IT Declaration

An Income Tax (IT) Declaration is a document provided by an employee to their employer at the beginning of a financial year. It contains details of the employee's income, planned tax-saving investments, and eligible deductions.

This helps the employer estimate the taxable income for the year and deduct tax accordingly, known as Tax Deducted at Source (TDS).

Purpose of IT Declaration

• Enables the employer to calculate taxable income.
• Helps in estimating the tax liability for the employee.
• Ensures accurate TDS deduction by the employer, preventing over or underpayment of taxes.

Key Components of IT Declaration

• Income Details: Salary, interest from savings accounts, rental income, and any other sources.
• Planned Investments: Contributions to Provident Fund (PF), insurance premiums, National Pension Scheme (NPS), and other tax-saving schemes.
• Deductions: Housing loan interest, medical insurance premiums, and expenses on tuition fees for children.

Submission Process

Employees typically submit the IT Declaration at the start of the financial year.

This is done through a company-provided platform or payroll system.

Employees are also required to submit Form 12BB, which summarises their tax-saving claims.

Verification of Investment Proofs

Towards the end of the financial year, employees need to submit proofs for all investments claimed in the declaration. These include:

• Receipts for insurance premiums.
• Provident Fund statements.
• Certificates of interest earned on savings accounts or fixed deposits.
• Medical bills or tuition fee receipts.

Steps Involved in IT Declaration

• Collecting Income and Investment Data: Employees gather information regarding their gross income and planned investments.
• Submitting the Declaration: The declaration is submitted through the employer's HR or payroll system.
• Form 12BB Submission: Employees must provide Form 12BB as a record of their claimed deductions.
• TDS Calculation: Based on the declaration, the employer calculates the applicable TDS to be deducted each month.
• Submission of Investment Proofs: Towards the financial year-end, employees submit proof of investments.
• TDS Payment: The employer remits the deducted TDS to the Income Tax Department.
• Filing Income Tax Return (ITR): The final step is filing the ITR after the financial year ends to reconcile the actual tax liability with the TDS deducted.

Frequently Asked Questions (FAQ)

Q. What documents are required for IT Declaration?

A. Here are the documents required:

• PAN and Aadhaar card
• Salary slips
• Form 16
• Tax-saving investment proofs (PF contributions, insurance premiums)
• Health insurance receipts
• Proof of capital gains

Q. Is IT Declaration mandatory?

A. Yes, IT declaration helps in ensuring that tax is deducted accurately. Failure to submit a declaration may lead to higher TDS deductions.

Q. Who is exempt from filing an IT Return?

A. Salaried individuals with a total income below Rs. 5 lakhs and bank interest up to Rs. 10,000 are exempt from filing tax returns.

Q. What happens if an employee fails to submit their IT Declaration on time?

A. If an employee misses the deadline, the employer may deduct higher TDS based on estimated income. However, employees can update the declaration later, and the employer can adjust the TDS accordingly.

Q. How do employees make changes to their IT Declaration mid-year if their income or investment plans change?

A. Employees can update their IT Declaration at any point during the year. They need to submit the revised details to the employer, who will adjust the TDS deductions for the remaining months.

Q. What is the deadline for submitting investment proofs to the employer?

A. The employer typically sets a deadline toward the end of the financial year for submitting investment proofs. Employees must submit proofs by this date to ensure accurate tax calculations and avoid excess TDS.

In conclusion, an IT Declaration is a critical process that ensures tax compliance and optimises tax-saving opportunities for employees, streamlining the deduction and remittance of TDS throughout the year.