Are you eligible to any Income Tax Deductions this year?
You might be eligible to claim income tax deductions. All you have to do is to get it mentioned in your TDS statement. The Employer has the responsibility to deduct Income Tax from the salary of employees monthly on proportionate basis and deposit the same to government before the due date as prescribed by the Income Tax Department. The total tax liability calculated on the estimated projected income will be deducted proportionately in 12 months. As such, employer is required to assess the income tax liability of all employees from the beginning of the Financial Year.
Now, the employer will be able to assess the income tax liability of the employees only when the employees declare all their incomes (other than Salary Income) & income tax deductions. It is important to understand for the employees that unless they submit all their incomes and income tax deduction details, the employer will not be able to assess the TDS amount accurately. As a result the employees might end up paying excessive taxes in the form of TDS and at the end of the year while filing the return they will have to claim the refund for such excess TDS.
Let’s understand this with a simple example:
Priyal is working with a bank and she has provided following details about her tax deductible investments and payments in the declaration form to her employer. She had also taken a home loan for Rs. 25,00,000 for which she will be paying total amount of Rs. 1,30,000 towards interest and Rs. 90,000 towards principal repayment by the end of the current financial year.
We are comparing the scenarios where she has submitted the declaration form as against the situation where she forgot to disclose the home loan details. It reflects the difference in the total amount of Income Tax Deductions.
|1) Income from Salary||8,00,000||8,00,000||-|
|2) Investments and Payments liable to Income Tax deductions|
|c. Insurance Premium||17,500||17,500||-|
|d. Home Loan||-||90,000||90,000|
|e. Home Loan Interest||-||-||-|
|3) Total taxable income (1-2)||7,42,000||5,22,000||2,20,000|
|4) Tax liability as per slab rates||75,705||30,385||45,320|
|5) Monthly TDS deducted by employer (4 / 12 months)||6309||2532||3777|
As you can see, she ended up paying excess amount of Rs. 3777 in form of monthly TDS (Rs. 45,324 annually) than what she was required to and she will have to claim the same as refund while filing her return for that financial year.
This is why it is very important that you declare all the incomes and investments and payments liable to income tax deductions to your employers. They already have a prescribed format in which you have to provide the details along with the supporting documents so that they can calculate your tax liability accurately.
Here is a sample of declaration form for income tax purpose, for your reference.
Tags Income Tax