Income Tax Filing FY 2024-25: Employers are at the moment requesting salaried employees to present documentation of tax-saving investments and bills if they want to scale back their tax legal responsibility. These paperwork are important to forestall full tax deduction at supply (TDS) from the wage.
Most employees usually have till March to present tax-saving documentation, nonetheless it’s useful to submit them promptly. Until documentation is offered, employers will deduct the total tax quantity from wage with out contemplating any tax-saving investments. Tax specialists point out that not each worker wants to submit investment documentation.
Which salaried employees are required to submit investment proof?
Regarding who should present investment proof to keep away from full wage taxation, Prakash Hegde, a working towards Chartered Accountant, advised ET, “The employees who have opted for the old tax regime are required to submit investment proofs to their employers to claim exemptions and deductions via their employer. The employees who have opted for the new tax regime need not have to submit any proof for exemption and deductions as most of them are not available in the new tax regime.”
The Income Tax Act, 1961’s outdated tax regime gives varied tax exemptions and deductions that people can declare to lower their gross taxable revenue. This discount in taxable revenue subsequently leads to decrease revenue tax obligations.
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For those that chosen the outdated tax regime originally of the monetary yr, you may need to present investment proofs to declare tax-saving deductions. Here’s a complete checklist of widespread deductions and their required documentation:
- For
HRA exemption tenants should present their employer with a hire settlement and/or hire receipts. When annual hire funds exceed Rs 1 lakh, the owner’s PAN particulars develop into necessary for claiming the House Rent Allowance exemption. - Regarding Section 80C deduction proofs, people can scale back their gross complete revenue by up to Rs 1.5 lakh earlier than taxation. This requires particular investments or expenditures throughout the Rs 1.5 lakh restrict, together with PPF, EPF, ELSS mutual funds,
NPS contributions life insurance coverage premiums, kids’s academic charges, and housing mortgage repayments. - Under Section 80D, taxpayers can declare deductions on medical insurance premiums, with extra allowances for fogeys’ protection. The most deduction out there for self and fogeys’ medical insurance premiums is Rs 1 lakh.
- For Section 24B curiosity deduction, owners paying EMIs can declare up to Rs 2 lakh for curiosity paid on their housing mortgage.
- An further NPS deduction of Rs 50,000 is accessible past the Section 80C restrict. Employers require proof for claiming this extra deduction.
Tax Deductions Available Under New Income Tax Regime
The new revenue tax regime permits solely two deductions for taxpayers, eliminating the need to submit investment documentation. These embody a typical deduction of Rs 75,000 from wage/pension earnings and a deduction up to 14% of primary wage for employer’s NPS account contributions.
According to CBDT’s assertion dated August 2, 2024, “72% of taxpayers have opted for the New Tax Regime, while 28% continue to be in the Old Tax Regime.” Documentation for these two deductions need not be submitted by employees.
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Flexibility in Tax Regime Selection for Salary TDS
Whilst employees can theoretically change their tax regime selection for TDS through the monetary yr, organizations typically resist such modifications due to administrative complexities involving TDS changes and documentation necessities.
Tax rules allow switching between regimes throughout ITR submitting, choosing the extra advantageous choice. For the monetary yr 2024-25, taxpayers should file returns by July 31, 2025. Late submissions will solely be accepted underneath the brand new tax regime.
It is crucial to file returns by July 31 to retain the choice of selecting the outdated tax regime. Additionally, sustaining complete documentation for exemptions and deductions is essential for addressing potential queries from tax authorities throughout verification processes.
