Income Tax: At the beginning of every financial year, companies ask their employees how much tax savings they are going to invest in the financial year. Then, companies are asked to submit proof of the same at the end of the calendar year. After receiving the investment proof, the finance department starts deducting tax from the employee’s salary.
Income Tax: Income Tax Department has recently given a full page advertisement. In this, taxpayers have been advised not to claim fake deductions and exemptions. This advertisement has come when private companies are asking for investment proof from their employees. Most companies have sent mail to employees. It has been said that the proof of investment made in the financial year 2023-24 should be sent to the Finance Department by January 15. To claim deduction on children’s tuition fees, it is necessary to send proof of fee payment to the finance department of the company.
Employers ask for investment plan in April
At the beginning of every financial year, companies ask their employees how much tax savings they are going to invest in the financial year. Then, companies are asked to submit proof of the same at the end of the calendar year. After receiving the investment proof, the finance department starts deducting tax from the employee’s salary. He deducts tax from the salary in equal installments in three months from January to March. This is called Tax Deducted at Source (TDS).
Proof is required to claim most deductions
It is necessary to submit proof to avail most of the deductions and exemptions. “Employees are required to provide proof of deductions and exemptions to avail them,” said Neeraj Aggarwal, partner at accountancy firm Nangia Andersen India. There are some deductions for which proof is not necessary. Standard deduction is an example of this. Apart from this, proof of contribution made in Employees Provident Fund and National Pension Scheme (NPS) is not asked from the employees. The reason for this is that the employer transfers them directly from the employees’ salary.
You will not get the benefit of deduction if proof is not given.
Aggarwal said that HRA, LTA, housing loan interest, children’s tuition fees, life insurance policy, tax savings scheme of mutual funds are such examples for which proof is necessary. He said that if proof is not given then the benefit of deduction in TDS calculation will not be available. This will increase the tax liability of the employee. However, if for some reason you are not able to prove the amount despite investment, you will still get the benefit of deduction. But, this will be available only when you file the income tax return. After this the refund process will start. This may take some time.
Loss due to claiming LTA directly in ITR
Aggarwal says that the situation is a little different in the case of Leave Travel Allowance i.e. LTA. Since, this facility is available only from the employer, due to which the Income Tax Department may ask questions from you if you do not give the document to the employer and claim it directly in ITR. To claim HRA, employers ask for rent agreement, rent receipt, proof of TDS deduction and PAN of the landlord from the employees. He said that different employers may ask for different documents to claim the same deduction.
Income tax department notice on giving fake documents
The most important thing is that it is wrong to give fake documents to avail the deduction. Now the Income Tax Department uses advanced technology like AI scanners. With this, he easily detects fake documents and income not disclosed in ITR. In such cases he sends notices to the taxpayers. Many times the taxpayer has to pay penalty or interest on tax.
