Investment declaration 2022-23: HRA, LTA/LTC, NPS

Make sure you are prepared for your investment declaration for FY 2022-23 and claim your tax deductions fully.

Claim these tax deductions with your investment declaration in FY 2022-23

An investment declaration is a form or statement wherein you provide the details of your expenditures and investments that qualify for an income tax deduction. So, before you fill it up, plan carefully as you will be required to submit the supporting investment proofs at the end of the financial year.

Important components of investment declaration

  • House Rent Allowance (HRA)
  • Leave Travel Concession or Allowance (LTC/LTA)
  • Interest paid on home loan
  • Deductions under various sections of the IT Act (including 80C, 80CCC, 80CCD, and 80D)

Also Read: Form 12BB: Investment Declaration 101

Why is the investment declaration important?

According to Income Tax law, a business concern is required to deduct tax at source on the ascertained pay of the employees regularly.

As per the Union Budget 2020, a new assessment system was presented with lower tax rates but with fewer allowances and exclusions. Therefore, employees got the chance to rethink and select the best system according to their pay. This way, they can lessen their tax burden. To make the most of your tax investments, it is crucial that you don't miss out on the annual investment declaration. The accounts team deducts your calculated tax liability from your salary based on your investment declaration.   

Investment proof for investment declaration

The original documents that the employees submit before the end of a financial year to receive the income tax deductions as per the rules provided by the Department of income tax constitute the investment proof. Investment proof helps you in tax savings. Employers generally retain these documents furnished by employees for seven years for Income Tax scrutiny notice.

Also Read: Time To Submit Investment Proofs? Here's The Guide

Important tax-saving investment or expenditure proofs

  • Section 80C - Investments like life insurance policy premium payment receipt, PPF, NSC, ELSS, ULIP, principal repayment of home loan, etc.
  • Section 80D - Health insurance premium paid
  • Section 24 - Interest on home loan
  • Section 80G - Donations to notified organisations
  • Section 80E - Interest paid on education loan
  • Section 80EE - Home loan interest payment for first-time buyers
  • Section 80EEB - Interest on loan for electric vehicle
  • Section 80GG - Rent deduction if the salary doesn't include House Rent Allowance
  • Section 80TTA - Interest received on savings bank accounts
  • Section 80 CCD 1B and 80 CCD(1) - National pension scheme (NPS) payment 

Mistakes to avoid during submission of investment declaration

  • Do not leave things till the last minute and run the risk of errors. Keep your plan for your annual investment ready at the start of the financial year.
  • Never forget to keep photocopies of the investment proof in case of a manual payroll system. If it is automated, these can be digitally stored.
  • Be sure to submit the expense reimbursement bills or invoice, or else an equivalent part of your compensation will be taxable.
  • Inform the employer about any future investment for tax allowance.

Also Read: How Does Insurance Help You Save Tax?

After the end of the financial year

By May or June of the following year, you will receive a Form 16 that captures the records of all the income received along with the TDS credited. This document is the reference point for the tax already deducted vis-à-vis the tax you are supposed to pay. 

A tax investment declaration is important if you want to save taxes during the year. It helps you to ascertain your precise tax liability, avoid over-deduction of tax, and also spares you from the wait for an income tax refund.

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