A Very Simple Guide to Form 12BB

A new form 12BB is introduced by Central Board of Direct tax.  Form 12BB is applicable from June 1, 2016. Every employer and employee needs to know about form 12BB. The Form 12BB is for all salaried employees to claim tax deductions. Earlier there was no standard format for salaried employees in which they could furnish their investment details to their employer.

Form 12BB is a single entity that employee could use to declare their investment and claim tax deductions under HRA (House rent allowance), LTA (Leave travel allowance), Section 80, and interest paid on home loans under Section 24 of Income Tax Act. It is to submitted at the beginning of the new financial year or at the time of joining of a company any time during the year. Documentary evidences are needed to be provided at the end of the financial year. TDS (tax deducted at source) will be deducted by employer on the basis of declaration made in form 12BB from monthly salary of the employee.

Click to download Form 12BB

12bb1

  1. Basic Details

First part of form consist of basic information of the employee i.e. Name, Address, PAN (Permanent Account Number) and the financial year.

  1. House Rent Allowance (HRA)

House rent allowance is exempt under section 10(13A) of Income Tax Act. In this part of Form 12BB Employee can claim HRA deductions. For claiming deductions under this section employee has to provide documentary evidences i.e. Rent receipts. He also have to mention his landlord’s Name and address along with Rent amount paid to the landlord. Landlord’s PAN card number is also to be mentioned if rent paid during the previous year exceeds Rs. 1 lakh.

12bb23. Leave Travel Allowance (LTA)

As per section 10(5) of Income tax act, Leave travel allowance is exempt. Employee has to submit details of the amount spent on travelling and provide evidences of expenses made towards the travel. Earlier it was not mandatory to provide proofs of all travel expense but the new rule makes it mandatory for providing the evidences in form of receipts for claiming deduction.

  1. Deduction of Interest on borrowing

As per Section 24 of Income tax act, interest paid for your home loan is tax deductable. In past, if any employee seeks tax deduction for interest paid for his home loan, he had to submit an interest certificate from the concerned bank. But now, he not only has to submit the interest certificate along with Form 12BB to claim tax deductions under section 24. In Form 12BB he need to mention the details like interest amount paid to lender, name and address of the lender including bank or non-banking financial company (NBFC) and PAN Number of the lender.

12bb35. Deductions under Chapter VI-A

All tax deductions under 80C, Section 80CCC and Section 80CCD as well as Other sections like 80E, 80G and 80TTA come under Chapter VI-A of the income tax act. To claim deductions, fill up Form 12BB and provide details and proof of the investments and expenditures incurred related to relevant section.

Various Deductions under Chapter VI-A

  • 80C: Premium paid for life insurance, investment made in ELSS funds, PPF, NPS and school tuition fees for children etc.
  • 80CCC:Premiuim paid for annuity plan
  • 80CCD: Additional contributions made to NPS
  • 80D: Premium paid for medical insurance
  • 80E: Interest paid on educational loan
  • 80G: Donations made to specified organization
  • 80TTA: Interest income earned from saving bank account.

Since Form 12BB is submitted at the beginning of a financial year and proofs are to be submitted at the end of the financial year, it is possible that an employee might find himself in three different situations that are:

  1. Investment is less than declared sum: Employer will compute TDS according to declaration made. But if overall investments made are less than declaration, employee may end up paying more tax. He needs to file tax return and seek refund of any excess tax paid or deducted by employer. With the new norms Form 12BB is needed for availing such refunds.
  2. Investment is equal to declared sum: If investment is equal to declared sum, employer will be deducting just the right TDS from your salary, thus eliminating chances of any tax refund.
  3. Investment is more than declared sum: If the investment is more than declared sum, employee may be eligible for further tax exemptions than initially sought. For claiming tax refund employee has to file tax return using Form 12BB.

About the Author

arpit goyalArpit Goyal is pursuing CA and B.com & also working as an article assistant in Gurgaon. He has an immense interest in Taxation. He loves to use technology to spread knowledge about taxation & accounts.

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