Investment Declaration Process

The Investment Declaration Process is a process for planning investments at the beginning of a financial year. An investment declaration form is to be filled which is a provisional statement that has details about one’s proposed investments and expenses that are income-tax deductible. The next step is to estimate the investments that a person plans to make at the beginning of the year. No proofs are required until the end of the financial year. Investment declaration is an important aspect for employees because it may lead to higher in-hand salaries.

Why is it so important?

Businesses need to deduct taxes at source by law on the assessed pay of the worker consistently. The income tax permitted workers are guaranteed with some ventures and costs to diminish their taxation rate. Workers are given the free will to think about and choose a good system dependent on their pay. Also, workers are allowed to make choices for their charge affirmations and figure out their expenses and liabilities. In the end, the goal of the employee is to reduce his/her tax burden and increase their take home pay.

Why you should never forget to submit your Investment Declaration Form?

As an employee, one must know that there are a lot of opportunities to lose out on take home income by paying higher taxes. Companies have now started assigning a proof submission deadline after which an employee will not be able to submit proofs and will have to bear the advance tax even though they might be eligble for tax deductions. This is crucial, as an employee’s proof should tally otherwise the entire deduction will be discarded and the employee will have to pay a large amount of tax. An employee can claim a refund of the excess TDS deducted by filing an income tax return, however, the refund process is cumbersome and may be processed over the period of a year.

Tax Deductions

Tax deductions are known as money savers as it allows one to lower its taxes and thus reduce your tax liability. The lower the taxable income, the lower is the tax bill.

What is standard deduction?

The standard deduction is a flat deduction of 50000 rupees on your “Income taxable under the head salaries’’. This can be benefit can be claimed on the amount spent for Transport Allowance and Medical Allowance.

The purpose of implementing standard deduction is to:

1. To reduce paperwork and allow deduction irrespective of actual expenses.

2. To provide benefit to pensioners

3. To provide tax relief to middle-class salaried individuals.

What is Tax Exemption ?

Tax Exemption is the reduction or removal of a liability. Tax Exemptions are the monetary exclusion that reduces the taxable income. It is a statutory exemption to a general rule rather than the absence of taxation in particular situations. Few examples are charitable organizations from property taxes and income taxes, and certain multi-jurisdiction scenarios. International duty free products are also regarded as ‘tax-free shopping’.

How is exemption different from deductions ?

1. Exemption means exclusion of certain taxable income whereas deduction means subtraction wherein an amount can be reduced to taxable income.

2. Exemption is an relaxation whereas deduction is a concession.

3. Exemption helps the weaker section of the society whereas deduction enhances the savings and investment.

4. Exemptions aren’t regarded as part of total income whereas deductions are first added to GTI.