Investment Proofs You Need Submit to Lower TDS Cut from Your Salary

Submitting the appropriate investment proofs, you can potentially lower the amount of TDS deducted from your earnings. Read further to avail tax benefits of a lower TDS cut from your salary.

10,240 Views | Updated on: Mar 12, 2024

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Tax planning in India has become accessible and easier to adopt due to the rising digitization and access to various sources and references. It plays a vital role in handling finances effectively. Understanding the investment proofs required can make a significant difference to tax liabilities.

Whether you are a seasoned expert or just starting your career, understanding TDS can prove to be a game-changer in optimizing your tax obligations. By making smart investment choices and presenting the correct proof, you can not only reduce your TDS cuts but also enjoy financial security and potentially enhance your wealth over time.

So, let us embark on this knowledge-packed journey together, uncovering the investment proofs that can help you minimize your TDS deductions and boost your take-home salary.

What is Tax Deducted at Source (TDS)?

Tax Deducted at Source (TDS) is a type of income tax deducted from the amount of money paid during specified payments, such as salaries, rents, professional fees, commission, interest, etc., by the person making the payment.

Normally, the individual receiving income is liable to pay an income tax. But the government, with the help of TDS, ensures that the income tax is deducted in advance from the payments. The receiver of income gets the net amount (after reducing TDS).

What is TDS on Salary and its Significance?

TDS deducted on salary is a way for the government to collect taxes directly from individuals’ income. When it comes to salary, employers deduct a certain percentage of tax from your salary each month as per the income tax rules. This deduction is essential for managing financial liabilities. Let us have a look at different ways in which TDS can be significant:

Tax Compliance

TDS on salary ensures tax compliance by making it mandatory for employers to deduct and deposit the tax on behalf of their employees. It helps in lowering tax evasion and promotes a transparent tax system.

Regular Cash Flow to the Government

By deducting tax at source, the government receives a regular inflow of tax revenue throughout the year. This aids in managing government finances and meeting various public expenditure requirements.

Ease of Tax Payment

TDS simplifies the tax payment process for employees. The tax liability is distributed over the year through monthly deductions from the salary rather than having to pay the whole amount at the end of the fiscal year. This reduces the burden of a lump sum tax payment.

Accuracy in Tax Calculation

Employers are responsible for estimating the correct amount of tax to be deducted based on the applicable tax slabs, exemptions, and deductions. This ensures that the tax deducted is accurate, avoiding any underpayment or overpayment of taxes.

TDS on Salary Certificate

The salary certificate or Form 16 is an essential document for individuals while filing their income tax returns. It helps the employee reconcile the TDS deducted by the employer with the taxes payable for the financial year.

This certificate includes details of the salary earned and the TDS deducted during the financial year. A salary certificate typically contains the following information:

Employer Details: Name, address, and Tax Deduction and Collection Account Number (TAN) of the employer.
Employee Details: Name, Permanent Account Number (PAN), and address of the employee.
Financial Year: The period for which the Salary Certificate is issued (e.g., April 1, 2022, to March 31, 2023).
Salary Breakup: Details of the salary components, such as basic salary, allowances, perquisites, and deductions.
TDS Details: The amount of TDS deducted by the employer on behalf of the employee.
Other Income: If the employee has any other sources of income, such as interest income or rental income, those details may be included.
Tax Computation: The Salary Certificate may also include the computation of income tax based on the employee’s salary and other relevant factors.
Acknowledgment: The certificate may include a declaration from the employer certifying the accuracy of the information provided.

Investment Proofs to be Submitted to Reduce TDS on Salary

While it may not be absolutely possible to avoid TDS on salary altogether, you can minimize its impact through certain methods:

Tax Exemption for Leave Travel Allowance (LTA)

LTA is an allowance provided by employers to cover your travel expenses during your leave. By submitting proof of your travel expenses, you can claim exemptions on LTA, reducing your taxable income and thereby lowering TDS.

Investment Proof: Submit the travelling bills, such as copy of train, air or bus tickets. You can also submit hotel bills or other bills.

Tax Exemption for Public Provident Fund (PPF)

Contributions made to PPF accounts are eligible for deductions under Section 80C. By showing PPF documents, you can reduce your taxable income and subsequently avoid higher TDS deductions.

Investment Proof: You have to submit a copy of your PPF passbook. If you don’t have a passbook, you can upload a printout or screenshot of your PPF statement from the website.

Medical Insurance Premiums

By paying premiums for medical insurance policies, you can claim deductions under Section 80D. This not only provides you with healthcare coverage but also reduces your taxable income and subsequently lowers TDS.

Investment Proof: You can present a copy of your policy agreement along with any receipts the insurance provider issues after you pay your premiums.

Tax Exemption for National Pension System (NPS)

Contributions made to NPS accounts are eligible for deductions under Section 80CCD(1B). By investing in NPS, you can reduce your taxable income and consequently save on TDS.

Investment Proof: To receive tax benefits, a copy of the Annual Transaction Statement (Tier I) can be used as investment proof.

Tax Exemption for House Rent Allowance (HRA)

If you are a salaried person living in a rented house, you can claim exemptions on your HRA as per the provisions of the Income Tax Act. This helps in reducing your taxable income and minimizing TDS.

Investment Proof: Rent receipts for each month are required. You can provide receipts proving license fee payment if you and your landlord have a leave-and-license agreement.

Sukanya Samriddhi Account

Investment Proof: You have to present a copy of the passbook of Sukanya Samriddhi Yojana to be exempted from TDS.

Tax Exemptions for Donations

Donations made to eligible charitable organizations are eligible for deductions under section 80G of the ITA (Income Tax Act). By contributing towards noble causes, you not only make a positive impact but also reduce your taxable income and minimize TDS.

Investment Proof: You have to submit a receipt from the trust or charity you donated the money to. The receipt should contain information such as your name, address, the amount donated, the trust’s PAN number, etc.

Did You Know?

TDS is also applicable to payments made to contractors, freelancers, and other non-salaried individuals. The TDS rates for these payments vary depending on the nature of the payment.

Conclusion

In a world where financial stability and independence are paramount, being proactive in reducing TDS deductions from your salary through the submission of investment proofs is an essential strategy. It allows you to take control of your finances, optimize your tax liability, and work towards achieving your financial goals. So, gather your investment proofs, engage in comprehensive tax planning, and pave the way to a brighter and more prosperous financial future.

Key Takeaways

Understand TDS to effectively optimize tax liabilities and reduce TDS cuts from your salary.
Investing in tax-saving instruments like EPF, PPF, NPS, and tax-saving fixed deposits can help lower taxable income and save on TDS.
Submitting investment proofs, such as rent receipts and medical bills, allows for exemptions to be considered while calculating TDS.
Knowing about deductions and exemptions under the income tax act, like HRA, housing loans, and charitable donations, can further reduce taxable income and minimize TDS deductions.

Investment Proofs You Need Submit to Lower TDS Cut from Your Salary

What is Tax Deducted at Source (TDS)?

What is TDS on Salary and its Significance?

Tax Compliance

Regular Cash Flow to the Government

Ease of Tax Payment

Accuracy in Tax Calculation

TDS on Salary Certificate

Investment Proofs to be Submitted to Reduce TDS on Salary

Tax Exemption for Leave Travel Allowance (LTA)

Tax Exemption for Public Provident Fund (PPF)

Medical Insurance Premiums

Tax Exemption for National Pension System (NPS)

Tax Exemption for House Rent Allowance (HRA)

Sukanya Samriddhi Account

Tax Exemptions for Donations

Did You Know?

Conclusion

Key Takeaways

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