Proof of investment, expenses to avoid TDS: Here is a checklist
All investments you make should be linked to your overall financial goal and not just for saving taxes
Mumbai: Is your employer asking you to submit your investment proofs? In the beginning of every financial year, your employer asks you to declare your tax investments. Based on your declaration, your employer computes and deducts tax at source and gives it to the income tax department. Around December and January, the employer then asks you to submit the proof of your investment declaration. Here is what you should know:
Proofs need to be in order
Based on the income, employers deduct tax at source (TDS) every month and deposit it with the tax department. In order to deduct tax, the employers first ask the employees to declare the tax saving investments. Based on the declaration, the TDS from the income is deducted and deposited every month.
However, employers also have to ensure that the investments declared are true. Hence, it collects investment proofs. The employer doesn’t have to submit the proofs to the income tax department but have to verify the claims and adjust the TDS wherever necessary before the end of the financial year.
Hence, employers ask you to submit your investment proofs in December and January. There are companies that ask employees to submit the investment proof in the beginning of the year as well.
Documents you need to submit
In order to get tax deduction, the investment proofs you require to submit include your document of insurance premium, investments made in tax-saving mutual funds, health insurance premium receipt and receipt of donation.
“If you have home loans and education loans, you will need to get a letter from your bank showing the loan repayment with details of principal amount and interest amount,” said Suresh Sadagopan, a Mumbai-based financial planner.
If you have investments in small savings schemes, like the public provident fund or Sukanya Samridhi Account, you will need to get a copy of the same too. In some cases you may not have the receipt for the full year. For instance, if you are doing a systematic investment plan or a monthly recurring payment for any of these investments, you will not have the receipt for February and March. In that case, you can either provide the previous year’s receipts or the employer will give you time to submit till March.
What you should know
If you don’t submit the proofs on time, your employer will not consider the investment and deduct tax on your overall income. Hence, it is necessary that you submit your investment proofs to avoid paying excess taxes.
However, in case you are taxed in excess you still don’t have to worry.
When you file your income tax returns you can claim a refund. However, this is possible only provided you make the investments in instruments which are qualified for tax deduction before the end of the financial year.
Remember that you will have to wait to get the refund after you file your income tax returns. Also avoid last minute investment in tax-saving instruments.
All investments that you make should be linked to your overall financial goal and not simply for saving taxes. Don’t buy an insurance product or a mutual fund product just to save taxes.
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