We have entered into the final quarter of the financial year. It is that time of the year when your employer starts thinking about your taxes. You might’ve received an email from your Accounts Department requesting you to submit your proofs for investments to claim your tax exemption.
“We are entering the last quarter of the financial year and year-end tax planning and preparation is crucial. It is time to submit the relevant proofs for the declarations you submitted against your tax exemptions.”
This is how the mail sent to me by my employer looks like. Let us look into why we (Salaried class) need to submit the investment proofs to our respective employers and how it needs to be done.
Why does your employer ask you to submit the investment proofs?
Employers are mandated and are responsible to deduct taxes from our salary and deposit the same with the income tax department. This tax deducted by the employer is known as Tax Deducted at Source (TDS).
At the start of the financial year (April), we would not have made any investments in any of the tax saving instruments. Hence, we would not be able to submit any proofs and therefore our employer does not really know how much of the tax to be deducted from each of its employees. To overcome this, the employer gives an option to submit provisional investments. We can plan our investments and tell the employer that we would invest in so and so instruments by the end of the financial year (March of the next year) on which we can claim our tax. The employer would consider that and deduct your taxes based on the provisional investments. Until now they have been deducting that calculated amount. But remember, these were just provisional and not the actual investments.
Now to ensure that the right amount of tax be deducted by the end of March (as per the income tax law), they request you to submit the actuals (proofs). Based on this, they can recalculate your taxes and re-adjust your salary to meet the tax obligations.
What happens if you choose not to submit your investment proofs?
In this case, a full salary amount will be considered by your employer for TDS. They will ignore all the provisional you have submitted earlier and calculate tax on your entire salary for the year. As an effect, more tax will be deducted for the next three months and hence your take home salary will reduce.
Once TDS is deducted, the only way to recover that money (if you have made your investments) is when you file your returns in the month of June/ July.
Documents to be submitted
You would need to submit investment proofs for each of the instruments where you would like to claim your tax exemptions.
The most important tax exemptions proofs are:
Housing Rent Allowance (HRA) – To claim tax benefits on rent paid, you need to submit your rent receipts for each of the month.
Home Loan Interest – Interest certificate from the Bank.
Education Loan Interest – Interest certificate from the Bank.
Medical Insurance Premium - Copy of Insurance Premium receipt paid.
Life Insurance Premium - Copy of Insurance Premium receipt paid. You can submit proof of payments made towards self and your parents as well.
Public Provident Fund – Account Statement/ copy of Passbook from the bank.
NSC – Copy of NSC Passbook.
ELSS (Tax Saving Mutual Fund) – Copy of Account Statement from the fund house.
Tax Saving FD – Copy of receipt.
Sukanya Samriddhi Yojana - Account Statement/ copy of Passbook from the bank.
Tuition Fees - Copy of receipts for Tuition Fees and Exam Fees (For max 2 children).
Home Loan Principal – Statement from the Bank.
National Pension Scheme (NPS) - Copy of receipt/ Statement from the bank.
Medical Treatment – Medical bills along with the hospital certificate.
So, start gathering all these documents and don’t wait till the last moment to submit the actuals.
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