An employee is required to submit a tax declaration along with documentary proofs of investments and expenses that are claimed as deductions from their salary income. This is done to ensure that their employer deducts the correct taxes at source (TDS) every month while paying salaries. It is also the basis for claiming tax rebates and benefits on investments made by employees.
The declaration is a formal request for the taxpayer to be exempted from paying taxes for a particular period of time, usually a year or more. A taxpayer is required to file this document before the end of the tax period, or else face penalty charges.
It is important to understand what is a tax declaration before you make one. This is because it helps you to prepare for the process of filing your returns on time and avoid penalties. It is also a way of ensuring that you have the necessary documents and information to file your returns properly.
Tax declaration is a form that is submitted to your employer at the beginning of the financial year. It lists all the investments you intend to make throughout the year and is a part of the income tax filing process. It is a common requirement for salaried employees to fulfil in order to claim tax benefits on their investments and expenses.
Your employer collects details and documentation on various investment instruments such as PPF, life insurance policies, health and medical bills, interest paid on home loans and HRA. It is essential to keep these records updated at all times to prevent discrepancies in the income declaration and filing of returns.
This information is then shared with the entity that deducts TDS from your monthly pay cheque. It helps them to arrive at your net taxable income, which is used to calculate the amount of TDS that should be deducted. The declaration also helps in determining your eligibility for tax exemptions such as Section 80C investments, medical bills and interest on educational loan.
The declaration must be submitted with the required proofs by your employer before the end of the financial year. Failure to submit the declaration or proofs before the specified date results in the denial of your tax benefits and you might be liable to face penalty charges.
It is also a prerequisite for residential property owners in designated taxable areas to declare their vacant properties and pay the speculation and vacancy tax. If you are a homeowner, it is important to review your property’s status and declaration annually.
The term ‘tax declaration’ is often misunderstood and confused with tax filing. It is vital to understand the differences between these two things so that you can save yourself from paying extra taxes. The article provides a clear distinction between the terms tax declaration and filing, as well as some tips for preparing a proper declaration. The article also highlights some common mistakes to avoid while making a declaration. Steuererklärung