Income tax returns (ITR) filing: How to avoid excess deduction of TDS from salary income

At the beginning of a financial year, employees are supposed to furnish their ‘Income-tax declaration’ comprising of details of the investments and expenses they planning to make during such financial year. Based on their declaration, the employer deducts income tax at source on a periodic basis and a true up is done, before the end of such financial year, either by deducting further taxes or deducting less taxes for the remaining period as per the actual proofs of investments/savings furnished by the employee. Hence, it should not be surprising if you find yourself in a situation where you are doing an annual drill of collecting and furnishing tax-saving proofs to your employer before the due date.

Keeping in mind  the provisions of section 192(2D) of the Income-Tax Act, 1961 (Act) read with Rule 26C of the Income Tax Rules, 1961 (Rules) and the industry best practices, with this article we attempt to guide you as what could be the right proof for a given investment or savings in order to save income tax.

House Rent Allowance: To claim such allowance, an employee may need to produce particulars such as name, address and PAN of the landlord in case the total rent paid during an FY exceeds Rs 1 lakh. In case PAN of the landlord is not available to be showcased then, declaration in Form number 60 should be obtained.

Interest on loan taken for residential house property: This is another way to save income tax wherein, name, address and PAN of the lender, a certificate from the lender bank/ institution consisting details such as date of availing the loan, interest chargeable and installment amount need to be submitted. Such document would also be helpful where the employee may want to set off loss under the head income from house property against his salary income.

Tuition Fees: Copies of tuition fee receipts duly signed/stamped by the educational institution.

Leave Travel Allowance (LTA): One needs to gather the copies of travel tickets including original copies of boarding pass in case of travel by air.

Investments under Section 80C: Investment/savings as prescribed under Section 80C gain importance as one can claim a total deduction of Rs 150,000.

In case of a Public Provident Fund (PPF) account, which is the most popular investments avenues for people wanting to save tax, an employee may produce copies of relevant extracts of the passbook containing the evidence of deposits made and in case of an online account, the e-receipts showing your account details and transactions could be showcased.

In case of investments or deposits made in NABARD Rural Bonds, Sukanya Samriddhi Yojana, National Saving Certificate (NSC), Infrastructure Bonds and 5-year tax saving fixed deposit, one can submit the deposit receipts, bond certificates or certificates etc., receipt from the bank may be produced. In case of an Equity Linked Savings Schemes (ELSS) of mutual funds (MFs) and life insurance, one may submit the ELSS fund statement and premium paid receipts, respectively.

For employees who have taken a life insurance (LIC) policy and wish to claim deduction on yearly premium paid, they may furnish the receipt obtained at the time of payment from the insurance companies and the relevant bank statement evidencing such payment made.

Employees can claim a deduction on installments made of housing loan taken on furnishing of a certificate from the lender bank or institution specifying the amount paid towards principal repayment.

National Pension System (NPS): A copy of receipt for amount deposited during the year and a copy of relevant bank statement to show the extract can be submitted.

Medi claim Premium: Employees may also show an 80D tax certificate obtained by the insurance companies in support of deduction of premium paid coupled with copies of extract of bank statement/ passbook evidencing such payment. Additionally, an employee may also furnish receipts/bills for any health routine/preventive check-up undergone during the financial year.

Donations: In case of donations to certain approved trusts,  funds, charitable institutions/donations for renovation or repairs of notified temples, Prime Minister’s National Relief Fund, National Defence Fund  etc., proof of donation can be submitted by way of a receipt containing the particulars viz., Name and address and PAN of trust or institution, Name of donor, Registration number and the validity of the same.

However, there are no standard guidelines is made available by the department with respect to investment proofs to be produced for all the prescribed investments. However, as per the annual circular issued by the Central Board of Direct Taxes, the responsibility of confirming the genuineness and completeness of the proofs lies with the company the employee is working for. Further, the circular also says that it is the duty of an employer, that in case there is a doubt about the genuineness of the employee’s claim regarding any deposit/ payment made by the employee/ subscription, he should not approve of it, and the employee would then be free to claim the deduction by filing his return of income and furnishing the necessary proof etc.

Hence it is strongly advised that one needs to be abundantly cautious while furnishing all relevant proofs obtained while making such investments at the satisfaction of the employer to prevent any excess deduction of taxes.