It is that time of the year where you, as a salaried tax payer, have to submit Income Tax Investment Proof in order to avoid excess tax deduction. If you miss out on this, you may have to go through the herculean task of claiming the tax refunds. Submitting the required proof to the employer, within the time limit, is the sole responsibility of the employee.
Therefore, there are certain things that you should consider before submitting your investment proof to your employer in time. Let’s proceed with 5 important things that you need to know before going ahead with the submission of all the proof:
Ensure that you submit the bills for your reimbursement claims
There are certain perquisites which are exempt under the Income Tax Act only if you submit the proof of actual expenses to your employer, like telephone reimbursement, reimbursement on books and periodicals, research allowance, etc. “Unless you submit the proof of the related expenses to your employer within the given time, these will be considered to be taxable allowances in your hand and you may not be able to claim exemptions while filing the tax return. Hence ensure that you submit the proof of these tax deductible expenses to your employer,” says Chetan Chandak, Head of Tax Research, H&R Block India.
Submit the details of Previous Employment Income to the Current Employer
March is the month where you can sort out your taxes. If you have worked for two or more employers in the current financial year, it is necessary that you report the income from all your previous employers to your current employer. This will help you to avoid paying any additional taxes and interest thereon. It so happens, that every employer calculates the tax liability on the basis of the salary paid by them without taking into account the salary paid by the previous employer. This results in short payment of taxes and excess claim of exemptions and deductions from both the employers.
Do not think that you can avoid taxes if you don’t report this income in your return. The Income Tax Department is fully aware of the income that you have earned from all your employers and it is in your best interest to share these details to your current employer as well as in your Income tax returns.
Educate yourself on Tax Deductible Personal Expenses and keep tab on it
If there is something worse than paying tax, it is the fact that you are paying more tax than is due on your account. You can easily save yourself from paying extra tax, by taking full advantage of personal expenses and investments which you may overlook. This is very much possible if you know which of your personal expenses and investments can fetch you tax deductions. “Once you have basic understanding of this, then you should also track these expenses and save the proof of it to be submitted to your employer. For example, ex. insurance premium receipts, PPF challan, school fees receipts for your kids, ELSS payment receipts, medical bills, attire bills, telephone bills, donations, travel tickets for LTA, etc,” informs Chandak.
Declaration of Additional Income to the employer to avoid penal interest
You might not be aware, but declaring your other income to your employer can work to your advantage. Other income can be in the kind of rentals from your property, interest on your fixed deposits, etc. If you declare these incomes to your employer, they can then deduct and pay the taxes on your behalf. “The important point to note here is that you may be liable to pay advance tax in respect of such additional income in four quarterly installments. Further, if you have not done this you may be liable to pay interest at 1% p.m. on the quarterly shortfalls. But the benefits of declaring this ‘other income’ to your employer is that they will calculate the due taxes on such income and pay it in the form of TDS. This will save you from the interest for default in payment of advance taxes,” says Chandak.
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Do remember to submit the Proof of TDS on Additional Income
The next important point to note is that if you have declared your other income to your employer, you should also ensure that you submit the details of tax deduction on such income to your employer. Else your employer will deduct the taxes due at full rate and this will result in you paying excess taxes.
Hence educating yourself a bit about taxes and tracking your expenses can go a long way in saving the taxes and avoiding the hassle of claiming the refund for excess taxes paid.