Everything to know about Form 12BB — Investment Declaration Guide

At the outset of every tax filing period, your employer’s human resources (HR) department will request information about any of your investments that qualify for tax breaks. They need this information to compute your tax deductions at source (TDS) details. An investment declaration allows you to lower your tax burden while increasing your take-home pay. If you are wondering how to disclose your investment, Form 12BB of income tax will come in handy.

What is Form 12BB?

Form 12BB is basically a declaration statement detailing the many claims you have filed to obtain tax benefits. The form applies to salaried employees only. According to the Indian Income Tax rules, filing this form is mandatory if you want to receive tax rebates on your investments. You need to submit this form to your company’s HR at the end of every financial year.

Form 12BB purpose

The Income Tax Act authorises your employer to offer you tax benefits for your investments and deductible expenses made during a financial year. The employer deducts the tax from your monthly salary depending on the declarations provided on Form 12BB.

This form serves as a foundation for TDS computation for salaried employees. However, you will not be eligible for relief from TDS if you fail to submit this form.

What information is required on Form 12BB?

Form 12BB requires the following information:

• Your personal details such as name, address, and PAN details
• House rent allowance
• Leave travel allowance
• Interest on home loan
• Deductions available under Chapter VI-A of Income Tax

What investment declaration can you make in Form 12BB?

• House Rent Allowance (HRA)

1. HRA is a type of allowance your employer provides to cover the cost of your rented accommodation. The HRA exemption is addressed in Section 10(13A) and Rule 2A of the income tax act.

• Things you need for claiming HRA tax benefits
• The actual amount of rent paid
• Landlord’s name and address
• PAN details of your landlord if the rent you have paid during the year is more than Rs 1 lakh.
• When can you claim HRA?
• Leave Travel Allowance

1. A Leave Travel Allowance (LTA), sometimes referred to as Leave Travel Concession, is an allowance provided by your employer you can use when going for a vacation. The LTA amount varies for each employee within the same organisation and is based on their hierarchical rank.

• Documents required for claiming LTA

1. You might need to provide any or a few of the following documents to claim LTA tax benefits:

• Boarding pass
• Flight tickets
• Sales invoice from the travel booking agent
• When can you claim LTA?
• Maximum fare eligible for tax exemption under LTA:

1. Mode of Transportation
2. Exemption Limit
3. Airway
4. National carrier’s economy class fare for the shortest route to your destination or the actual amount spent, whichever is less.
5. Railway
6. Rail ticket charges for the first-class AC for the shortest route to your destination or the actual amount spent, whichever is less.
7. Bus
8. Bus fare for the deluxe class for the shortest route to your destination or the actual amount spent, whichever is less.

Confused between Income Tax and TDS? Know the Differences!

Home loan Interest

Details and documents required to claim tax benefits under this subhead:

• Interest paid or payable to the financial institution during the financial year
• Name, address, and PAN details of the financial institution from where you have availed the loan
• Possession certificate or proof of construction completion
• Self-declaration certificate stating whether the house is occupied or rented
• Loan statement

When can you claim tax exemption on home loan interest payments?

Maximum exemption limit for home loans:

Tax benefits on interest payment (i) In the case of a self-occupied house

(ii) In the case where the property is let out

• Maximum interest deduction of Rs 2 lakh.
• If you paid more than Rs 2 lakhs in interest, you could carry forward the excess to set off in subsequent years.

Tax benefits on principal repayment

List of deductions under Chapter VI-A of the Form 12BB

What should be considered before completing Form 12BB?

Take Advantage of Lesser Known Income Tax Deductions

Conclusion:

Form 12BB is a crucial form for salaried employees. It serves as the foundation for your employer’s TDS computation. You can declare your investment along with various allowances that are part of your salary to reduce your tax liability. It is better to prepare this form in advance along with the required document proofs for a given financial year. Otherwise, you might need to apply for excess tax refunds when filing your income tax.

Originally published at https://www.herofincorp.com.