Income Tax Return (ITR) filing is a must for salaried employees having an annual income above Rs 2.5 lakh. The Income Tax rules have several provisions through which employees can reduce their overall tax outgo. However, it has been observed that many employees fail to make the most of these tax-saving provisions. This article explains five common problems faced by salaried employees and their solutions.
Unawareness about available deductions
A large number of salaried employees are unaware of the deductions available to them over and above Section 80C of the Income Tax. “Therefore tax planning awareness needs to be created for the following deductions i.e 80CCD(1B)/80D/80E/80EEA/80EEB/80G/80TTA/80TTB/80U to reduce tax liability,” says Sujit Bangar, Founder of Taxbuddy.com.
Lesser TDS deducted due to multiple Form 16
Whenever an employee changes his/her job, the employer claims standard deduction and Basic Exemption due to which TDS is less deducted and the employee ends up paying self-assessment tax along with interest at the time of return filing.
“To overcome this employee should declare the income earned from the previous employer to his current employer so that it gets reflected in Form 16 also and accordingly TDS is deducted,” says Bangar.Not able to avail of HRA (House Rent Allowance) tax relief
Several employees often fail to submit HRA documents to their employers on a timely basis. Hence, the employer does not consider HRA exemption while computing tax liability, which in turn leads to a higher deduction of TDS throughout the year. As per tax experts, employees should take the following actions to avoid such a scenario:
- Provide a declaration of rent at the start of the year
- Submit the rent agreement, rent receipts and other documents as required by the employer in a timely manner.
- Claim deduction u/s 80GG up to 60000 if he doesn’t receive HRA from his employer.
Interest and penalties due to non-payment of Advance tax on income other than Salary
Salaried employees are often under the impression that TDS is being deducted by their employer and hence no advance tax is required to be paid by him. However, this leads to interest and penalty u/s 234B & 234C at the time of return filing.
Employees should take the following steps to avoid such situations:
- Declare all income other than salary to the employer at the beginning of the year
- 90% of the total tax liability should have been paid before the end of the financial year
Missing out on reporting income as reflected in AIS (Annual Information Statement)
A salaried person may underreport his income if AIS is not checked or there is a mismatch of income reflected in 26AS.
“To ensure accurate reporting of Income, the employee should match the figures and reconcile it with employer/Form 16 in case of any discrepancy in Form 26AS. Moreover, the salaried employee should report all the income showing in AIS and if there is inaccuracy then correct the information in AIS by providing feedback online/offline,” says Bangar.