What is an income tax declaration?
An income tax declaration is a document employees submit to their employer that details their total income, expenses, and eligible tax-saving investments. It includes proof of investments in schemes such as PPF, life insurance, and annuity plans, along with details for claiming exemptions on allowances such as LTA and HRA, and on home or education loan interest.
This declaration helps the employer calculate the correct TDS based on the employee’s taxable income. By submitting it, employees can claim tax benefits and lower their tax liability. Employers typically deduct TDS in January or February or as per their internal schedule. Employees can also use Form 12BB along with the income tax declaration to plan their investments efficiently.
Here is an example for better understanding:
Mithilesh is an employee at a government bank in India. In this tax declaration form, Mithilesh quoted ₹20,000 investments in a tax-saving mutual fund. He has also declared that he would be paying ₹30,000 as a premium towards his life insurance policy. Hence, the bank will calculate the annual tax liability of Mithilesh by deducting ₹50,000. The remaining annual income will be taxable. The tax amount will be divided by 12, and the same will be deducted every month from this salary.
Why is the tax declaration form important?
An income tax declaration is essential for accurate tax calculation.
Under Section 192 of the Income Tax Act, 1961, employers must deduct Tax Deducted at Source (TDS) from the salary of their employees each month. To calculate this correctly, employees must submit an income tax declaration to their employer. This document lists tax-saving investments and eligible deductions, such as HRA, life insurance premiums, housing loan interest and principal, and tuition fees for children.
Without this declaration, the employer may deduct higher TDS, resulting in excess tax payments during the financial year. Submitting it helps prevent discrepancies between actual and projected income, reducing the risk of notices or adjustments later.
Employees submit this income tax declaration at the start of the financial year, along with supporting documents like Form 12BB. Accurate and timely submission simplifies filing the income tax return, avoids refund delays, and maintains compliance with statutory requirements for salaried individuals in India.
What is Form 12BB? 3
To prove the declarations made in a tax declaration form, a salaried employee needs to submit Form 12BB. The employee can claim tax benefits and a rebate on expenses and investments by submitting the Form 12BB to their employer. Usually, Form 12BB is submitted at the end of a financial year. Form 12BB supports the investments and expenses made by salaried employees, which are eligible for tax deductions. The documentary evidence of the investments must be submitted by the end of the financial year. Therefore, both the documentary evidence and the Form 12 BB are essential documents that have to be submitted.
How can you file a tax declaration form? 3
This section explains how a salaried employee fills out the necessary declaration form and Form 12BB. Follow the steps mentioned below to accurately submit your income tax declaration.
Step 1: File online or offline, depending on your company
You need to submit the form to your employer. It can be filled in physically and then submitted online or offline, depending on your company’s internal policies.
Step 2: Download Form 12BB
You can download Form 12BB and take a printout of the same.
Step 3: Fill out the form
Please carefully fill in the required details on the form. It may ask for a house rent allowance, LTA, etc. Understand your CTC structure to check if HRA and LTA are part of your package.
Step 4: Submit to your employer
Please re-check the details entered and sign the document. Then, you need to submit the Form to your employer.
For reference purposes, you may keep a copy of Form 12BB with you. Click here to download the 12BB form and carefully go through the steps on how to fill out the income tax declaration form.
What happens if you invest less than what's mentioned in the tax declaration?
A tax declaration form is financial planning done by an employee. You mention the investments you intend to make in a financial year. However, what if you end up investing less or more than the amount mentioned in the declaration?
If you fail to present investment documents, your tax-saving calculations will be termed as inaccurate. The employer will again calculate your tax liability based on the actual investments made. If you invest more than the declared amount, you can claim the amount while filing the income tax returns (ITR).
What investments can you mention in a tax declaration form?
There are certain investments that you can mention in the tax declaration form. These include:
Interest on the home loan 3
If you have an ongoing home loan interest, you may mention the same in Form 12BB. Additionally, you may also have to submit an interest certificate to your employer. The certificate can be collected from the lending bank.
Disclaimer: The above exemption is available only under the old tax regime.
House rent allowance (HRA) 2
The house rent you pay can be declared in the tax declaration in form 12 BB. The landlord's name, address, rent paid and PAN or Aadhaar Number of the landlord must be mentioned. The requirement for submission of PAN or Adhaar Number is only if the rent paid in the previous year is more than ₹1,00,000.
Disclaimer: The above exemption is available only under the old tax regime.
Health insurance premium
You can claim deductions for health insurance premiums under Section 80D (under the old tax regime) in your income tax declaration. You can claim up to ₹25,000 for premiums paid for yourself, your spouse, and your dependent children. If you or your spouse is a senior citizen, the limit is ₹50,000.
When premiums are paid for your parents, an extra deduction of up to ₹25,000 (₹50,000 if either parent is a senior citizen) is available. Payments for preventive health check-ups are allowed up to ₹5,000 within the total limit. 1
Disclaimer: These deductions are separate from the ₹1.5 lakh limit under Section 80C and are available only under the old tax regime.
Other investments
Some other deductions can be availed under various Sections of the Income Tax Act of 1961, such as:
Section 80C
Premium paid for life insurance policies or investments in mutual funds are a few examples amongst the others on which deduction is available under 80C section, subject to the provisions of the Income Tax Act, 1961.
Section 80CCD 5
Contribution made in the National Pension Scheme (NPS)
Section 80E 6
Individuals who have taken a loan for themselves , their spouse , children or a student for whom they are a legal guardian can avail deductions under this section . The deduction is available on the interest of loans taken for higher studies and is subject to other provisions as mentioned under the section.
Section 80G 7
Tax benefits against donations to specific relief funds and charitable organisations.
Disclaimer: The above deductions are available only under the old tax regime.
Key Takeaways
- Submit your income tax declaration at the start of the financial year to avoid excess TDS deductions and cash flow issues.
- Always support your declared investments and expenses with valid proofs and Form 12BB to accurately claim tax benefits.
- Review your actual investments before year-end and update your declaration if needed. It can prevent refund delays or tax mismatches when filing your ITR.
Conclusion
Submitting your income tax declaration allows accurate TDS computation and smoother payroll processing. It also prevents end-of-year tax mismatches and compliance issues. Verify each investment proof, deduction, and exemption before submission to align with Form 12BB requirements and claim all eligible benefits within the same financial year.
FAQ
1. What is the purpose of the tax file declaration form?
A tax declaration form serves to notify your employer about your tax-saving investments. This helps them accurately calculate your tax liability and deduct the appropriate Tax Deducted at Source amount from your monthly salary.
2. Who is exempted from IT Return? 10
If you earn below the taxable income threshold, you are exempt from paying income tax. Under the old tax regime, the exemption limit is ₹2.5 lakh per annum, while under the new tax regime, it is ₹3 lakh per annum.
3. Who is eligible for a tax declaration?
Salaried employees earning taxable income must file tax declarations to their employers for TDS calculation, detailing investments and deductions under Sections 80C, 80D, and others. Furthermore, other deductions need to be declared in Form 12BB at the beginning of the financial year.
Note: These deductions will be available only under the old tax regime.
4. How much income is tax-free?
Under the new regime (FY 2025-26), income up to ₹12 lakh is tax-free due to the rebate under Section 87A, plus the ₹75,000 standard deduction for salaried taxpayers. Under the old tax regime, a resident individual can claim a rebate under Section 87A only if total taxable income (after deductions) is ₹5 lakh or less. Furthermore, the standard deduction for salaried taxpayers is ₹50,000.2 3
5. What happens if the tax declaration is not done?
If the income tax declaration is not submitted, employers may deduct higher TDS without deductions. While you can claim refunds while filing ITR, your monthly take-home salary decreases.
References:
- https://incometaxindia.gov.in/_layouts/15/dit/pages/viewer.aspx?grp=act&cname=cmsid&cval=102120000000073092&searchfilter=&k=&isdlg=1
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