All you need to know about Form 12BB to claim Income Tax Deductions:
Prior to the circular issued by Ministry of Finance, employees were required to submit self-declaration of their investments/ expenditures to their employers for the purpose of income tax deduction at the start of every financial year. Also, there was no standard format or rule for the employees to disclose the details of their investment or expenditure and submit the proofs of the same to the employers.
However, with effect from June 01, 2016, the Central Board of Direct Taxes (CBDT) has introduced Form 12BB which has to be used by the salaried employees to claim Income Tax deduction with the employer. It has also been mandated to furnish the evidence of claims for the investments/expenditures to the employer for the calculation of Tax Deducted at Source. In agreement with this, the following rule was inserted by the Central Board of Direct Taxes (CBDT) in the Income-tax Rules, 1962:
Rule 26C: Furnishing of evidence of claims by employee for deduction of tax under section 192:
(1). The assessee shall furnish to the person responsible for making payment under sub-section (1) of section 192, the evidence or the particulars of the claims referred to in sub-rule (2), in Form No. 12BB for the purpose of estimating his income or computing the tax deduction at source.
(2). The assessee shall furnish the evidence or particulars specified under the ” Evidence or particulars” column in the table below corresponding to the claim specified in “Nature of claims” column as listed in the table below:
Form 12BB is a standard form introduced by the Central Board of Direct Taxes under new rule 26C of the Income Tax Rules, 2016. It is required by the salaried employees to use this form for claiming Income Tax deduction under the following heads:
1. House Rent Allowance
2. Leave travel concessions or assistance
3. Deduction of interest on Home loan
4. Deduction under Chapter VI-A that includes deduction under various sections such as Section 80C, Section 80CCC and Section 80CCD, other sections such as 80E, 80G, 80TTA, etc.
Investment/ Expenditure proof to be submitted under the above heads
1. House Rent Allowance:
In case you are a salaried employee and is staying in a rented house thereby receiving an HRA, HRA so received is taxable under the head “Income from Salaries”. However, on some part of HRA, you can claim for tax exemption under Section 10(13A) of the Income Tax Act, 1961. HRA exemption is based on the below options:
• Place of Residence
• Rent Paid
• HRA Received
Effective from June 01, 2016, you have to claim HRA using Form 12BB. You also need to provide the documentary proof of the Rent paid to the landlord i.e. Rent Receipts along with furnishing details such as the amount of Rent paid to the landlord, Name and Address of the landlord, Permanent Account Number of the landlord.
Note: Permanent Account Number shall be furnished if the aggregate rent paid during the previous year exceeds one lakh rupees.
2. Leave Travel Concessions or Assistance:
Employees are now required to furnish the amount and proof of travel expenses in the form of receipts to the employer in Form 12BB while claiming for LTA/LTC.
3. Deduction of interest on Home loan:
To claim the tax deduction on interest payable on home loans under Section 24, earlier you were required to submit an interest certificate acquired from the respective bank. However, effective from June 01, 2016, you have to furnish the details of the Intere st payable/paid to the lender, Name of the lender, Address of the lender, Permanent Account Number of the lender i.e. Financial Institutions/ Employer/ Others (if available) in Form 12BB while claiming for tax deduction.
4. Deduction under Chapter VI-A:
This includes deduction under various section such as Section 80C, Section 80CCC, Section 80CCD, 80E, 80G, 80TTA, etc. To claim deductions under these sections, you have to provide the details of the investments/expenditure in Form 12BB along with submitting the proof of investments/ expenses such as receipts.
The employers will be required to assess the evidence/ proof submitted by the employees for the investments/ expenditures claimed for the computation of the Tax Deducted at Source.
You can download Form 12BB from the link below:
The above form shall bring the transparency in claims made by the employees for income tax deduction as one has to submit the documents of proof for the claim. It will help the employer to calculate the tax liability in a more accurate way as they will have the proof of investments/expenditures. Further, it will be helpful for the income tax authorities to detect a false claim.