Simplifying Tax for C.A's and Taxpayers

Form 12BB: New Form to claim tax benefits for LTA, HRA, Home loan interest and Sec 80 deductions

Form 12BB: New Form to claim tax benefits for LTA, HRA, Home loan interest and Sec 80 deductions

As an employee, at the beginning of every financial year or while joining the company you have to submit ‘Income Tax Declaration’ to your employer.  This is a provisional statement that has details about your proposed investments and certain expenses against allowances that have allowable exemptions under Income Tax law. Usually, this will be available on company’s portal.

Employers need this information to arrive at your net taxable income after considering these investments, expenses like HRA and other tax saving options. Based on this, employers calculate the tax payable by you. This tax liability of yours will be deducted from your salary on the monthly basis and deposited with IT Department.

As the financial year-end approaches, like in the month of January, your employer asks you to submit the proof of such investments or expenditure for deductions. Based on this actual proof, they recalculate the income tax liability and adjust tax accordingly.

Till date there has been no standard format or template available for furnishing the investment details or expense proofs.

But with effect from 1st June, 2016, to claim income tax deductions, you need to submit Form 12BB to your employer.

What is Form 12BB all about?

Vide Notification No. 30/2016 dated 29-04-2016, CBDT has inserted new income tax rule 26C which requires every employee to furnish evidences of claims/deductions for salary TDS purposes in Form 12BB.

This newly specified form 12BB requires proofs to be submitted for tax benefits being claimed around

  1. house rent allowance (HRA),
  2. leave travel assistance (LTA),
  3. housing loan interest and
  4. financial savings.

Why Form 12BB has been introduced?

It’s not that employees were not furnishing information relating to claims and associated evidence to employers for deciding the tax deduction at source. The purpose to introduce Form 12 BB is just to provide a standard statutory format, spelling out the format of declaration and the details of evidence required to support the claims.

By specifying a statutory form, it is expected that now only genuine claims of tax benefits will be entertained and the employee will resist from making any false claims via fake bills.

Also, a kind of consistency in respect of the tax benefits being claimed can be expected.

What are the evidences or particulars prescribed in rule?

Following are the evidences prescribed in the rule for claims/deductions:

S NoNature of claimEvidence or Particulars
1.House Rent AllowanceName, address and PAN of the landlord if the total rent paid in the financial year is more than Rs 1lakh
2.LTAEvidence of expenditure
3.Deduction for interest on home loanName, address and PAN of the lender.
4.Deduction under section 80 (chapter VI-A of the income tax act)Evidence of investment or expenditure

Though no specific documentary evidence has been prescribed under the rule, but following are generally considered to be the required evidence to support the claim.

S NoNature of claimDocumentary proof
1.House Rent AllowanceRent receipts or rent agreement
2.LTATravel bills, boarding pass, tickets etc.
3.Deduction for interest on home loanBank certificate or provisional statement showing principal and interest details.
4.Deduction under section 80 (chapter VI-A of the income tax act)Investment /expense proof

From where, Form 12BB can be downloaded?

Form 12 BB can be downloaded using the following link:

http://www.incometaxindia.gov.in/forms/income-tax%20rules/itrform12bb.pdf

Remember below points-

  • You have to use Form 12BB only if you are claiming deductions. Otherwise, it is not mandatory to use while filing IT return.
  • Still there is no need to attach proof while filing IT return. But it is mandatory to show the proof to your employer.

 Other important links:

The entire notification can be reached to using the following link:

 http://www.incometaxindia.gov.in/communications/notification/notification30_2016.pdf

Missed your income tax proof submission deadline..Still you can save tax

Missed your income tax proof submission deadline..Still you can save tax

Many of us, due to work pressure or for other reason, forget to submit proofs for investment made for tax purposes or for claiming deductions or reimbursements to the employer. Even sometimes, we do invest in tax saving investments near the year end which we realize later is generally past the income tax proof submission deadline. Result: Employer deducting higher taxes.
Read More

Understanding MCLR

Understanding MCLR

Seeking a Loan? Welcome to the new interest rate regime from April 2016. There has been a lot of buzz in the news about this system to calculate interest rates for loans. We here, have made an attempt to explain the same to you in an easy manner.

Read More

ESOP: An Introduction

ESOP: An Introduction

ttt

Definition under Companies Act:

Sec 2(15A) defines employee stock option as

“option given to the whole time directors, officers or employees of a company which gives such directors, officers or employees, the benefits or right to purchase or subscribe at a future date, the securities offered by the company at a predetermined price.”

Above definition can be analyzed to conclude that ESOP involve granting some ownership stake in the company to employees (some or all)  in the form of options at reduced price than what prevails in the market. The personnel can exercise the options only after the vesting period elapses. Read More