If you have invested in tax-saving products during the year, it is essential that you submit your investment certificate to your employer in order to claim deductions for those investments.
For the uninitiated, salaried employees are supposed to inform their employers about the investments they made in tax-saving financial products during the year. And December is usually the month when employers will ask for proof of the investments you claimed to have made.
Here are five things to remember:
1. Old tax regime: It is important to note that these tax credits are only allowed if you choose the old tax regime. The new tax system also provides certain tax deductions listed here.
2. Regime change: It is important to note that taxpayers can change from the new tax system to the old tax system. However, this cannot be done within the fiscal year. You need to continue with the regime you chose at the beginning of the year.
3. Tax-saving instruments: There are only a limited number of tax-saving instruments that you can invest in, and only up to a certain threshold.
For example, if you invest up to INR1.5 million in certain financial instruments like PPF, NSC, ULIP etc., you will be entitled to income tax exemption under Section 80C of the Income Tax Act.
4. Changing jobs: When changing jobs, it’s important to tell your employer not only the income you earned in your previous job, but also the deductions you claimed there. Otherwise, you’ll have to pay tax on any additional credits you claimed when you file your July tax return.
“By the time they file their tax return in July, it is not uncommon for some salaried workers to find that they have claimed income tax (IT) exemption in two separate installments. For different employers,” said Chirag Chauhan, CA. Chartered accountant based in Mumbai.
5. Failure to provide proof of investment: To understand the timeline, you must first declare to your employer the investments you plan to make during the year. Then, towards the end of the year, you will need to submit proof of your investments, otherwise your employer will deduct your TDS by including the income you have already invested.
As a result, the salary in hand for the end of the year, that is, February and March, will be significantly reduced. Therefore, to avoid any unpleasant situations, it is necessary to submit the investment certificate on time.
