Complete Guide on Tax Declaration

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Complete Guide on Tax Declaration

As a taxpayer, you are required to pay a specific amount of tax to the government based on your income. However, there are various aspects of taxation that you must have come across. One among them is income tax declaration.

In simple words, a tax declaration is a document that lists all the tax-saving investments the employee expects to make in the financial year. It is typically submitted at the beginning of the financial year.

Continue reading to discover more about income tax declarations for salaried employees and self-employed individuals.

What is a Tax Declaration?

A tax declaration is a formal statement made by an individual or entity to the relevant tax authority, disclosing details about their income, assets, expenses, dedication and other financial information for a specific period, typically a fiscal year.

This declaration is crucial for determining the amount of taxes owed or refundable to the taxpayer. It serves as a means for taxpayers to comply with tax laws and regulations, ensuring transparency and accountability in their financial affairs.

Tax declarations vary in complexity depending on the jurisdiction’s tax laws and the taxpayer’s financial situation. Accuracy and honesty in completing tax declarations are important, as incorrect or fraudulent information can lead to penalties, fines or even legal consequences.

Refusing or forgetting to submit the tax declaration on time can result in receiving an income tax statement letter or a legal notice from the tax authority, prompting further action to ensure compliance with tax laws.

Why is Tax Declaration Important

Tax declaration is crucial for several reasons. Here are some key reasons why tax declaration is important:

Legal obligations: Indian citizens and organisations are mandated by law to declare their income and pay taxes accordingly. The Income Tax Act of 1961 governs the tax regime in India, and adherence to its provisions is an obligation for all eligible taxpayers. Failure to file the declaration by missing the tax declaration's last date may lead to legal consequences, including penalties.

Facilitating TDS calculation by employers: Employers rely on the information provided by employees in their tax declarations to calculate TDS accurately from their salaries. By declaring investments, expenses and other income sources, employees help employers determine the correct amount of tax to be deducted from their salaries each month.

Ease of ITR filing: When you submit a tax declaration to your employer at the beginning of the financial year, it becomes easier for you to file your tax return at the end of the year. The same documentation can be used to ensure consistency and correctness of the information provided.

Enhancing governance and accountability: Tax declaration fosters transparency, accountability, and good governance in India. It enables the government to track income patterns, assess the tax liabilities of individuals and entities, and monitor compliance with tax laws. This data-driven approach not only strengthens the tax administration system but also promotes public trust in the government's ability to manage public finances effectively.

How to Fill an Income Tax Declaration Form?

Filling out a tax declaration form in India is a crucial task for every taxpayer. Whether you are an individual, a business or an organisation, accurately reporting your income and other financial details is important to comply with the country’s tax laws.

Here is a guide on how to fill out an income tax declaration form in India.

  • Start by visiting the Income Tax Department of India.

  • Look for the Income Tax e-filing portal.

  • After opening the portal, click on the “Forms” and download the form 12BB.

  • Once you have downloaded the form 12BB, fill in all the details required in it, including your name, date of birth, employee code, gender, etc.

  • Ensure to mention details, including home rent allowance, deductions for the premium paid for insurance, home loan, etc.

  • After filling in all details, ensure to sign the form and hand it to your employer.

Useful links:

  • Form no 12BB

  • Pay Tax Online

What is Form 12BB?

  • Form 12BB is a document that plays a crucial role in the tax filing process in India. It serves as a declaration form for employees to provide details of their investments, expenses and other financial aspects to their employers.

  • Form 12BB assists employers in calculating and deducting the correct amount of tax at source (TDS) from their employees' salaries.

  • Form 12BB requires employees to furnish details of various allowances, perquisites, and other benefits received from their employers. These may include house rent allowance (HRA), leave travel allowance (LTA), deductions under section 80C (such as investments in provident fund, life insurance premiums, etc.), and any other allowances or reimbursements received.

  • This allows employees to verify that the TDS deducted from their salaries is appropriate and reflects their actual tax burden depending on their investments and spending. This helps to prevent excessive deductions of tax at the source, ensuring that employees do not incur needless financial difficulties.

  • Form 12BB also serves as a record of the employee's income, investments, and expenses, which can be useful during the assessment of their tax liability by the Income Tax Department.

Therefore, it is important for employees to accurately fill out Form 12BB and submit it to their employers within the specified timeframe.

Types of Investments and Expenses that Can Be Declared

Investment options under section 80C

Including investment options in your portfolio that now not only aim at wealth creation but also aid in tax savings is a wise decision. You can consider investing in Employee Provident Fund (EPF), Public Provident Fund (PPF), Equity-Linked Savings Scheme (ELSS) and others which are eligible for tax relief under section 80C.

House Rent Allowance (HRA)

House Rent Allowance (HRA) provides individuals with tax benefits on the rent paid for accommodation. Employees receiving HRA as part of their salary can declare a portion of their rent expenses to claim tax exemptions. The amount eligible for declaration depends on factors such as salary structure, actual rent paid, and location of residence.

Health Insurance Premiums

Health insurance policy offers financial coverage at the time of medical emergencies. The premium paid for obtaining this insurance is eligible for tax deduction under section 80D.

Life Insurance Premiums

Investing in life insurance not only offers financial protection but also presents opportunities for tax savings. Premiums paid towards life insurance policies qualify for deductions under Section 80C of the Income Tax Act. By declaring these premiums, individuals can reduce their taxable income, thereby lowering their tax liabilities while securing their family’s future financial well-being.

Home Loans

Homeownership is a successful milestone for many individuals, and home loans serve as a popular financing option. Tax benefits associated with home loans can be claimed under multiple sections of the Income Tax Act:

Principal Repayments: Repayments towards the principal amount of the home loan are eligible for deduction under Section 80C.

Interest Payments: Interest payments on home loans are eligible for deductions under Section 24(b) of the Income Tax Act. Individuals can declare the interest component of their home loan repayments, subject to specified limits and conditions.

How Can Tata AIG Health Insurance Policy Help in Tax Saving?

Tax declaration is a vital aspect of financial planning, and health insurance premiums are often included in this declaration for tax benefits. As individuals seek ways to optimise their tax liabilities while securing their health, options like Tata AIG Health Insurance emerge as a compelling choice.

Tata AIG provides a comprehensive health insurance policy tailored to meet diverse needs, ensuring financial protection against medical expenses.

With competitive premiums, Tata AIG stands out in providing low-premium health insurance without compromising on coverage.

Our critical illness insurance plans offer additional layers of security, addressing specific health concerns comprehensively. In a market flooded with health insurance plans in India, Tata AIG's commitment to affordability and reliability makes it a preferred choice for individuals and families alike.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

Related Articles

How can I minimise my tax liability through tax declaration?

How can I minimise my tax liability through tax declaration?


There are various strategies you can use to minimise your tax liability, including claiming deductions and credits, contributing to retirement accounts, and structuring your income in a tax-efficient manner. Engaging with a tax professional can help you identify the best strategies for your individual situation.

Do I need to hire a professional to help with tax declaration?


While it's possible to file your tax declaration on your own using tax preparation software or paper forms, many people choose to hire a professional tax accountant, especially if their tax situation is complex. A tax professional will ensure that your tax return is legit and you get benefits of all available deductions and credits.