The tax filing season is a much-awaited rather dreaded period for the salaried employees and other taxpayers. Taxpayers make all the necessary investments in the current year to take maximum benefits of all the deductions as per the Income Tax Act. This ensures that their tax liability is reduced and at the same time they can make substantial investments to secure their future. These investments have to be declared by the employees in a prescribed format to ensure necessary compliance. Form 12BB is the investment declaration form that has to be submitted by the employees. Given below are the details of this Form 12BB and the related provisions.
What is Form 12BB – Investment Declaration Form?
Form 12BB, as mentioned above, is the investment declaration form that is to be submitted by the salaried employees to their employers. This declaration form has to be submitted by the employee at the time of joining the organization or at the beginning of the financial year.
At the beginning of the year, the employees can provide an estimate of the investments that will be made during the year. These investments need not be exactly the same as declared. They can be more or less depending on the discretion of the employee. The declaration simply helps the employer to deduct the tax from the employee’s salary every month and deposit it with the Government as per the compliance of TDS laws under the Income Tax Act, 1961. The employee will have to eventually provide the proof of the investments actually made at the end of the year.
How to fill Form 12BB?
Here are the steps to fill Form 12BB:
- Download Sample Form 12BB: You can download the sample Form 12BB from the Income Tax Department website.
- Add Personal Details: Fill Personal Details i.e, Add your Name, Address, and PAN details. Also, mention the current financial year i.e 2020-2021.
- Add house rent allowance Details: If you are incurring house rent expenses and claiming HRA exemption, then you need to provide details of rent paid to the landlord.
- Add LTA Details: If you are claiming Leave Travel Allowance (LTA), then you need to provide details of travel expenses incurred by you and your family members.
- Enter Details regarding Interest on Loan for Borrowings: If you have taken a loan for a house or education, then you can claim tax benefits on interest paid on such loans.
- Add Chapter VI-A Deductions: You can claim deductions under Chapter VI-A of the Income Tax Act by providing details of investments made in LIC, PPF, NSC, etc.
What is the need for Form 12BB?
The Income Tax Act provides many types of deductions and rebates to the taxpayers based on various investments made as well as some major expenses like home loans, etc. These deductions reduce the ultimate tax liability of the taxpayer. Providing this necessary information to the employer helps in determining the tax to be deducted from the salary of the employee and lets the employee know the final in-hand salary available to them each month.
The rule of thumb, in this case, is the higher the investment declarations, the higher the deduction which ultimately results in lower tax deducted from the salary and more take away salary for the employee each month.
The only condition to avail such benefit is the timely declaration of the investments in the prescribed Form 12BB at the beginning of the year.
What is the information needed in Form 12BB?
Form 12BB starts with the basic information of the employees like their name and address as well their PAN number and the financial year for which the investment declaration is being submitted. Furthermore, Form 12BB comprises four main categories of declarations that need to be provided by the employees. These categories and the details required to be submitted are explained below.
1. House Rent Allowance
HRA is one of the many components of salary that is provided to the employee as per the terms and conditions of the employment. The information needed to be provided in this regard is,
- The total rent paid to the landlord
- Details of the landlord
- Name of the landlord
- Address of the landlord
- PAN of the landlord
It is to be noted that the PAN of the landlord is mandatory to be furnished in case the total rent for the year exceeds Rs. 1,00,000.
2. Leave Travel Concession or Assistance
Under this declaration, the employee has to furnish the details of the leave travel allowance given to the employee and the actual expenditure incurred by the employee in this regard. All the claims for this concession or assistance have to be supported by detailed documentary evidence to the satisfaction of the employer and competent IT authorities.
3. Deduction under the Head ‘Income from House Property
The third part of Form 12BB deals with the expense towards the interest paid for the home loan taken by the employee if any. The details required to be submitted include,
- The total interest paid to the lender
- The details of the lender
- The name of the lender
- The address of the lender
- The PAN of the lender along with that of the financial institutions, employer, and other relevant parties
Deductions under Chapter VI-A
This is the final and also the most used declaration under Form 12BB. It requires the employee to provide the details of the deductions under various sections like Section 80C, Section 80 CCC, Section 80CCD, and other sections from the Chapter VI-A
Finally, the employee will have to provide a declaration that the information submitted is correct and complete and will have to sign the Form along with further details like date and place of signature and their full name and designation.
What is the format for Form 12BB?
Before 2016, there was no set format for investment declaration to be followed by the employees. However, now there is a set format to be followed by the employees for making investment declarations. This format for Form 12BB is given below.
Form 12BB is an important document that has to be submitted by the employees to ensure that their tax deducted is not too much which will limit their take-home salary. A continuously reduced take-home salary will put a financial strain on the employees making it difficult for them to meet their financial obligations. The employees can get a refund of the extra tax paid after the assessment of the return but the refund processing may take time. Hence it is essential to make a timely declaration of the investments and the expenses in Form 12BB to meet the necessary tax compliance as well as reduce the tax incidence.
The maximum deduction available under section 80C is Rs. 1,50,000
No. The supporting proofs for the investments declared are necessary for them to be valid. If the employee fails to provide documentary evidence for the investments and expenditure claimed, the same will not be entertained or accepted by the IT Department and the tax would be levied on the salary not deducted earlier.
Form 12BB has to be submitted to the employer at the start of the financial year or at the time of joining the organization.
Yes. the employee needs to provide the PAN of the landlord as the total rent for the previous year exceeds Rs. 1,00,000.
Form 12BB is the adhoc declaration or the general idea of the investments to be made by the employee during the financial year. If the employee declares higher investments and expenditure, it will result in lower tax being deducted from the salary. However, if such declaration is not supported with the correct documentation, the employee will have to pay tax on the excess amount declared on which TDS was not applied.