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Every financial year, salaried employees in India are required to submit an investment declaration to their employer. This declaration is an estimate of the investments and expenses eligible for tax deductions under various sections of the Income Tax Act.
By declaring investments in advance, employees ensure that their TDS (Tax Deducted at Source) is calculated accurately, preventing excess deduction or underpayment of taxes. Let’s explore what investment declaration is, its process, deadlines, and supporting proof requirements.
An investment declaration is a statement submitted by an employee to their employer at the start of a financial year, detailing planned tax-saving investments and expenses. The employer uses this information to calculate the correct monthly TDS from the salary.
This declaration is not the actual proof of investment; rather, it is a forecast that must be supported with documents at the end of the year.
Making an investment declaration on time offers several key benefits for both employees and employers:
Accurate TDS Deduction: Helps employers deduct the correct tax each month.
Avoids Excess Tax Outflow: Prevents overpayment of tax and the need for refunds later
Form 12BB is an income tax form used by salaried employees in India to declare their investments and expenses to their employer, so that the employer can calculate the correct TDS (Tax Deducted at Source) on salary.
Section 80C – Deduction up to ₹1.5 lakh for investments like PPF, ELSS, NSC, Tax-saving FD, Life Insurance premium, Home Loan principal, Tuition fees, etc.
Section 80CCC – Deduction for contributions to pension funds/annuities (within overall 80C limit of ₹1.5 lakh).
Section 80CCD – Deduction for NPS (National Pension System) contributions:
80CCD(1): Employee/self-contribution (within 80C overall limit of ₹1.5 lakh)
80CCD(1B): Extra ₹50,000 exclusive deduction for NPS
80CCD(2): Employer’s NPS contribution (up to 10% of salary – over and above 1.5L limit).
Section 80D – Deduction for Health Insurance premium: up to ₹25,000 (self/family), plus ₹25,000 (parents) – higher limit of ₹50,000 if parents are senior citizens.
Most organisations provide an investment declaration form—either physical or online through HR portals—where employees can enter details of eligible investments and expenses. Typical sections include:
Section 80C investments (e.g., PPF, ELSS, life insurance premiums)
Section 80D (health insurance premiums)
HRA exemption claims
Education loan interest (Section 80E)
Home loan principal and interest repayment
Submitting your investment declaration involves a simple step-by-step process to ensure smooth tax compliance:
Collect the Form: Provided by the HR or payroll department.
Fill in Estimated Investments: Include only those you plan to make during the year.
Submit Before the Deadline: Usually in April or early May.
Make the Declared Investments: Follow through during the year to match your declaration.
Submit Proof at Year-End: Employers verify actual investments against declared amounts.
While deadlines vary by employer, most require employees to submit the investment declaration at the start of the financial year (April). This ensures correct TDS from the first month’s salary. Delayed submissions may lead to higher initial tax deductions.
At the end of the financial year (typically January–February), employers request investment declaration proof to validate the actual investments made. This could include:
Receipts for insurance premium payments
PPF deposit slips
ELSS mutual fund statements
Home loan repayment statements
Rent receipts for HRA claims
Failure to submit proof can result in higher TDS deductions in the last few months of the year.
Avoiding these common errors can help you maintain accurate tax deductions and prevent year-end surprises:
Overestimating Investments: Leads to higher take-home pay initially but large deductions later.
Missing Deadlines: Causes unnecessary higher TDS at the start of the year.
Not Submitting Proof: Invalidates your declaration, causing tax recalculation.
Many companies have shifted to online investment declaration systems via HRMS portals. This ensures:
Easy updates during the year
Instant submission acknowledgment
Reduced paperwork and errors
Employers are responsible for deducting TDS as per employee tax liability. Without an investment declaration, they must calculate tax assuming no deductions, resulting in higher TDS and lower in-hand salary for employees.
An investment declaration is a vital step in ensuring smooth tax planning for salaried individuals. By declaring planned investments early and submitting proof on time, employees can manage their tax liability efficiently, avoid last-minute stress, and ensure consistent take-home pay throughout the year.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
It is a statement of planned tax-saving investments submitted by employees to employers for accurate TDS calculation.
Ideally at the start of the financial year in April, or as per your employer’s deadline.
No. Proof is required at the end of the year to validate the declaration.
Your employer will recalculate TDS without deductions, leading to higher tax being deducted from your salary.
Yes, most employers allow mid-year updates via HR portals or revised forms.
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