Hurry! Complete your tax-savings investments before March 31 to reduce tax liability

If you have not completed your tax-saving task, hurry up as March 31 is the last date for completing tax savings for the current financial year. Every salaried individual has to submit proof of investments to the employer to claim deductions and exemptions under the old income tax regime in accordance with Income Tax Act, 1961.

Employers are responsible for calculating their employees' yearly taxable income and proportionately deducting the amount from their monthly salaries in accordance with section 192 of the Act.

If you fail to complete the tax-saving related exercise before March 31, your employer will deduct tax from your salary. It is a common practice for employers to 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, employees are only required to make a declaration as it is anticipated that the employee will file the requisite paperwork later on in the calendar year, but before the end of the fianancial year. Employers take into account this declaration and give employees access to the benefits of such investments and appropriate deductions.

"An employee has to show proof of investments that he/she is 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 has to submit the PPF passbook entry," Amit Gupta, MD of SAG Infotech which helps taxpayers to fulfil their tax compliances, said.

"If an employee fails to submit the required documents of tax-saving investments, then the employer recalculates the tax for the year and deducts more tax in such circumstances from the employee's salary in the remaining months," he added.

However, if an employee misses the deadline for providing documents, Amit said, is allowed to claim a refund of excess tax when he/she files tax returns. All you need to do is to provide valid supporting documents for the return.

On Leave Travel Allowance (LTA) deduction, Amit said that LTA allows salaried individuals to claim tax exemption for a trip made within the country. 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 CTC.

"Employees are required to submit a 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," he said.

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 have to 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," Amit said, adding that 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.