Investment Proof Submission for Income Tax - Complete Guide (2024)

Tax saving can be done more efficiently if 5 things are taken into account before submitting investment proofs. These have to be done on time to ensure that tax is saved as much as possible.

5 Basic Ideas to help you Submit Investment Proofs

1.Investment Declaration

2.Sharing Saving Bank Interest, FD Interest with Employer Helps

3.Claim Later If Declaration Proofs for Tax Have Not Been Submitted to the Employer

4.Submitting Proofs while Filing Tax Returns is NOT Mandatory

5. Provide “Proposed Investment” Proofs for February and March

1. Investment Declaration

This helps the employer to deduct appropriate tax from their employers. When you are an employee, your employer deducts appropriate amount of tax from your salary. This is something that we are already aware of. In order to deduct these taxes from the employer’s salary he or she has to calculate exactly how much is an employee’s taxable salary.

This can be done when you, as an employee are able to give the exact idea of your income, investments as well as tax saving efforts. All this, ofcourse has to be supported by the appropriate documents. tax saving instruments including the ones that your employee provides generally include your HRA, LTA, along with your Medical reimbursem*nts and other entitlements. Your employer needs to be aware of all these numbers, in details as well documents that prove it.

Employers start collecting their employers proofs and tax related details around the months of December up to January. They do this in order to make the appropriate comparison with the information that is already there with them. Companies require a minimum time of around 2 to 3 months, in order to set these calculations correctly.

Repercussions of Not Making Proper Investment Declarations:

If an employee a.ka. tax payer fails to make these declarations the following repercussions might cause much distress:

• You become liable to pay a much higher amount of income tax, in case the investments are not correctly reported.
• You also might have to pay higher amount of income tax further if you were not honest about your investment. For this, the company will be allowed to take 2 to 3 months to subtract the extra amount of tax from your salary.

In order to claim your LTA, you need to hence provide all the Travel receipts (which includes flight boarding passes and train tickets).

You also have to submit Home loan certificates as documented proof in the case that you wish to claim the deductions under the principal as well as the interest repayment.

You also need to provide the following other investment proofs:

• ELSS investments proofs or any other 80C investments
• Receipts of Life insurance and health insurance premiums
• Donations receipts if you have made any
• Rent receipts for your rented accommodation to claim HRA

2. Sharing Saving Bank Interest, FD Interest with Employer Helps

You are also share the following:

1. Saving bank interest,
2. Any capital gains from shares or mutual fund,
3. FD/RD interest earned during year,
4. Rental income and other kind of incomes with your employer.

This allows your employer to get a better picture of your taxable salary and hence subtract your income tax with more accuracy. If you fail to share such information, you might then have to make a payment of additional income tax separately and then would have to take these things into your account when you are filing your income tax returns.

This also generally helps to avoid any sort of penalty which may come up because of not paying advance tax before the due date given to you. This also enables you simply avoid the additional tax payment at the end of the fiscal year, since the tax would be distributed almost equally throughout the whole fiscal year.

3. You Claim Later If Declaration Proofs for Tax Have Not Been Submitted to The Employer

Submitting investment proofs to your employer before the due date is crucial to avoid complications during the filing of your income tax (IT) returns. If you are unable to provide these proofs on time, your employer will deduct the income tax based on the available information. However, there is still a chance to claim a tax refund when filing your tax returns if you have subsequently made investments in tax-saving products.

It's important to note that some exemptions, such as Leave Travel Allowance (LTA) and medical reimbursem*nts, may be considered at the employer level. If you fail to provide proof for these exemptions to your employer in a timely manner, you may lose out on these benefits, and they cannot be claimed back at the time of filing returns.

4. Submitting Proofs while Filing Tax Returns is NOT Mandatory

When it comes to providing information about investments for income tax purposes, individuals typically need to furnish details rather than attaching actual investment proofs. The requirement for investment proofs is primarily on the part of the employer, as they are responsible for deducting Tax Deducted at Source (TDS), and being a third party, they require documents for the verification of investment proofs.

A declaration stating the details of your investments is usually sufficient. However, it's advisable to retain all receipts and documents related to your investments for a few years. This documentation can be invaluable in resolving any potential issues that may arise later.

It's crucial to emphasize the importance of honesty in providing information about your investments. Falsely claiming investments that have not been made can lead to legal consequences. Therefore, it's always advisable to provide accurate and truthful information when declaring your investments for tax purposes. This not only ensures compliance with tax regulations but also contributes to a transparent and accountable financial system.

5. Provide “Proposed Investment” Proofs for February and March

Providing a declaration for intended investments in February and March is a common practice for individuals looking to avail themselves of tax-saving benefits. Employers typically facilitate this process by offering a declaration form, often available through the Admin or HR department.

By filling out this declaration form, you essentially commit to making the specified investments for tax-saving purposes in the upcoming two months. Based on this declaration, your employer processes the Tax Deducted at Source (TDS) with the understanding that you will fulfill the promised investments.

This streamlined process allows for a more dynamic approach to tax planning, permitting individuals to plan and declare their intentions for investments in advance. It's essential to ensure that the commitments made in the declaration are upheld, as any discrepancies could lead to adjustments in TDS during subsequent processes.

Important Documents required as Investment Proofs

The list of investments eligible for tax savings along with the required documentation for each investment are given below:

1. Housing Loan: Interest certificate from the bank/financial institution.
2. Completion certificate of the house property from the builder or self-declaration from the employee.
3. ELSS Mutual Fund: Copy of the investment certificate.
4. Public Provident Fund: Stamped deposit receipt or passbook mentioning the PPF account.
5. Life Insurance Policy: Premiums paid towards life insurance
6. HRA (House Rent Allowance): Monthly rent receipts, PAN Card of the landlord. Revenue stamps for cash payments above Rs. 1,00,000.
7. NSC (National Savings Certificate): Copy of NSC Certificate in the name of the employee.
8. Tax-saving FDs: Copy of the deposit receipt.
9. Tuition Fees of Children: Copy of tuition fees paid to educational institutions.

1. Post Office Term Deposit: Copy of the deposit receipt (for deposits over 5 years).
2. Preventive Health Check-ups under section 80D: Copy of the premium receipt, Bills for preventive health check-ups.
3. Medical Expenses under section 80DD (for handicapped dependent): Proof of amount spent on medical treatment, training, and rehabilitation, Form 10-1A.
4. Interest Paid on Higher Education Loan: Copy of the bank certificate mentioning the principal and interest amount paid.
5. House Loan for First-time Buyers under section 80EEA: Deduction on interest paid by first-time buyers for loans taken to purchase a new home.
6. Deduction under section 80U: Medical certificate, Certificate Form 10-1A from a competent medical authority.
7. Donations under section 80G: Valid receipts for qualifying donations in the name of the employee.

Important Points for Tax-Saving Investments

1. Compute tax before investing under Section 80C.
2. Check existing contributions and additional contributions needed in the financial year.
3. Explore various sections in the Income Tax Act for deductions and exemptions beyond Section 80C.
4. Invest in provident fund under section 80C up to Rs.1,50,000; amounts beyond this limit do not qualify for deduction.
5. Consider an additional deduction of up to Rs.50,000 for NPS investment under section 80 CCD(1).
6. Evaluate a range of options available under section 80C and align investments with financial goals.