If you have invested in tax-saving instruments during the year, it is imperative that you submit the proof of investment to your employer in order to claim deduction for those investments.
For the uninitiated, salaried employees are supposed to intimate their employer about the investment they made in tax-saving financial instruments during the year. And December is typically the month when your employer must have asked you for the proof of those investments wherein you had claimed to have invested into.
These are the five things that you need to remember:
1. Old Tax Regime: It is vital to note that these tax deductions are allowed only when you opt for the old tax regime. The new tax regime also offers certain tax deductions which are listed here.
2. Changing the regime: It is vital to note that taxpayers can change the tax regime from New to Old. However, this can’t be done during the year. The regime that you opted for in the beginning of the year needs to be carried forward.
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3. Tax-saving instruments: There are only a few tax-saving instruments that you can invest into, and that too up to a certain threshold.
For instance, if you invest up to ₹1.5 lakh in certain instruments such as PPF, NSC, ULIP, you become entitled to income tax exemption under section 80C of Income Tax Act.
4. Changing of job: When you change jobs, it is vital to inform your employer about not only the income you earned in your previous job but also the deductions you claimed there. Else, you will have to pay taxes at the time of filing your tax return in July for the extra deductions that you claimed.
“It is not unusual that at the time of filing of their tax return in July, some salaried taxpayers realise that they claimed income tax (I-T) exemption on two separate occasions – each time with a different employer,” says CA Chirag Chauhan, a Mumbai-based chartered accountant.
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5. Failure to submit investment proofs: To understand the chronology, one must first declare the investments to the employer that one intends to make during the year. And towards the end of the year, one must submit the proof of your investment, failing which your employer will deduct TDS including on the income that you have already invested.
As a result, your salary in hand will reduce considerably towards the end of the year i.e., for the months of Feb and March. To avoid any unpleasant surprises, therefore, you must submit the proof of investment on time.
