In order to claim tax deductions and exemptions on their salary income, employees must provide their employer with Form 12BB. Details of various investments, costs, and allowances that qualify for tax benefits are included in this form. With the help of this form, the employer can determine how much tax should actually be withheld from the employee’s pay.

Typically, a form 12BB is completed at the start of the fiscal year or upon starting a new job. However, you must provide the actual documentation at the end of the year to support the tax exemptions, investments, and expenses that you have already claimed on form 12BB.

Previously there was no standard format for declaring your tax-deductible expenses and investments. The Income tax department has introduced a standard format of Form 12BB.

Purpose of Form 12BB

The goals of Form 12BB are as follows:

• The employer provides the employee with the benefits of all tax-deductible expenses and investments.
• The Income Tax Department grants all employers the authority to grant their employees the benefit of claiming tax exemption through Form 12BB.
• Only employees who file Form 12BB with proof of tax deduction or declaration are eligible to receive this benefit.
• All employees are required to fill out this form in order for the employers to calculate the take-home pay and the amount of tax that should be withheld from each employee’s monthly paycheck.

Read also: Top 10 tax-saving investing strategies for sustained growth

How Can I Download or Create Form 12BB?

The steps to download Form 12BB are given below:

• visit : https://incometaxindia.gov.in/forms/income-tax%20rules/itrform12bb.pdf.
• You can download Form 12BB by clicking the download button, print it, and accurately fill it out with all the necessary information.

To qualify for tax savings and reimbursement, the following investments require the submission of an investment declaration:

Personal Details:

This is the first section of Form 12BB, you need to mention your:

• Full Name
• Address
• Permanent Account Number/Aadhar Number
• Financial year (Current Financial Year is F.Y. 2023)

 Allowance for House Rent (HRA):

To claim HRA tax exemption, you need to submit the following details to your employer –

• Amount of Rent paid
• Name of your landlord
• Address of your landlord
• PAN No of your landlord in case the total amount of rent paid during the year exceeds Rs.1 lakh.

In addition, you must also submit proof for claiming an HRA tax exemption.

1. Evidence/Proof for claiming House Rent Allowance tax exemption:

The proof for claiming HRA tax exemption is the monthly rent receipts. In many organizations, employers also ask for a rent agreement to allow HRA tax exemption.

2. Amount of tax saving on House Rent Allowance(HRA):

This is the best tax saving avenue. Calculate your HRA tax exemption with  HRA exemption calculator tool.

3. Things to remember when claiming HRA tax exemption:

• You can claim HRA tax exemption only when HRA is a part of your CTC.
• if you live in a rented home and your HRA is not included in your CTC, you may be eligible to receive tax benefits under section 80GG.
• A rent receipt is required only when your monthly rent exceeds Rs. 3,000.
• You can’t claim HRA if you are living in your own house.
• If you are paying rent to your parents, ask them to show it as their income when filing their Income Tax Return.
• Never submit fake rent receipts; this might land you in big trouble with the income tax authorities.
• It is advisable to have a formal rent agreement printed on Rs. 500 stamp paper, or at the rate that applies in your state, for records, even if your employer does not request one.

Read Also: Save Tax : Why do you need to submit investment proofs in last quarter of FY?

LTA (Leave Travel Concession/Allowance):

1. LTA (Leave Travel Concession/Allowance):

Employees need to submit travel bills like boarding passes, flight tickets, invoices from travel agents, boarding passes, etc., to the employer.

2. Amount of tax saving on LTA:

This tax exemption is allowed only on actual travel costs to the extent specified in CTC. The fare is exempt as per the following conditions:

3. Things to remember when claiming LTA tax exemption:

• You can claim LTA only when it is a part of your CTC.
• You can claim LTA for yourself, your spouse, children, dependent parents, and dependent brother and sister.
• It is eligible for two claims within a four-year period. The block in question is 2022–2025.
• You can carry over and use the second LTA if you only claimed one during the previous four-year block. However, you must claim it during the first calendar year of the following block.
• Only domestic travel is permitted; international travel is not. Furthermore, there is no allowance for the cost of lodging

Read also: Income Tax Department targeting employers and employees for TDS-claims mismatch

Deduction of Interest on Borrowing:

Section 24 of the income tax laws permits the deduction of interest on home loan borrowings. Interest on a home loan taken out for building, reconstruction, repair, acquisition, or renovation may be written off.

The data that must be entered into Form 12BB is:

• Interest Payable/paid to the lender during the financial year
• Name of the lender from whom the loan is taken
• Address of the lender
• PAN of the lender/Aadhar Number: Financial Institutions/Employer/Others, from whoever the loan is taken

1. Evidence/Proof for Claiming tax exemption for interest on borrowing:

Documents required to claim deduction u/s 24B on interest payment of home loan are:

• Statement / Certificate stating total EMI paid along with Interest and Principal components.
• Possession/construction completion certificate
• Self-declaration from the employee whether the house is self-occupied or let out.

2. Amount of saving on Home Loan:

a. Tax advantages when paying interest:

The amount of the deduction will vary depending on the kind of property you own if you are paying interest on a home loan. Let’s go into more detail about the same.

I. Tax benefit in case you have self-occupied property (SOP):

If you take out a loan to build or buy a house, you can have a maximum interest rate of Rs. 2,00,000. In the event that a loan is obtained for repair or reconstruction, this benefit will be reduced to Rs. 30,000. In addition, building or purchasing must be finished within five years of the loan’s inception.

Read Also: TDS deducted in wrong FY? Income Tax Form 71 will help you to get it

II. Tax benefits in case you have rented out (let out) the property (LOP):

In the event that the property is rented, you can deduct the whole amount of interest you pay on the loan. This sum will be subtracted from the annual rental income.

b. Tax benefits on repayment of Principal Amount:

Under Section 80C of the Income Tax Act, principal amount repayment is allowable in both situations, regardless of whether the property is rented or self-occupied. Section 80C allows for a maximum claim of Rs. 1.5 lakh for the principal amount. The maximum amount that can be deducted under section 80C is 1.5 lakh. Thus, make appropriate plans.

3. Additional deduction under Section 80EE

For first-time buyers, this section allows for additional deductions of up to Rs. 50,000. Section 80EE is only applicable to loans approved through March 31, 2017. In order to be eligible for the home loan tax benefit under this section, one must fulfill the following requirements:

• The loan should be less than or equal to Rs.35 lakhs. Also, the property’s value should not exceed Rs. 50 lakh.
• On the date the loan is sanctioned, the individual should be a first-time house owner.

4. Extra deduction allowed by Section 80EEA

Under Section 80 EEA, home buyers were also eligible for an additional deduction of up to Rs. 1,50,000.
The following requirements must be fulfilled in order to be eligible for tax benefits under a home loan:-

• The individual should be a first-time home buyer on the date of loan sanction.
• The individual claiming deduction under Section 80EEA is not eligible to claim the deductions under Section 80EE.
• Stamp duty value of the property does not exceed Rs 45 lakhs.
• Loan must be sanctioned between 1st April 2019 to 31st March 2022.

5. Things to remember when claiming Interest on Home Loan tax exemption:

• In case, you have taken a home loan jointly, then you can claim the benefit of the interest deduction proportionately.
• The interest payment on a home loan taken out from a lender other than your bank, such as friends, family, or any moneylender, may be deducted under section 24.As long as you obtain an interest certificate from the person you paid interest to.
• If you take out a loan from friends, family, or any other type of money lender (other than banks), section 80C does not allow you to deduct the principal repayment.

This part of the form may take longer to finish if you claim maximum tax benefits. If you do not have any deductions to make, you can then move on to the last section.

Deductions under Chapter VI-A

Income tax deductions are covered by Chapter VI-A under a number of sections, including 80C, 80D (medical insurance), 80G (donation), and so on. Evidence of an investment or expense must be presented in order to claim a deduction. You may be wondering what kind of documentation is needed in order to make these deduction claims.

Read also: Clause 44 of Form 3CD of Income Tax Audit Report

Verification

The “verification” of the data entered in Form 12BB is the final section of the document. All that is required is your name, your parent(s)’ names, the city in which the form is being filled out, the date it was filed, and your signature.

“To avoid tax deduction altogether, you’ll declare investments to reduce your income to the basic exemption limit so that no taxes are leviable and no TDS deduction is required.”

Is it compulsory to fill out Form 12 BB for every salaried individual?

As of June 1, 2016, all salaried individuals are required to submit Form 12BB to their employer in order to file claims for tax exemptions and deductions. This form assists the employer in determining how much tax should be correctly withheld from the worker’s pay.

Employees can make sure they claim all available tax benefits, including deductions and other tax exemptions, by filing Form 12BB. Their take-home pay may rise and their overall tax liability may be decreased as a result.

Is Form 16 and Form 12 BB same?

The complete salary breakdown, tax deduction, and deposition information with the government are all detailed in Form 16. Concurrently, Form 12 BB notifies the employer of all the investments and outlays you have made.

What information is required to be filled in Form 12BB?

The details required to be reported in Form 12BB are:

• Your Personal Details – Name, Address, PAN Aadhar Number, Position/Designation, Father’s Name
• Financial Year – Current Financial year is F.Y. 2022-23
• HRA: House Rent Allowance
• Leave travel concessions or assistance
• Interest on home loan
• Income Tax Deductions under Chapter VI-A of Income Tax
• Other Details like Date, Place, Signature, etc

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