Thinking how to maximize tax benefits! It's quite natural among salaried employees seeking ways to reduce taxes. Income Tax (IT) department allowed various tax exemptions and benefits for salaried employees classified under expenditure, savings, social activities, and individual economic growth. To claim all these tax benefits, employee should submit relevant details to her / his employer in a standard format - Form No. 12BB published by Central Board of Direct Taxes (CBDT).
What is Form No. 12BB?
Form No. 12BB is a declaration made by an employee who claims tax benefits as per prevailing Govt. orders and to be submitted to employer prior starting new financial year or when she / he joins as an employee to new organization. The details of Form 12BB declaration has to be incorporated to employees payroll calculating tax benefits during the financial year. Thus employer will deduct TDS from the employee’s salary on the basis of details declared in Form 12BB.
The Central Board of Direct Taxes (CBDT) released Form No. 12BB to be the new standard form for salaried tax payers to claim tax deduction. It is in force after making statutory amendments to the Income Tax Act, 1961. Earlier, claiming tax benefits can be done by just mentioning the sum under exempt allowances and submit the evidences at the time of submitting IT return.
Form No. 12BB for Claiming Tax Savings
Form 12BB offers salaried employees to claim tax benefits effective from 1st June, 2016 on House rent expenses, interest paid on borrowing, travel expenses and other investments that eligible for tax exemptions. Salaried employee are eligible to claim tax benefits through form 12BB subject to approved documentary evidences.
Submission of Form 12BB required only if an employee claims tax benefits. Hence Form 12BB has to be submitted prior new financial year starting based on available information. If given value has been changed in the later stage, it can be stated at the end of financial year along with documentary evidences.
Employer considers form 12BB for tax benefits to their employee when they prepare payrolls in order to avoid miscalculation and confusions in later stage.
Following are the main items highlighted in the form which affects most of the employees:
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA) / Concessions (LTC)
- Interest on borrowing - Home Loans
- Investments Under Chapter VI-A
1. Claim House Rent Allowance (HRA)
To claim House Rent Allowance, employee has to submit Rent receipts from landlord as documentary evidence. Income Tax Act exempted HRA under section 10 (13A). Following details are required from landlord:
- Name and address
- Amount paid as rent
- Permanent Account Number (PAN) of the landlord (required only if the total rent amount paid exceeds Rs. 1,00,000/- during the year.
2. Claim Leave Travel Allowance (LTA) / Concessions (LTC)
Employee should produce proofs and evidences of leave travel details to claim tax benefits. It is now become mandatory requirement.
3. Claim Interest on Borrowing - Home Loans
Employee can claim tax exemption on home loan interest payments under section 24. Following details are to be furnished in the Form No. 12BB:
- Interest payable / paid
- Lender’s name & address
- Lender's PAN number
4. Claim on Deductions Under Chapter VI-A (Section 80C-80U)
Employee has to provide documentary evidence to claim tax exemptions through various sections from 80C to 80U. Some of the section details are as under:
- 80C - LIC Premium / ELSS funds / PPF / NPS / School Tuition fees for children
- 80CCC - Premium to be paid for annuity plan
- 80CCD - Additional contributions made to NPS
- 80D - Health / Medical Insurance Premium
- 80E - Interest on Education Loan
- 80G - Donations to organisations specified
- 80TTA - Interest from Savings Bank account
Download well organized PDF format of Form 12BB below: