tax Deductions by the Employees
• Misconceptions on TDS
• Tax Saving investment options u/s 80c : In whose name can they be invested?

.(Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Post first published on : 14-December-2015)