The employer is primarily responsible for determining the veracity of the claim and relies on the paperwork provided by the employees to do so.
By Amit Gupta
You may already be past due if you haven’t given your employer the required documentation to claim deductions and exemptions in accordance with certain parts of the Income Tax Act. To modify the final tax deduction at source (TDS) in the salary for the final three months of the fiscal year, companies typically need their employees to submit the documentation by mid-January.
You might be misled if you’re still debating whether or not to submit the documents because you believe that it won’t be a huge concern and that you can still claim the deductions when you file your tax return. Certain deductions and exemptions must be claimed through your employer to be claimed. To ensure that you receive all of the tax benefits for which you are qualified, it is crucial to provide your employer with the required documentation as soon as possible. Even though your employer might not agree to your request for them to accept the proof right away, it might be wise to make an effort to persuade them, particularly if there are claims you might not be able to make directly.
HRA and LTA
Employees who miss the deadline for providing information about expenses or specific allowances to their employers may still claim those expenses or allowances when they file their tax returns. The employee must make sure they have all the supporting documentation for the expenses they have incurred in case there are any tax proceedings where these claims may need to be supported.
But it will be difficult to claim some allowances, such as Leave Travel Allowance (LTA), where the onus for deduction of tax is on the employer on submission of proof by the employee. When a company pays a worker’s travel expenditures, whether they are traveling with or without their family, it is referred to as LTA. Although it can be claimed on a monthly basis, it is provided as an annual benefit that is tax-free as part of the employee’s Cost to the Company (CTC).
Employees must submit a completed declaration form and documentation verification, such as tickets or boarding permits, to claim LTA. The LTA amount is taxable if an employee is unable to travel for whatever reason. However, the government created the LTC Cash Voucher program as an exception during the pandemic, when travel was prohibited. According to this plan, employees might, under certain restrictions, use the LTA to pay for other products and services.
Employers also have a significant role in claims involving House Rent Allowance (HRA), in addition to LTA. If the total rent paid over the preceding year exceeds Rs 1 lakh, employers must gather information such as the rent receipt that includes the landlord’s name, address, and PAN. Employers permit HRA claims after receiving all the necessary information. The tax agency may request that employees provide documentation of HRA if it is not claimed through the company but rather at the time of submitting the return.
Maximizing the tax-saving investment evidence
Employers are responsible for calculating their employees’ yearly taxable income and proportionately deducting the relevant TDS from their monthly salaries in accordance with section 192 of the Act. Employers ask their employees to furnish information or make a declaration of their investments and expenses that are eligible for tax deductions at the beginning of the year in order to calculate the annual taxable income.
At this time, only a declaration has been made; it is anticipated that the employee will file the requisite paperwork later on in the calendar year. Employers must take into account this declaration and give employees access to the benefits of such investments and appropriate deductions.
But, the employee must show the employer proves that he is truly qualified for those deductions before the end of the fiscal year. For instance, if someone is claiming the PPF as a deduction under Section 80C of the Income Tax Act, he must exhibit the PPF passbook entry. It will be assumed that the employee has not incurred these costs or made these investments if the employee fails to provide documentation of investments and expenses. The employer will recalculate the TDS for the year and deduct more TDS in such circumstances.
As a result, throughout the remaining months of the fiscal year, the employer will deduct more TDS from the employee’s salary.
TDS deduction after considering the facts
The use of the proof that employees provide to their employers is not widely known among them. Contrary to popular belief, these records are not sent by the employer to the income tax division. The employer is often not compelled to give the proof or evidence they have gathered to the income tax department until the authorities ask for it.
Instead, companies ask for these documents as proof of the claims made by their workers. After the employer is satisfied, TDS is withheld appropriately, and the employee’s claimed deductions and exemptions become a component of Form 16 that the employer issues.
Send in your investment documentation on time
Keep in mind that unless specifically requested, the employer is not compelled to provide any documentation to the tax department. So, the deductions and exemptions that the firm grants its employees are dependent upon and approved by the income tax department. But what if the assertions stated are false and the supporting evidence is made up?
The employer is primarily responsible for determining the veracity of the claim and relies on the paperwork provided by the employees to do so. The employer, however, “is not held accountable when an employee presents false proof. However, even if the employer accepts the proof, there is a potential that the employee may need to resubmit the proof if their case is flagged for inspection by the income tax department.
A significant fine may be assessed in cases where it is discovered that the employee provided false documentation and used that documentation to claim unauthorized tax benefits. Employees giving erroneous facts may be subject to penalties under section 270A for under-reporting [@ 50% of the tax on such under-reported income] or mis-reporting [@ 200 percent of tax for such misreported income]”.
About the Author: Amit Gupta, MD, SAG Infotech
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