Understanding Investment Declaration and the Importance of Submitting Proof

The HR department of the company usually sends out notices and reminders to us employees to file investment declarations and proofs each year, right? However, you may wonder why this work is so crucial. Why are employees required to declare their investments and then provide supporting documentation later on? How much of an impact does the procedure have? Let us assist you in comprehending its significance, meaning, and effects on your pay and taxes.

What Is Investment Declaration?

An investment declaration is usually a process that has to be completed at the start of the fiscal year. If you are in the taxable income bracket, your employer must be informed of your tax-saving options for the next fiscal year to withhold taxes from your monthly pay. 

Why Is Investment Declaration Important?

As previously stated, to calculate your monthly tax and, consequently, your income, your company requires you to complete the investment declaration. Additionally, you must present the actual documentation of your investments around the end of the fiscal year, since the employer bases its salary and tax calculations for that year on the planned investment declaration. 

Remember that if you fail to file, it will be deemed to be zero, and as a result, income tax will be withheld from your salary each month for that fiscal year. Because of this, if you timely file the investment declaration at the beginning of the fiscal year by your expected income tax burden, you can improve your take-home pay.

When Do You Need To Submit The Proofs?

The real proof of investment must often be provided during the last quarter of a fiscal year, which runs from January to March. This is also the reason for the tax-saving rush during this time of year; those who are too lazy to invest under their earlier financial year declarations must act fast before the financial year ends in March, or else a sizable portion of their salary may be withheld as taxes for investment declarations for which proof of purchase has not been submitted.  

What To Keep In Mind When Submitting Investment Proof?

  1. Verify that each document’s signature is self-attested and corresponds with the PAN information.
  2. Digital evidence such as mutual fund or demat statements should have the investor’s name, PAN, and closing portfolio value.
  3. All papers, including bank FDs, need to have their maturity date prominently displayed.
  4. There must be an exact match between the amounts in the evidence and the claimed deductions. For gold or real estate, indexation computations must be verified twice.
  5. Maintain a yearly proof submission file with purchase invoices and statements to expedite subsequent inspections.
  6. Ensure you have copies of all investment documents in case you need them.

Don’t worry if you forget to complete the investment declaration assignment. By submitting your income tax return, you can request a refund of the excess TDS that was withheld. So, if you missed providing any investment evidence to your employer in Form 12BB, you can declare them while completing your tax return, for which you may also be able to receive a tax refund after that.

Form 12BB, an employee’s statement of claims for a tax deduction. Form 12BB must be given to the employer by a salaried employee to get tax advantages or refunds on investments and expenses as of June 1st, 2016. It is necessary to submit Form 12BB at the end of the fiscal year for every taxpayer with a salary,

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Stuti Talwar

Expressing my thoughts through my words. While curating any post, blog, or article I'm committed to various details like spelling, grammar, and sentence formation. I always conduct deep research and am adaptable to all niches. Open-minded, ambitious, and have an understanding of various content pillars. Grasp and learn things quickly.

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