This is the time of year to submit proof of investment to your employer to claim tax exemption. If you don’t do this, you may miss out on your tax savings. Although you may have already let your company’s HR know how many investments you have made this year. However, it is imperative that you also provide evidence of your investments.
Meanwhile, there are taxpayers who do not realize that the employer must be informed of the previous tax return you filed with your previous employer.
CA Chirag Chauhan, a chartered accountant from Mumbai, says, “It is very common for some people to claim these benefits twice – first from your previous employer and then from your next employer. Finally, when they file their tax returns, they realize they have to pay income taxes. This must be avoided.”
For example, someone had made an investment worth ₹1.25 lakh before September 30 and is entitled to exemption under 80C and 80D. He declares the investment to his employer and claims exemption in TDS (tax deducted at source).
As a result, the employer does not deduct TDS for this ₹1.25 lakh income.
He changes jobs on October 15 and in December, when the HR of the new employer asks him for the investment documents. He also submits the documents to the new employer and thus claims the deductions for the second time.
Finally, when he files his income tax return in July next year (2025), the tax calculation will turn out to be higher than the TDS deducted by his employer. He will then have to pay more tax, because he has applied for exemption from both employers.
These are some of the most important tips to remember
1. Inquire: Inform the new employer about the income you earned in the previous months of this financial year.
2. Investment declaration: If you didn’t share the investment information with the previous employer, that’s fine, but if you did, you should also share the same information with the new employer to avoid claiming the deduction twice.
3. Maximum limit: One is entitled to a total deduction of ₹1.5 lakh under Section 80C of the Income Tax (IT) Act, based on all investments made, such as NSC, PPF, LIC, among others.
4. Additional savings: In addition to 80C, one can claim an additional deduction of ₹50,000 under Section 80CCD(1B).
5. Old tax regime: It is noteworthy that most tax exemptions are granted to taxpayers when they opt for the old tax regime. And since the new tax regime is the default regime, you must opt for the old regime to claim tax benefits.
