Last Updated on December 22, 2023 by BFSLTeam BFSLTeam
Many people dread the time when it comes to paying income tax and typically wish to avoid high taxes. If you are one of the many people who wish to save on taxation, it is essential to take 5 things into consideration. Before investment proof submission for the purpose of taxation, you can make yourself aware of certain aspects of efficient tax-saving methods at the time you have to provide proof of investment to your employer. 5 things to take into consideration to help you save on tax are basically 5 documents and actions that you may submit and undertake, respectively, and efficiently manage your taxation.
Investment Proof Submission Documents
- Declaration of Investment
The first investment proof submission is in the form of an investment declaration. This is a document that aids your employer in deducting the proper tax amounts. If you are an employee, it is the right practice of your employer to deduct a tax amount from your salary. You may already know that an employer has to know the amount of your salary that falls under the tax bracket in order to deduct the correct amount of tax. If you, the employee, are able to give your employer the appropriate picture of your income, which includes your investments, then employers can work towards deducting tax in the correct amounts.
A POI declaration (proof of investment declaration) will go a long way to save you tax and money as your employer may deduct less of an amount for taxation. Of course, when you submit this declaration to your employer, you must also submit supporting documents detailing your investments. Apart from these investments for saving tax, your employer also takes your HRA, medical reimbursements, LTA, and other perks into consideration. These proofs are collected by your employer from December to January. This is done so adequate comparisons may be made with employers’ information about the employee. Typically, companies require 2-3 months to get these calculations in order.
In case you do not make these declarations with proof, you may lose out on tax savings as things like life insurance and medical insurance receipts, home loan proof, receipts of donations, and rent receipts, among others, can save you significant tax amounts.
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- Details of Interest from Banks, FDs, Etc.
While submitting your proof of investments to your employer, you may also submit information about any interest you earn from your bank accounts and other financial instruments like RDs/FDs (recurring deposits/fixed deposits). Furthermore, it is vital that you share details of capital gains from mutual funds and shares or any rental income you may be earning. All this enables your employer to get an accurate idea of your investment earnings and tax can be deducted in a more precise manner. In this way, you not only avoid any potential penalties due to not paying advance tax but also prevent any additional payment of taxes at a later date.
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- Investment Proof Submission Before Due Date
It stands to reason that all your documentation proof must be submitted before the due date. This helps your employer to have enough time to calculate your tax and any deductions without any hassle, failing which, they may make deductions proactively. In case you have made any investments later than the due date or failed to submit documents in advance, you can still claim a refund from the income tax authorities. However, there remain a few exceptions to this practice, and if you fail to give your POI declaration for LTA and medical reimbursement on time, you will forgo these benefits.
- The Proof is Not Mandatory
While it is imperative that you undertake your investment submission within the dates stipulated, it is not mandatory to submit actual proof documents. You may only submit details of investments without investment proof submission. This is not required for the Income Tax Department but is required for your employer so that they can make tax calculations properly. Furthermore, this is because employers have to subtract TDS amounts. Documents and proof facilitate the verification of the investment declaration you make. When you provide real and true information, you can gain the benefits of tax relief in a hassle-free way.
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- Proposed Investment Proof for February and March
Since employers collect your POI declaration and proof by January, you can, in the same declaration, provide information and proof about the proposed investments you are going to undertake in February and March. Based on this, your employer can process TDS. All you need to do is to promise your employer that you will undertake the investments as planned and any exemptions should be aligned with your declaration.
Final Words
Providing your employer with a declaration about your investments lets you enjoy potential tax benefits and gives your employer a true idea of your earnings. Investment proof submission should be done in a timely manner to avoid missing out on the benefits of tax deductions.
FAQs
If you invest in ULIP, under Section 80C of the Indian Income Tax Act, you can claim tax deductions.
Under Section 80C, a tax-saving fixed deposit is entitled to tax deductions.
You need to submit a stamped deposit receipt (a copy) for the amount that is paid in the present financial year. You can also submit a copy of your passbook (stamped) with PPF details attached.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
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