If you have invested in tax-saving instruments during the year, it is necessary that you provide proof of investment to your employer in order to claim the deduction for these investments.
For the uninitiated, salaried employees are expected to inform their employers about the investments they have made in tax-saving financial instruments during the year. And December is usually the month by which your employer must have asked you for proof of the investments you claimed to have invested in.
Here are the five things you need to remember:
1. Old tax regime: Please note that these tax deductions are only allowed if you opt for the old tax regime. The new tax regime also offers certain tax deductions listed here.
2. Changing the regime: It is essential to note that taxpayers can change the tax regime from New to Old. However, this is not possible during the year. The regime you chose at the beginning of the year must be transferred.
3. Tax saving instruments: There are only a few tax saving instruments that you can invest in, and that too up to a certain threshold.
For example, if you invest maximum ₹1.5 lakh in certain instruments like PPF, NSC, ULIP, you get entitled to income tax exemption under section 80C of the Income Tax Act.
4. Change of job: When you change jobs, it is essential that you inform your employer not only about the income you earned in your previous job, but also about the deductions you claimed there. Otherwise, you will have to pay tax on the additional deductions you have claimed when filing your tax return in July.
“It is not unusual for some salaried taxpayers to realize when filing their tax returns in July that they have claimed income tax (IT) exemption on two separate occasions – each time with a different employer,” says CA Chirag Chauhan, a Mumbai-based Chartered Accountant .
5. Failure to submit investment certificates: To understand the chronology, one must first declare to the employer the investments one plans to make during the year. And by the end of the year, you must provide proof of your investment. Failing this, your employer will deduct TDS, even on the income you have already invested.
As a result, your salary will drop significantly towards the end of the year, that is, for the months of February and March. To avoid unpleasant surprises, you must therefore submit the investment certificate on time.
