Importance of Investment Declaration Form

Investment Declaration Form

At the beginning of the financial year, the salaried persons need to fill up a declaration form and give to their respective employers. This declaration form contains details of all the necessary investments that the salaried person proposes to undertake during the year. Based on this statement, companies give tax reliefs. However, this often is an intimidating paper for a lot of people, especially because it mentions various sections of the Income Tax Act that people are not familiar with.

But filling up this form is a necessity because the individual gets salary on a net basis, that is, after deduction of provident fund amount and income tax. There is a specific way your company calculate the tax liability. The employer first looks at the deductions under different sections that the person is eligible for.

The employer deducts the investments, along with the provident fund to reach the taxable salary. Depending on the income tax slab, your company calculates the tax liability for the year and deducts it every month from the salary.

This is the reason why at the start of the financial year, the employer asks employees to show the tax-saving investments they will be making during the year.

Towards the end of the financial year, the employee has to submit proof of these investments. In case, a person is not able to produce required receipts and statements, a lump sum tax is deducted.

This time when you get the income tax declaration from your HR department, keep the following things in mind.

What Investment Declaration Form Covers?

The first thing the employee has to ensure is that all the areas eligible for tax benefits have been covered in the investment declaration. Just because it is called an investment declaration, does not mean it will only include the Rs 1-lakh deduction available under Section 80C. Even the medical insurance premium paid by the employee will be covered and this comes under Section 80D. Similarly, if there is a donation made, this needs to be mentioned to get the tax benefit under Section 80G.

Finally, if you have an ongoing housing loan, for which you pay an equated monthly installment, then both the interest as well as repayment of the capital should be considered for the investment declaration.

Now there are some important to do for Employer as well Employee.

To do for Employees:

  • Download Investment Declaration Form IDF FormatEnsure that, the declaration form has been submitted to the employer within the month of April of Financial Year.
  • Investment proofs not required at the time of Declaration.
  • Investment proofs as per Investment Declaration Form should be submitted before the date specified by Employer

To do fore Employers:

  • Investment Declaration Form must be circulated to the entire Employee during the month of April.
  • In case of new joinee, Investment Declaration Form must be circulated in the first month of joining.
  • The Employer has to declare the last date of submission of Investment Declaration Form as well as Proof.
  • The employer should ensure that all the relevant supporting as per the declaration form given by the employee is received before the declared date.
  • Investment may be increase or decrease, Employer should be deducting TDS accordingly.

Frequently Asked Questions:

Is Investment Declaration Form necessary to be submitted by a Pensioner?

If a Pensioner’s getting income from new job where his Income is taxable, he will have to submit Investment Declaration Form to his New Employer and his New Employer will deduct TDS accordingly. OR if he getting only Pension as his all income, Investment Declaration Form is not required. Actually Investment Declaration Form is required to deduct tax of a salaried person as per his investment planning.

Whether Pensioner of the age beyond 60 years i.e. senior citizens is also required to follow suit? If yes, to whom it will be submitted? What is the penultimate date for submission? If the pensioner fails to submit for any reason whatsoever, and if his/her income from Pension only comes below threshold quantum of Rs. 2,50,000, whether question of TDS arises ?

The pension paying bank is responsible for deduction of Income Tax from pension amount in accordance with the rates prescribed by the Income Tax authorities from time to time. While deducting such tax from the pension amount, the paying bank will also allow deductions on account of relief to the pensioner available under the Income Tax Act. The paying branch, in April each year, will also issue to the pensioner a certificate of tax deduction as per the prescribed form. If the pensioner is not liable to pay Income Tax, he should furnish to the pension paying branch, a declaration to that effect in the prescribed form (15 H).

And if his/her income from Pension only comes below threshold limit, TDS will not get deducted.

Download Investment Declaration Form Format

Download (XLS, 9KB)

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