Also, much like our exam study and countless number of such tedious tasks (Don’t take it seriously!), we tend to postpone the submission of the proofs until the personnel from department are literally standing in front of us like the teachers in school an asking (though politely), “Did you do it yet?”
While we cannot really take over the task from you and neither can you outsource it to any third party for an inconsiderate wage, it only makes sense that you are not put-off by the thought of this submission. In my opinion, one of the ways to make you like or at least give you the courage of bearing with this exercise (Sorry, finance dept.) is to tell you about the significance of this recurring activity. Do not worry, its gonna be much shorter than a TV sitcom 😉
So, what is this investment proofs all about?
As you know that our Income Tax Act lays down the responsibility on employers to collect Tax from employees in form of TDS and deposit it with the Central Govt on a monthly basis so that the Govt has early funds. Thus, a company needs to compute your estimated income over a financial year (for example, 2014-15) and tax thereon and deduct it while paying out your salary.
A brief example: Say, Rahul’s total income after all deductions works out to be Rs 3 lacs for a particular year on which total tax payable will work out to be Rs 8240 then his employer i.e UPA corporation will deduct Rs 690 per month while paying his monthly salary (Tax deducted by number of months)
Apologies if the example is preposterous in terms of numbers but I hope you get the concept.
Such a provision exists because the Govt needs consistent funds over a year to carry out all of its plans. The earlier practice of paying tax to the Govt at the end of year delayed availability of funds and hence, the Govt came up with a provision to collect tax every month from salaried tax-payers.
Also, if you noticed correctly, I mentioned the term “income after all deductions” and here comes the funda of investments and proofs.
Okay, can you go on further?
Yes sure! Assuming that you would have heard about section 80C i.e a plethora of investments that could prevent the Government from taking your hard-earned money, it is important that your employer knows about these investments before computing your tax. Hence, a company asks for your investment proofs to ascertain the veracity of the investments you have made in that year.
Example: You or your dad (on your behalf) could have deposited say, Rs 20000 into a PPF account in the financial year. This amount is eligible for deduction u/s 80C and you would want to let the company know about it. So, just take a copy of your updated PPF passbook and submit it to your finance dept for calculation of accurate tax.
Please note that these investments need not necessarily fall under the umbrella of 80C as there are a good number of other avenues that can be used to save tax. (It will be discussed in the upcoming articles)
Thus, in a way, your company loves you and wants you to save your hard-earned money from the government. So please do not criticize the finance guys if they bug you for proofs of investment because they are only helping you.
Remember this the next time!
What if I fail to submit the documents within specified time?
This is highly possible and you need NOT PANIC at all. If you fail to submit the proofs within given time then you can do this:
First off you could go to your wonderful finance dept and request if they could accommodate your late submission and accordingly process your tax.
If that does not go through, you can always claim the deduction on these investments while filing your IT return with the department. For individuals, the last day for filing your IT returns is 31st July of the last financial year. Now, if you miss that deadline too then it is improbable that you could claim the deductions. However, if you want to avoid penalty on missing the IT return deadline, go through this article.
Well, that is pretty much it!
I am guessing that there might be certain doubts regarding certain jargon used in the article and if that is the case, please feel free to mention it in the comments or mail email@example.com
Also watch out this space for the next articles in the series:
See beyond 80C: Part I
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of any agency, organization, employer, or any company. Fintuned Co. LLP shall not be held responsible in any manner whatsover, for any decision/action taken by readers on the basis of the content mentioned in the article. Readers are requested to exercise their best judgement before taking any decision/action. Fintuned Co. LLP shall also not be held responsible for any copyright infringement committed by the author in the process of writing and/or publishing this article and in the event any such offence is found, cooperate with necessary authorities to take remedial action
Thank you Yuva members for organising such a fun and informative lecture. We enjoyed it a lot. Meeting and learning from Mihir Sir was really an amazing experience. And this is not only our feeling but all the students enjoyed his lecture very much and look forward to many such events.