Saving on Income Tax is one of the primary financial goals of an average Indian employee in any financial year. Usually, one has to invest in instruments that qualify for Income Tas deductions and submit the relevant investment proofs to the employer firm to get Income Tax deductions at the salary level itself, which raises the net payable salary at the end of a month for any employee (assuming he/she earns above the basic taxable limit.)
“However, one has to bear in mind that the government is encouraging taxpayers to move from the old income tax system to the new system. The new income tax system has very few income tax deductions. Therefore, those who are still with the old income tax system should be concerned with investments that qualify for income tax deductions and remember to submit them to their employers for upfront deduction,” said Income Tax Bar Association, Calcutta secretary, Himadri Mukhopadhyay.
What is proof of investment for Income Tax
Section 80C of the Income Tax Act stipulates investment in various instruments that qualify for income tax deductions. These are PPF, investments in LIC, NSC (National Savings Certificate), SSY (Sukanya Samriddhi Yojana), SCSS (Senior Citizens Savings Scheme) etc. Deductions are also mentioned under Section 80CCC, 80CCD and 80D. The upper limit to invest in most is Rs 1.5 lakh per financial year. These documents are essential to prevent complete tax deduction at source (TDS) from the salary. If you invest in one of these or more and submit to your employer, the full incidence of income tax on your salary will decrease and you net pay in hand will rise.
What is investment declaration for tax exemption
Investment declaration consists in submitting the proof of investments that, according to Income Tax Act 1961, qualify for income tax deductions. Employees have time till March 31 of any year to make these investments. However, since all companies need time to prepare income tax calculations, effect the necessary deductions and then incorporate them in the payroll of individual employees, it is advised that these proofs are submitted well in advance.
Income Tax deductions is one of the primary areas of financial planning with which innumerable Indians remain concerned throughout a financial year. For the salaried class, submitting proofs to the company about Income Tax deductible investments is a must-do. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
