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Every salaried individual plans tax in advance to help streamline the income tax deductions as per the regulations under the Income Tax Act, 1961. For most employees the TDS deductions on salary is done by the employers or the organization they work with. And it is the responsibility of the employee to submit the investment declaration in advance at the start of a financial year. This makes it easy to have the necessary assessments on income tax deductions.
If the taxable income of an employee exceeds the income tax limit even after tax exemptions, the employer deducts taxes from their salary in equal proportion on a monthly basis. This money is then remitted to the income tax department by the company. The form in which the standard investment declaration is provided is known as Form 12BB. We are going to discuss the important aspects related to the form in this post.
Form 12BB means a claim declaration statement that is used by an employee for tax deduction. Employees use this form to declare the investments that they are planning during a financial year to save tax.
Investment declaration is very important for every salaried employee. However, prior to the introduction of Form 12BB on 1 June, 2016, there was no standardized facility to declare investments. But, the introduction of the investment declaration form 12BB made it smooth for salaried people to reveal their tax deductions in a single form and submit it to their employer to claim tax exemptions or rebate in investments during a financial year. It also makes it easy for the employer to evaluate taxable income of the employee and to apply TDS as per the required norms.
However, it is important for the employee to know and understand the tax slab rates well to plan tax savings and investments accordingly. An employee should submit Form no 12BB at the end of a financial year and it applies to all salaried taxpayers. Hence, employees are required to keep documentary evidence of all tax planning investments to disclose at the end of a financial year.
The income tax slab rates apply to individuals/taxpayers as per the income thresholds that are defined by the government. Every taxpayer is expected to pay tax as per the income tax slab that applies depending on his/her tax liability.
Hence, taxpayers are required to evaluate tax liability depending on the tax slab and make investments accordingly in various tax saving vehicles. Once that is done, it becomes worthwhile to fill up the Form 12BB. This way a salaried individual can protect their net income.
The below list shows applicable form 12bb income tax slab rates for Individuals below the age of 60 years.
| Regular Tax Regime (Old)
Income Range |
Regular Tax Regime (Old)
Tax Rate |
Alternate Tax Regime (New)
Income Range |
Alternate Tax Regime (New)
Tax Rate |
| Up to INR 2.5 Lakh | Nil | Up to INR 2.5 Lakh | Nil |
| INR 2.5 to INR 5 Lakh | 5% | INR 2.5 to INR 5 Lakh | 5% |
| INR 5 to INR 10 Lakh | 20% | INR 5 to INR 7.5 Lakh | 10% |
| Above INR 10 Lakh | 30% | INR 7.5 to INR 10 Lakh | 15% |
| INR 10 to INR 12.5 Lakh | 20% | ||
| INR 12.5 to INR 15 Lakh | 25% | ||
| Above INR 15 lakh | 30% |
Also Read: Zero Tax on Salary Income INR 20+ Lakhs
It is important for salaried individuals to consider the different income tax rates applicable on their salary and plan investments accordingly in different tax-saving instruments to lower their tax liability.
Though a salaried individual declares investment at the beginning of a financial year using Form 12BB, he/she can change the investment portfolio afterwards during the year. However, he/she has to submit proof of investment before the financial year ends to ascertain the claims made. Let us understand the structure of Form 12BB now.
Form 12BB include the following:
A taxpayer can claim tax deductions on house rent expenses for accommodation. However, the taxpayer is expected to submit the following in the applicable section of Form 12BB:
LTA concessions offered by employers’ as per salary package can also be used for tax deductions. A taxpayer can claim deduction on tax by claiming LTA allowances by submitting proof of travel expenses to claim the deduction. Thus, the taxpayer has to submit such proof in the 12BB Form to avail tax deductions.
Also Know: 5 Tax Saving Investment Alternatives for Indian Citizens
If the taxpayer has loans to pay, he/she can claim deduction on the same during the financial year. A claim deduction of up to INR 2 Lakh is allowed under Section 24 for interest on a housing loan (subject to conditions). Moreover, taxpayers can claim deductions for house registration fee, brokerage expenses, stamp duty etc. during the financial year.
Also Read: Old vs New Income Tax Slab
A taxpayer can claim deductions under different income tax sections as mentioned below:
| Section | Investment |
| 80C | Premiums paid for life insurance and/or other investments such mutual funds, endowment policy, children policy etc. |
| 80CCC | For Premiums paid towards annuity pension plans |
| 80CCD | Any additional contributions made to NPS, APY etc. |
Read More: Income Tax Saving Investments Under Section 80EE, 80C, 80D
| Section | Investment |
| 80D | For premium paid towards medical insurance and senior citizen medical bills |
| 80E | For premium paid towards education loan for higher education of children |
| 80G | For donations made towards specified organizations, charitable funds, etc. |
| 80TTA | For interest income earned from savings bank account, co-operative societies or post office |
There are some key features to remember to benefit from the declaration made by using Form 12BB as mentioned below:
The data or investment options mentioned in your Form 12BB should be genuine as you are accountable for the same. If any invalid data is offered in the form, it might get you in trouble. Further, you have to provide evidence for the declarations made in the form 12BB before the end of the financial year to establish your investments so that the form could pass the enquiry. If any fake proof appears in the form, it might lead to severe punishment for the taxpayer.
Taxpayers planning to switch jobs or who have already shifted from one job to another in a particular year should not claim for maximum benefits of all the investment deductions in both organizations. Doing so would lead to incorrect TDS deduction and consequently you may have to pay more tax while filing for tax returns.
Like financial planning, tax planning is another significant thing that a taxpayer must plan in advance at the beginning of a financial year. Most salaried individuals declare more investments at the start of a financial year to lower the TDS liability. However, they fail to invest accordingly later in the year, which increases their income tax liability at the time of submitting proof. Hence, it is important to consider it.
To Sum Up
Form 12BB serves as a significant instrument of tax declaration for salaried employees to balance TDS claims during a financial year. It helps your employer to assess your tax liability and allow deductions from your salary every month in a proportionate manner as per the income tax regulations. However, simply declaring investments will not help in claiming deductions. The taxpayer has to submit proofs to confirm the claims as per income tax regulations.
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Investment declaration is a statement of deductions and exemptions submitted by employees at the start of a financial year that they are planning to claim later to save income tax on salary. The employer deducts TDS on the salary of the employee as per these declarations. In general, employers ask employees to declare tax deductions on investments at the start of a financial year. This helps them to calculate TDS for the entire year. Later, the declarations are submitted in the form 12BB at the end of the financial year. Most people think that Form 12BB has to be submitted at the income tax department. However, you actually need to submit it to your employer. In such a situation you can claim a refund of excess TDS deducted by your employer by filing your income tax return. You can download the form 12BB online in PDF or word format and get a print out of the form. You can fill the form and submit it to your employer along with the required proofs.
FAQs: Form 12BB Investment Declaration and Tax Saving
Does investment declaration have any purpose?
What is the right time to submit Form 12BB?
Where does the Form 12BB need to be submitted?
What happens if a person fails to declare investments on time and his/her employer deducts excess TDS?
Can form 12BB download?
PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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