What is Form 12BB?
Form 12BB is an employee declaration of claims, for investments or expenditure made by a company employee, for tax-savings purposes. You can declare any investments and are eligible for tax deductions, or other expenditures on which tax rebates are applicable. Form 12BB is also called an investment declaration form, which is to be filled by the employee, along with investment or expenditure details, and given to the employer.
What is required to fill the form 12BB?
The time for making your “investment declaration” is in the first quarter of the financial year. From April to June every year, your employer will ask you to provide the tax-saving investment made by you for the year. The key thing to remember is that you only have to provide an estimation of the investments that you plan to provide in the coming months at the start of the financial year. In reality, you may spend less or more. These declarations are typically required to be posted on the employer’s website. But you don't have to furnish any proof until the end of the financial year.
At the end of the financial year, you are supposed to submit the actual proof/evidence against tax exemptions, investments and expenses already claimed by you in form 12BB. This form must be completed by employees to allow their employers to know how much income tax they need to deduct from their monthly income and, in effect, how much money they will take home with each payroll.
Most people get confused about to whom Form 12 BB or investment declaration form must be submitted. To clarify, it must be submitted to your employer, not to the Income-tax department.
Benefits of filing form 12BB
- By filing form 12BB, you can avail of several tax benefits provided by the income tax department.
- The rent paid to the landlord can be claimed under House Rent Allowance (HRA) with supporting proof, like rent receipts, etc.
- If you are paying rent to your parents, then ask them to report it as their income. at the time of filing their income tax return.
- Similarly, the employees can also claim a tax exemption for the costs incurred by traveling under Leave Travel Allowance (LTA), but only up to the amount included under Cost to Company (CTC).
- You can also claim LTA for yourself, your husband/wife, children, and dependent brother/sisters.
- In case if you are paying interest for a home loan, then certain deductions can be made depending upon the value of the property.
Tax benefits for self-occupied property and rented out property:
- For the Financial Year 2017-18 i.e from April 1, 2017, to March 31, 2018, the maximum tax benefit of Rs 2 lakhs can be availed for all types of houses based on loan taken for purchase/construction of the rented-out property
- In case, you have paid more than Rs.2,00,000 as interest on home loan taken for construction/purchase, then the remaining amount will be permitted to be carried forward, for subsequent years.
Tax savings on repayment of principal amount:
The principal amount repaid on both self-occupied or rented property is eligible for a claim under sec 80C of the income tax act. A maximum of up to Rs 1.5 lakhs can be claimed under sec 80C.
Other tax-saving schemes covered under the following sections
- Section 80C (Investments in a mutual fund, FD, etc)
- Section 80CCC (Pension plan)
- Section 80D (Health insurance for self, spouse, children)
- Section 80DD (Health insurance for parents)
- Section 80G (Donations to charitable trust)
- Section 80E (Payment of interest on education loan), etc.
Checklist for filing form 12 BB
- Study your CTC structure carefully, to see if HRA or LTA are part of your package. These allowances can only be claimed if they are explicitly part of your CTC structure.
- Never submit any fraudulent rent receipts, this could end up putting you in a lot of trouble with the income tax authorities.
- One cannot claim HRA if he is living in his own house.
- Monthly rent receipts are required only if the rent exceeds Rs 3000 per month.
- It’s preferable to hold a formal rental agreement printed on a Rs 500 stamp paper, despite your employer not asking for it.
- The tax exemption is allowed only for the fare or class mentioned in the CTC.
- For Air travel - economy class fare for the shortest route or for the amount spent, whichever is smaller.
- For Rail travel - First-class, air-conditioned rail fare for the shortest route or the amount spent, whichever is less.
- For Bus travel - First Class or deluxe class fare depending on the shortest route or the amount spent, whichever is smaller
- The above-mentioned allowance can be claimed for domestic travel alone, not for international travel.
Interest deduction on the loan:
- In case, you took a home loan together then you can claim interest deduction benefits proportionately.
- If you have taken a home loan from a lender other than a bank, i.e. your parents, family relatives, friends or any money lender, you can claim interest payment as a deduction under section 24 of Income Tax Act.
- In case, if the loan is taken from friends, family or other money lenders i.e. other than banks, the principal repayment is not eligible for tax deduction under section 80 C.
Procedure for filing Form 12 BB
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Form 12 BB format:
- Earlier, there was no prescribed format for disclosing the investment details of salaried employees, to the employer.
- As per the rule 26C of the Income Tax Rules, a new form called Form 12 BB was introduced by the Central Board of Direct Tax (CBDT). This form became applicable from June 1, 2016, and is required to be submitted to the employer.
- It will be used to disclose your investments and claim tax deductions under HRA, LTA, Section 80, interest paid on home loans, etc.
Download Form 12 BB:
- You can download the 12BB form in pdf or word format online, then print it, fill the investment details, annex the required proof, and submit it to your employer.
- Alternatively, you can fill out Form 12BB online and either send an email directly to your HR or print, sign and enclose the required proof to your employer.
Step by step procedure for filing Form 12 BB:
As not like other forms, Form 12 BB is very easy to enter details, as it requires very few documents only. Let’s understand how to fill each part one by one in detail.
Personal details: It is the first part of Form 12BB, and needs to be filled with the following details;
- Full name of the employee
- Address details
- Permanent Account Number (PAN)
- Corresponding Financial Year.
House Rent Allowance (HRA): As per the CTC mentioned by the company, you can claim the tax deductions under the HRA by submitting the following details to your employer.
- Enter the landlord's name and address.
- Enter the actual rent paid.
- In case, if the total rent paid for a year exceeds Rs 1 lakh, then the PAN of the landlord must be submitted.
- The rent receipts must be submitted as proof for claiming the HRA. Some organizations will ask for the rental agreement as proof.
- When you pay the rent in cash, you will have to affix a revenue stamp on the receipts.
Leave Travel Allowance (LTA): Section 10 (5) of the Income Tax Act, 1961 discusses the tax-exemption benefits of an employee under the LTA.
- Leave Travel Allowance is provided to a salaried employee as per salary package, and they need to submit travel-related expenses as proof to their employers if they want to claim a tax exemption on LTA.
- The employee must furnish travel bills such as boarding passes, airline tickets, travel agency invoices, etc.
- The total expenses being claimed and the supporting documents being submitted should be mentioned in Form 12BB.
- As stated earlier, the tax benefits on LTA can be claimed for domestic travel only, with a restriction of up to 2 times in a gap of 4 years.
- In case, If anyone has claimed only 1 LTA in the previous block of 4 years, then you can carry forward and make use of your 2nd LTA on the next.
Interest deduction on borrowings: Deduction of interest on home loans is permitted under section 24 of the income tax act.
- You can claim interest deduction on your home loan for any building establishment, reconstruction, repair, and purchase or renovation.
- The following details have to be submitted
- Enter the appropriate interest payable or paid to the lender for the financial year.
- Mention the name of the lender
- Address of the lender
- Lender PAN details: From whom the loan is availed like financial institution/employer/others.
Tax deductions under chapter VI A: Chapter VI-A includes tax deductions under different provisions such as 80C, 80D (Medical Insurance) 80 G (Donation), etc. Evidence of the investment made or expense incurred is required for claiming the deduction.
- if you have invested in the following schemes, then enter the details about
- Section 80C:
- Life insurance
- Public Provident Fund (PPF)
- Repayment of the principal amount of housing loan.
- Mutual Fund
- Tuition fees paid for up to 2 children
- Fixed Deposits (FD)
- Sukanya Samriddhi scheme
- Any other deposit scheme/ pension fund set up by the National Housing Bank (NHB).
- Section 80 CCC: Deduction under the pension plan.
- Section 80 CCD: Deduction against the contribution made by the employer to National Pension Scheme (NPS) or Atal Pension Yojana (APY).
- Section 80 D:
- Medical insurance for self, spouse, and children
- Medical insurance for parents
- Section 80 DD: Expenditure made for a dependent with a disability.
- Section 80 U: Expenditure made for own disability
- Section 80 DDB: Treatment made for a particular disease for a dependent spouse, children, parents, siblings.
- Section 80 G: Donation provided to a charitable trust.
- Section 80 E: Interest payment on education loan.
Documents required for form 12BB
The employees cannot claim any tax deduction without furnishing proof that can support the claim. So all the necessary documents required for tax deduction are;
- Monthly rent receipts
- Rent agreement, if needed
- Travel bills like airline tickets, bus tickets, rail tickets, invoices of the travel agent, boarding pass, etc.
For Home loan:
- Interest certificate from bank/Home loan statement.
- Construction completed certificate for the housing loan taken
- Employee self-declaration on a house that is self-occupied or let out.
Section 80 C:
- Life insurance premium slips.
- Passbook or certificate copy of PPF
- Home loan statement for paid principal
- Mutual fund statement
- Children tuition fee receipts
- NSC certificate
- FD receipts
- Sukanya Samriddhi passbook
- Proof of deposit in NHB.
Section 80 CCC and 80 CCD:
- Certificate/ passbook/ statement copy of pension plan.
Section 80 D:
- Premium Copy/ mediclaim policy copy/ health check-up receipts.
Section 80 DD and 80 U:
- Certificate from the prescribed authority (Form no 10-1A).
Section 80 DDB:
- Prescription for a specified disease by the specialist
Section 80 G:
- Receipt of donation for trust / PAN of the donee
Section 80 E:
- Interest payment copy about education loans
Frequently Asked Questions
Employers ask for a declaration, to estimate the TDS for the entire year at the start of the financial year. But Form 12BB must be submitted later at the end of the financial year.
No, Form 12 BB should be submitted to the employer, not to the income tax department.
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