Income tax return for financial year 2024-25: Employers are now requiring salaried employees to submit documentation of tax-saving investments and expenses if they wish to reduce their tax liability. These documents are essential to prevent full tax deduction at source (TDS) from your salary.
Most employees typically have until March to submit their tax relief forms, but it’s beneficial to do so sooner rather than later. Until documentation is submitted, your employer will deduct the full amount of the tax from your paycheck without considering any tax-saving investments. Tax experts point out that not all employees are required to submit investment documents.
Which salaried employees are required to provide proof of investment?
On who has to submit proof of investment to avoid full payroll tax, Prakash Hegde, a practicing chartered accountant, told ET, “Employees who choose the old tax system will need to provide proof of investment to claim exemptions and deductions through their employer.” Employees who choose the new tax system will need to know that most exemptions and deductions are not available under the new tax system. Therefore, there is no need to submit a certificate. ”
The Income Tax Act, 1961, the former tax system, provides various tax exemptions and deductions that individuals can claim to reduce their total taxable income. This reduction in taxable income leads to a subsequent reduction in income tax burden.
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If you chose the old tax regime at the beginning of the financial year, you will need to provide proof of investment to claim the tax savings. Here is a comprehensive list of common deductions and their required documentation:
Tax credits available under the new income tax regime
The new income tax regime allows taxpayers only two deductions and eliminates the need to submit investment documentation. These include a standard deduction of Rs 75,000 from salary/pension income and deduction of up to 14% of basic salary towards employer NPS account contributions.
According to a CBDT statement dated August 2, 2024, “72% of taxpayers have opted for the new tax system, while 28% continue to follow the old tax system.” Employees do not need to provide documentation for these two deductions.
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Payroll TDS tax option flexibility
In theory, employees could change their tax election for TDS during the financial year, but organizations may resist such changes due to administrative complexities, including TDS adjustments and documentation requirements. is common.
The tax system allows you to switch regimes and choose a more favorable option while filing your ITR. For the 2024-25 financial year, taxpayers must file their returns by July 31, 2025. Late filings will only be accepted under the new tax regime.
It is essential that you file your return by July 31 to maintain the option of choosing the old tax regime. Additionally, maintaining comprehensive documentation of exemptions and deductions is critical to addressing potential inquiries from tax authorities during the verification process.
