Many companies are sending emails to their workers asking them to provide proof of any tax-saving investments or expenses. If you want to save on taxes, it’s crucial to send these proofs quickly! If you don’t, your company will deduct the full amount of tax from your salary without considering your possible savings.
At the beginning of the financial year, your employer tries to estimate how much tax you will owe based on your full salary. If you tell them about your planned tax-saving investments, they can adjust the tax deductions each month. But, in the last quarter of the financial year (between January and March), you need to send your final proof of these investments. If you don’t, your employer will withhold full tax from your salary.
Employees who choose the old tax method must submit proof to claim tax benefits. If you’re on the new tax method, you don’t need to show any proof since most tax-saving options aren’t available in this plan.
Here are some common things you need to submit proof for if you’re on the old tax method:
a) House Rent Allowance (HRA): If you pay rent, you must show your rent agreement and rent receipts. If you pay more than Rs 1 lakh in rent in a year, you also need your landlord’s PAN.
b) Section 80C Deductions: You can deduct up to Rs 1.5 lakh from your total income for eligible investments. These include things like PPF, EPF, ELSS mutual funds, life insurance, and school fees.
c) Health Insurance: You can claim up to Rs 1 lakh for health insurance premiums for yourself and your parents.
d) Home Loan Interest: If you’re paying off a home loan, you can claim a deduction of up to Rs 2 lakh on the interest amount.
e) NPS Contribution: You can also claim an extra Rs 50,000 for investing in the National Pension System (NPS).
If you’re on the new tax method, you don’t need to provide proof since it doesn’t allow many deductions. But, you can still claim a standard deduction of Rs 75,000 and up to 14% of your basic salary for your employer’s contribution to your NPS.
You can switch between tax methods at the time of filing your tax return, but it might be difficult to change it during the financial year if your company doesn’t allow it.
Remember, if you don’t send your investment proofs to your employer, they will deduct full tax amounts from your salary. You can still claim deductions when you file your tax return later, but some deductions, like Leave Travel Allowance, must be processed through your employer. Submitting your proofs on time helps you avoid paying extra taxes and reduces chances of future tax-related troubles.
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