Various income-tax deductions and allowances are calculated and allowed only upon submission of proofs by an employee

It is that time of the year when employers begin to ask for the submission of income-tax proofs from you. The tax deducted at source (TDS) by the employer is based on the income-tax proofs submitted by you. Various income-tax deductions and allowances are calculated and allowed only upon submission of proofs by an employee.

Claiming deductions

You can claim the various allowances in your salary package, such as house rent allowance (HRA), leave travel allowance (LTA), telephone reimbursement, books and periodicals by submitting the receipts and invoices. You have to submit the monthly rent receipts (PAN of the landlord is also required where the rent is more than Rs 1 lakh in a year). You can submit the invoices for claiming the other allowances. Your employer will then calculate the tax-exempt portion of the allowances based on the proofs submitted by you.

You may have also paid your home loan instalments, children’s tuition fee, health insurance premium or interest on loan taken for higher studies. In these cases, you should submit the home loan statement for claiming interest on home loan or education loan certificate from your bank to claim interest deduction on an education loan under section 80E. Similarly, you can also submit donation receipts for any charitable donations made by you, which are allowed under section 80G. Do remember that to be able to claim this deduction in your income tax return, you will need the PAN and name of the beneficiary.

You must have submitted an income-tax declaration to your employer at the beginning of the year or at the time of joining the company. This is used to calculate monthly TDS deduction and at the end of the financial year, the employer makes a final tax calculation and TDS is re-calculated.

Submitting documents

In addition to the proofs mentioned above, you also have to submit the proofs for your tax-saving investments declared to your employer. For your investments in PPF (public provident fund), NSC (national savings certificate), ELSS (equity linked savings scheme) of a mutual fund, NPS (national pension system) and Sukanya Samriddhi Account (for your girl child), you should submit the statements or copies of certificates from the issuing authorities. These are all eligible for deduction under section 80C. For your fixed deposit investments and LIC premium payments, you should submit the receipts issued to you.

Do note that you are not required to submit any proof for contribution to the provident fund made on your behalf by your employer, and for medical insurance paid on your behalf. These details will be included by the employer automatically for allowing you deduction under section 80C.

Each employee is entitled to a standard deduction of Rs 50,000 from his or her taxable salary. Employers can also provide their employees with tax-exempt meal coupons up to Rs 26,400, and gift vouchers up to Rs 5,000 annually. Do note that the standard deduction and these allowances do not require submission of any proof from the employee.

It is critical that you submit the income-tax proofs mentioned above within the cut-off dates indicated by employers to avoid any excess deduction of tax or TDS. Employers generally provide a deadline for submission of income-tax proofs sometime in December or January. You may plan your investments accordingly, as well as pre-pay your insurance premiums to claim the tax benefits.

Also, you must review your annual tax calculation done by the employer once the proofs are submitted, so that you can be sure that all your submissions have been included and considered.