A Conclusive Guide on Tax Declaration

While we earn, we often come across various tax-related terms such as Tax Deduction at Source (TDS), investment declaration form, etc. However, we often get confused with what exactly these terms mean and often face hassle while paying taxes or filing for Income Tax Return (ITR). Therefore, we need to have well-structured and conclusive information on tax declaration in today's time.

What is Tax Declaration?

Tax declaration refers to the process of reporting your income, expenses, and other financial details to the tax authorities in order to calculate and pay your taxes. Here are few facts regarding tax declaration in India:

1. Tax declaration is the process of reporting income, expenses, and financial details to calculate and pay taxes.
2. In India, tax declaration is governed by the Income Tax Act, 1961, and rules set by the Central Board of Direct Taxes (CBDT).
3. Individuals and entities must declare their income and provide supporting documents.
4. Income can come from various sources like salary, business profits, capital gains, rental income, and interest on investments.
5. Taxpayers need to file an income tax return (ITR) with the tax department, using the appropriate form based on income type and taxpayer category.
6. The tax declaration should include income details, deductions claimed, and taxes paid during the financial year.
7. Tax declaration and payment are done annually, with the financial year running from April 1 to March 31.
8. The tax declaration deadline is usually July 31, but it may be extended by the tax authorities.
9. Accurate and complete tax declaration is important to avoid penalties and legal consequences.
10. Taxpayers should maintain records and supporting documents like salary slips, bank statements, investment proofs, and expense receipts.
11. Deductions and exemptions can be claimed for specified financial instruments, medical expenses, and home loan interest payments.
12. After filing, the tax authorities review the declaration and may conduct audits or seek clarification.
13. Relevant documents and records should be kept for a specified period as prescribed by tax laws.

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Income Tax Declaration for Salaried Employees

Salaried employees have to fill out a tax declaration form at the end of every financial year. A tax declaration is a list of all the tax-saving investments that the employee makes during a financial year. Based on the information provided in the tax declaration form, Tax Deduction at Source (TDS) is calculated from the employee's income.

Let us first understand how to make a Tax File Declaration.

How to Fill a Tax Declaration Form?

1. The first step is to open the Income Tax e-Filing portal
2. After opening this e-Filing portal, click on the 'Forms' and download Form 12BB.
3. After downloading Form 12BB, start filling in your personal details such as name, employee's code, date of birth, gender, etc.
4. After filling in these details, fill in the details such as house rent allowances, home loans, deductions for the premium paid for insurance, leave travel concession, etc.
5. Filling in the tax deductions, the last step towards filling in this form is signing this form and handing it out to your employer.

While filing for Tax Deduction at Source (TDS), you must have read about Form 12BB in the above-mentioned points. Have you thought about what exactly this form is? We’ll let us help you understand.

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What is Form 12BB?

Form 12BB is to be submitted by a salaried employee at the end of every financial year to his employer to claim tax benefits. This form is applicable to all salaried employees who pay taxes to the Government. Salaried employees can make investment declarations for the expenses made by him. Let us now understand what the different types of investment declaration are.

Different types of Investment Declaration That Can be Made by the Employee

1. House Rent Allowances (HRA): In terms of House Rent Allowance (HRA), the taxpayer can claim the rent that is paid to the landlord. The employee/taxpayer has to provide the landlord's name, PAN details, and address for investment declaration.
2. Leave Travel Concession: Leave Travel Concession can be declared by the taxpayer/employee only if it is included in his salary package by his employer.
3. Home Loans: Your home loans may include a certain amount of interest every financial year. You can declare the investment made while paying the interest by filling up Form 12BB and providing your name and PAN card details. Apart from these, the employee also needs to provide a provisional interest certificate which can be taken from a bank or a financial institute.
4. Mediclaim Premiums: The premiums paid by the policyholder for medical insurance policies are eligible for tax benefits under Section 80D of the Income Tax Act, which the taxpayer or the policyholder can claim.

While filling out the tax declaration form, the taxpayer or the employee can face various scenarios. Let us look at them.

Scenarios of Investment Declaration Form That a Taxpayer or an Employee Can Face

Scenario 1: When an Employee Invests Less Amount than the Amount Declared

In cases wherein the amount invested is less than the employee's or the taxpayer's declared, your employer will recalculate the amount of tax liability before the end of the financial year. You can ask for an income tax if you have invested on the date that your employer provides for investment proof submission. Moreover, you can also ask for a Tax Deduction at Source (TDS) if you are eligible for the same.

Scenario 2: When an Employee has Invested in an Equal Amount Declared

In cases, wherein the amount invested by an employee or a taxpayer is equal to the amount that he or she claims in a particular financial year. Most probably, he or she will not be eligible for any tax returns.

Scenario 3: When an Employee Has Invested in an Amount That is More than the Amount Declared

In such cases wherein the amount invested by an employee or a taxpayer is more than the amount declared by him or her in a particular financial year, you can file for an Income Tax Return (ITR).

The employees or the taxpayers often face the above scenarios.

We have often come across the term Tax Deduction at Source (TDS). However, most of the employees or the taxpayers often face problems in filing for TDS. Moreover, it is also necessary to have well-structured and conclusive information on what we mean by Tax Deduction at Source (TDS).

Everything You Must Know About Tax Deduction at Source

Tax Deduction at Source refund or TDS return is the amount of income tax reduced by the Government when an employee or a taxpayer pays income taxes for rent, education, premiums for insurance policies, and more.

One can find the TDS returns rates of the financial year mentioned in the Income Tax Act, 1961. This will help the taxpayer calculate the amount of TDS returns hassle-free and seamlessly.

Let us now look at an example of Tax Deduction at Source (TDS) to understand better.

What is TDS Return?

Let us understand this using an example. Suppose you have taken a shop on rent with a total amount of Rs. 50,000 per month as rent. The TDS amount that is deducted on rent per month is 10%.

The TDS returns amount that will be deducted every month will be Rs. 5000. The balance that is left is now Rs. 45000 , which you will pay to the person who has given your shop on rent after the TDS deduction.

You will add Rs. 50,000 as rent paid to the shop owner. Moreover, you will take credit of Rs. 5000 as tax deducted under TDS returns of the Income Tax Act.

Wrapping Up

You must now have understood what we mean by tax declaration, the different types of investment declaration that the employee can make and how you can file for TDS using Form 12BB in a hassle and seamless way.