Everything You Need To Know About Investment Declaration

Investments are the core of a successful financial plan, and many of them also offer tax benefits to investors, lowering their taxable income. However, the earnings from a majority of the investments are taxable and require the investors to declare the investments while filing the Income Tax Return. Salaried employees are required to pay TDS on their salaries, which the employers deduct. However, a salaried employee can declare investments made in the current financial year to ensure TDS is computed correctly. If you are a salaried employee and an investor and have multiple current investments, it is vital to know how to declare them to the employer to ensure you adhere to all the taxation laws.

This blog will help you understand what is an investment declaration and how it can help you correctly compute your TDS, to be deducted and deposited by your employer.

• An investment declaration is a formal statement disclosing an individual's investment holdings and sources of income for tax compliance.
• Salaried employees use Form 12BB to submit the investment declaration to their employer.
  The main purpose of submitting the investment declaration is to claim tax deductions and reduce the taxable income to pay a lower TDS.

An investment declaration is a formal statement provided by individuals or entities to disclose their investment holdings, sources of income, and any changes in their financial status. This declaration serves various purposes: tax compliance, regulatory requirements, and transparency in financial dealings. The main purpose of an investment declaration is to ensure individuals and entities adhere to all the tax laws and to prevent tax evasion. Salaried employees generally use an investment declaration form to declare the investments they have made during the financial year to their employers. The employer then uses the investment declarations to compute the overall tax liability of the employer, deducts the tax deducted at Source (TDS) accordingly, and deposits it with the government.

Form 12BB is a tax form used by salaried employees to declare their investments to their employers and claim tax deductions and rebates on certain investments. Form 12BB allows salaried employees to ensure their TDS is computed correctly by their employer. An individual must have made the following investments to generate Form 12BB:

• Home loan interest: If you have paid a home loan interest, you need to submit a home loan interest certificate.
• Leave travel allowance: If you are entitled to a leave travel allowance, you need to submit all the proof of your travel to claim the amount and lower your taxable income.
• House rent allowance: If you are entitled to a house rent allowance, you can submit all the details of your rental agreement to claim HRA and save tax.
• Other income: If you have earned income from any other source, such as FDs, dividends, capital gains, etc., you must declare them with your employer for correct TDS computation.

Here are the tax deductions you can claim to reduce your taxable income:

• Section 80C: Tax deduction up to Rs. 1.5 lakh for investments in specified instruments such as Public Provident Fund (PPF), Employees' Provident Fund (EPF), National Savings Certificates (NSC), tax-saving Fixed Deposits, Equity-Linked Saving Schemes (ELSS), and life insurance premiums.
• Section 80CCC: Tax deductions up to Rs. 1.5 lakh, included within the overall section 80C limit on contributions to pension funds, which can be either offered by insurance companies or mutual funds.
• Section 80CCD: Employee contributions up to Rs. 1.5 lakh are tax-exempt made towards the National Pension Scheme (NPS). An additional deduction under section 80CCD(1B) of Rs. 50,000 for contributions made to NPS, which is over and above the Rs. 1.5 lakh limit.
• Section 80D: Tax deduction up to Rs. 25,000 for premiums paid for health insurance policies for self, spouse, children, and parents. An additional tax deduction of Rs. 25,000 of premium is paid for parents (Rs. 50,000 if they are senior citizens).

An investment declaration is an official document that provides all the information on the investments made by an individual or entity during the financial year. Generally, it is used by employees to declare their investments to their employers to ensure they can lower their taxable income and pay less TDS on their salary amount. Now that you know the investment declaration meaning, you can better utilise the declaration while paying taxes.