- Form 12BB is prescribed by the CBDT for salaried individuals to declare their investment
- In the beginning of each financial year, you have to just make an estimate of the investments that you intend to make
- Based on the details you mention, your employer deducts TDS from your monthly salary and deposits it to the government account
One call that most employees detest the most is the one from the accounts office or HR seeking details of tax savings they have committed for the current financial year. The declaration that is given decides how much of their taxes are deducted and by when they need to submit the proof to avail reduced tax deduction before their salaries are credited to their bank accounts. Form 12BB comes to their rescue in such instances. The form is prescribed by the Central Board of Direct Taxes or CBDT for salaried individuals to declare their investment.
Earlier there was no standard form for making declarations but from June 1, 2016, the process has been standardized with the introduction of Form 12BB. Employers deduct TDS from the salary of employees if their income falls in the taxable limit. To avoid TDS deduction, employees declare their investments usually in the months of January and February. The onus on deduction is with the employer post the Finance Act, 2015, which introduced section 192(2D) of the Income-tax Act, 1961 (the Act) wherein the person responsible for making payment of salary (employer) was obliged to collect the necessary evidence or proof in the prescribed form and manner to allow any claim for any deduction and/or tax saving investments.
For optimum results, investment declaration has to be done in the beginning of a financial year. Your employer asks you to declare your tax-saving investments for the year to be able to deduct tax accordingly from your monthly salary. Investment declaration is important for you because it can lead to higher in-hand salary. In the beginning of each financial year, you have to just make an estimate of the investments that you intend to make. There is no need to submit actual proofs till the end of the financial year, which means you, have the leeway to invest less or more than what you have committed.
Form 12BB details
You can easily download the new form 12BB to provide investment proofs such as Leave Travel Allowance, Leave Travel Concession, House Rent Allowance, Section 80C of income tax deductions and more. The form is widely and easily available. Following are the details in the new Income Tax Rule 26C which is incorporated in Form 12BB, which needs to be submitted by employees to their employers:
House Rent Allowance: House Rent Allowance is exempt under section 10 (13A) of the Income Tax Act. To claim HRA, you have to provide documentary evidence i.e., Rent receipts. You also have to provide details of landlord (name & address) and the amount paid as rent. Permanent Account Number (PAN) of the landlord shall be furnished if the aggregate rent paid during the year exceeds Rs 1 lakh.
Leave Travel Allowance: Effective from 1st June, 2016, the CBDT has made it mandatory for all the salaried employees to submit travel related expenditure proofs to their employers.
Interest Payments on Home Loans: To claim income tax deduction under section 24 on home loan interest payments, you have to furnish details of interest amount payable/paid, lender’s name & address & PAN number of the lender in Form 12BB.
Income Tax Deductions under Chapter VI -A: You have to provide the details & evidences of your investments or expenditures related to various sections like 80C, 80CCC, 80CCD, 80D (medical insurance premium), 80E (deduction of interest on education loan), 80G (donations), Section 80EE and others.
Based on these details mentioned by you, your employer deducts TDS from your monthly salary and deposits it to the government account. To calculate TDS, your employer considers the declared investments and expenses that are either Tax Exempted (or) eligible for tax deductions under Income Tax Act.
