The new financial year has begun, and chances are your HR has already started asking for your investment declarations for the upcoming year.
But why does your employer need these investment details?
Well, your employer is responsible for deducting tax at source (TDS) from your salary every month. If they don’t have a clear picture of your tax-saving investments and expenses, they might end up deducting more tax than necessary, leaving you with a lower take-home salary.
To avoid this, employers ask you to declare your tax-saving investments at the start of each financial year. This helps them calculate your taxable income more accurately and deduct the right amount of TDS.
How to declare your investments to the employer?
All salaried employees are required to submit Form 12BB to their employer in order to claim tax benefits on eligible investments and expenses.
The Income Tax Department has provided a standard format for Form 12BB, and your HRMS portal will usually have it ready to fill out.
Here’s what you’ll need to provide:
- Basic details – Your name, PAN, designation, address, and the financial year for which you’re declaring these investments.
- House Rent Allowance (HRA) – Expected rent to be paid and landlord details (name, address, PAN).
- Leave Travel Allowance (LTA) – If you plan to claim exemptions on travel expenses, then you can add these details.
- Deductions – Investments and expenses under sections like 80C (LIC, PPF, NPS, ELSS), 80D (health insurance), 80E (education loan), etc.
- Home loan – Details of the principal repayment and interest payable against home loan during the year.
Since this declaration is done at the beginning of the financial year, you just need to provide an estimate of the investments you plan to make. It’s okay if the actual amount varies by the end of the year. You’ll have the chance to submit actual proofs later, and your final TDS will be adjusted accordingly.
Form 12BB is especially useful if you’re filing your ITR under the old tax regime, since most tax-saving options aren’t available under the new regime.
Finally, let me answer a few FAQs on form 12BB:
Q. When should I submit Form 12BB?
Ideally in April or May, at the start of the financial year.
Q. Do I need to submit Form 12BB to the income tax department?
No, it only needs to be submitted to your employer.
Q: What if I switch jobs during the year?
You’ll need to declare your investments to your new employer as well. Also, share the income and TDS details from your previous employer so that they can calculate your total TDS correctly.
Q: What if my investment plans change by year-end?
No problem. You can submit the actual proofs at year-end or make corrections while filing your Income Tax Return (ITR).
Q: What is the difference between form 12BAA and 12BB?
Form 12BB is for declaring your tax-saving investments and deductions. Form 12BAA is used to report TDS/TCS collected or deducted on other types of income or expenses, helping your employer calculate TDS more accurately.
