Tax Saving Tips: Know Why You Should Submit Supporting Documents To Save Tax

It is important to note that some deductions and exemptions can only be claimed if they get routed through an employer.

Did you submit all the necessary proof in order to claim deductions and exemptions to your employer under various sections of the Income Tax Act? If not, then you may be already late. Employees are typically asked to submit such proofs by mid-January so that the final tax deduction at source (TDS) can be adjusted in the salary of the last three months of the financial year.

In case you are not sure whether to submit the proofs or not and feel it's not that significant since the deductions can be claimed at the time of filing a tax return, then you may be mistaken. It is important to note that some deductions and exemptions can only be claimed if they get routed through an employer.

Hence, it is necessary to submit the proof to your employer at the earliest to ensure that you don't miss out on any tax benefits you are eligible for. Even if your employer may not accept your request, it is still advised that you try to convince them if there are claims that cannot be claimed directly.

 LTA and HRA

If you fail to provide the necessary information regarding expenses or specified allowances to your employer within the given timeline, they may claim such eligible expenses or allowances at the time of filing tax returns.

It is important to ensure that employees have all the documentary evidence of the incurred expenditure in case of any tax proceedings, where such claims may need to be substantiated.

But remember that it would be difficult to claim some allowances, such as Leave Travel Allowance (LTA), where the onus for deduction of tax is on the employer on submission of proof by the employee, according to a financial expert.

Such an allowance is paid by employers to cover the travel expenses of employees who are on leave, with or without their families. It is a part of the employee's Cost to the Company (CTC) and is given as a tax-free annual benefit, although it can be claimed on a monthly basis.

In order to claim LTA, employees must provide documentary proof, such as tickets or boarding passes along with a completed declaration form. If an employee is unable to travel for any reason, the LTA amount is subject to tax.

Also, note that in case of claims related to House Rent Allowance (HRA), employers play an important role. Employers will ask to provide a rent receipt containing the name, address, and PAN of the landlord if the aggregate rent paid during the previous year exceeds Rs 1 lakh. After the information is shared, employers allow claims for HRA.

Tax-saver investment proof

Under section 192 of the Act, employers determine their employees' yearly taxable income and deduct the appropriate TDS from their monthly salaries in a proportionate manner.

To arrive at the yearly taxable income, employees are required to provide details or make a declaration of their investments and expenses that qualify for tax deductions at the beginning of the year.

At this point, it is just a declaration and it is expected that the employee will submit the supporting documents during the year. An employee must provide evidence of investments to the employer before the end of the financial year showing eligibility for those deductions.

In failure to submit any proof of investments and expenses, it will be deemed that the employee has not incurred these expenses nor made these investments. “In such cases, “the employer will recalculate the TDS for the year and deduct additional TDS,” according to financial expert Vivek Jalan, Partner, Tax Connect Advisory as quoted in Moneycontrol. This may result in a higher TDS deduction for the remaining months of the financial year.

Submit investment proofs to avoid penalty

It is important to note that the employer is not required to submit any proof to the tax department unless specifically asked for. The income tax department goes with the deductions and exemptions allowed by the company to employees. It is upon the employer to verify the authenticity of the claims made by the employee based on the documents submitted.

However, if an employee submits fake proof, the employer is not held liable. If it is found that the proof submitted by the employee is fake and the employee has claimed undue tax benefits, it can attract a penalty.