The individuals having income from salary can claim tax benefits through allowances, exemptions and deductions. Having stating that, at the beginning of every financial year, employers seek an investment declaration from their salaried employees. This tax file declaration contains a list of all the tax-saving investments that an employee proposes to make during that relevant year.
Why should you submit documents to claim tax benefits?
The reason why you should submit documents to your employer for claiming the tax benefits is because the employer has to ascertain the tax liability of their employees. While calculating the tax liability, the employer will take into consideration these exemptions, allowances and deductions. And accordingly, your tax liability will be reduced. On the contrary, if you do not submit these documents, then you may have to pay higher taxes.
Also Read: Meaning, Types, Treatment of Dearness Allowance
In addition to this, collecting these details at the beginning of the year makes it easier for the employer to deduct Tax at Source (TDS) every month. TDS is covered under Section 192 of the Income Tax Act, 1961, making it the obligation of employers to withhold taxes while paying salaries.
Documents to submit to claim tax benefits through allowances
The tax benefits through allowances which an employee can avail are house rent allowance, leave travel allowance, telephone reimbursement, books and periodicals. The employee can claim these allowances, only if they are part of part of his salary package. Keeping in view of these allowances, following documents are required to be submitted:
| Allowance | Documents to be Submitted |
|---|---|
| House Rent Allowance (HRA) | Rent receipts or rental agreement |
| Leave Travel Allowance (LTA) | Travel tickets, boarding passes, and other supporting documents for travel expenses incurred during the leave travel period |
| Medical Reimbursement | Original medical bills, prescriptions, and supporting documents for medical expenses incurred by the employee or their family members |
| Transport Allowance | No specific documents required, as transport allowance is usually fixed and does not require submission of supporting documents |
| Children Education Allowance | School fee receipts or any other relevant documents proving the education expenses incurred for the employee’s children |
| Hostel Expenditure Allowance | Hostel fee receipts or any other relevant documents proving the hostel expenses incurred for the employee’s children |
| Uniform Allowance | Purchase invoices or bills for uniforms purchased by the employee, as per the employer’s guidelines |
| Special Allowance | No specific documents required, as special allowance is generally paid as part of the employee’s salary and does not require submission |
| Conveyance Allowance | No specific documents required, as conveyance allowance is usually fixed and does not require submission of supporting documents |
| Food Allowance | No specific documents required, as food allowance is generally paid as part of the employee’s salary and does not require submission |
| Entertainment Allowance | No specific documents required, as entertainment allowance is generally paid as part of the employee’s salary and does not require submission |
| Research Allowance | No specific documents required, as research allowance is generally paid as part of the employee’s salary and does not require submission |
| City Compensatory Allowance | No specific documents required, as city compensatory allowance is generally paid as part of the employee’s salary and does not require submission |
| Overtime Allowance | Overtime records or timesheets maintained by the employer, as per the employer’s policies and requirements |
Also Read: Can you claim HRA if you’re staying at your parents’ home?
Tax benefits through deductions: documents to be submitted
Deductions are the tax benefits which an employee can avail beyond his salary package. Some of these deductions are:
– Firstly, Life Insurance Corporation premium
– Secondly, investments in Public Provident Fund, National Savings Certificate, Equity Linked Savings Scheme, Tax Saving Fixed Deposits
– Thirdly, children’s tuition fees
– Fourthly, housing loan repayments
– Fifthly, medical insurance premiums
– Sixthly, interest on loan for higher education
– Seventhly, donations, etc
The employee can claim these deductions under Section 80C to Section 80U. In order to claim these deductions, following documents are to be submitted:
| Section | Deduction | Documents Required |
|---|---|---|
| 80C | Investments in specified schemes | Life insurance premium payment receipts Public Provident Fund (PPF) deposit receipts Employee Provident Fund (EPF) contribution statement National Savings Certificate (NSC) certificates Tuition fee receipts for children’s education Repayment certificate for home loan principal repayment 5-year fixed deposit certificates with banks Equity Linked Saving Scheme (ELSS) investment statements |
| 80CCC | Pension funds | Receipts or statements for contributions made towards pension funds |
| 80CCD(1) | National Pension System (NPS) | Contribution statement from NPS or employer |
| 80CCD(1B) | Additional contribution to NPS | Contribution statement from NPS |
| 80CCD(2) | Employer’s contribution to NPS | Contribution statement from employer |
| 80D | Health insurance premium | Receipts for health insurance premium payments |
| 80DD | Maintenance of a dependent with disability | Medical certificate, Form 10-IA |
| 80DDB | Medical treatment of specified diseases | Medical certificate, prescription, bills |
| 80E | Interest on education loan | Loan statement, interest certificate |
| 80G | Donations to approved charitable institutions | Receipts or acknowledgments from the charity |
| 80GG | Rent paid for accommodation | Rent receipts, rental agreement |
| 80GGA | Donations for scientific research or rural development | Receipts or acknowledgments from the institution |
| 80GGC | Donations to political parties | Receipts or acknowledgments from the party |
| 80TTA | Interest on savings account | Bank statements or passbook entries |
| 80TTB | Interest on deposits for senior citizens | Bank statements or interest certificates |
| 80U | Disability deduction | Medical certificate, Form 10-IA |
Also Read: 10 Best Ways to Save Taxes in 2022
Exemptions tax benefits: Documents required:
Apart from the above allowances and deductions, the employee can also claim tax benefits through certain exemptions. However, in order to claim these exemptions, the employee does not have to submit any documents. The employer calculates these exemptions himself on retirement or resignation of the employee. These exemptions and calculation of such exemptions are as follows:
| Income component | Criteria for exemption | Exemption allowed |
|---|---|---|
| Gratuity | Allowed on retirement or resignation or death or disablement | Least of the following: -Last salary (basic + dearness allowance)* number of years of employment* 15/26; -Rs 20 lakh (which has been hiked from Rs 10 lakh as per the amendment); -Gratuity actually received |
| Pension | Commuted value of the pension allowed at the time of retirement | – If the employee receives gratuity, then one-third of the amount of pension -If only pension received, one-half of the pension |
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