What is Form 12BB? – All You Need to Know

What is Form 12BB? – All You Need to Know

There are several tax-saving investments that salaried employees can consider for reducing their tax liabilities. Moreover, there are also expenses such as house rent, housing loan interest, tuition fees, leave travel, etc., that are eligible for deductions. 

At the end of a financial year, employees must submit an estimate of tax-saving investments and expenses to their employers through Form 12BB. Here’s everything you should know about it. 

What is Form 12BB?

In simple words, Form 12BB is a declaration form for claiming tax deductions. All the salaried employees should submit 12BB to their employers with an estimate of their tax-saving investments and expenses. At the end of the financial year, employees should also submit detailed proof of these investments and expenses. 

It is based on the details provided by an employee in Form 12BB that the employer deducts an estimated TDS (Tax Deducted at Source) from the salary. 

What Investments and Expenses Can You Include in Form 12BB?

Here are the investments and expenses you can include in Form 12BB to get tax benefits.

  •      House Rent Allowance (HRA)

Under Section 10(13A), salaried employees living in a rented house can claim a full or partial tax deduction on the HRA they receive from their employers to reduce their tax liabilities. 

  •      Interest on Home Loan

Salaried employees currently repaying a housing loan can also claim a tax deduction on the interest component under Section 24 of the IT Act. The principal component of home loan repayment is also eligible for tax deductions under Section 80C. 

  •      Leave Travel Allowance (LTA)

Salaried employees who receive LTA from their employers can claim deduction on the same under Section 10(5). 

  •      Deductions on Investments

Apart from the expenses mentioned above, employees can also claim deductions on the following investments and include them in Form 12BB:

–         Section 80C- Life insurance premiums and investments in PPF, NPS, or ELSS and child tuition fees, etc. 

–         Section 80CCC- Annuity plan premiums

–         Section 80CCD- Additional contributions to NPS

–         Section 80D- Health insurance premiums

–         Section 80E- Interest component of education loan

–         Section 80G- Donations to eligible organizations

–         Section 80TTA- Interest generated from a savings bank account

What If Employer Deducts Higher TDS?

The details included in Form 12BB are only an estimate of the income tax deductions an employee would like to claim in the financial year. Based on the details submitted by the employee, the employer will deduct an estimated TDS. As tax deduction is based on an estimate, an employer might deduct higher TDS than what is applicable to an employee. 

In such cases, employees can claim a TDS refund by submitting the required proofs while filing tax returns. If your claim is genuine and supported by evidence, you will receive a refund of excess TDS. 

Final Word

As salaried employees, you can find many investment products to suit your long-term financial goal and risk-taking capacity. You can take advantage of these investment instruments to secure your family’s financial future and at the same time enjoy tax benefits. And, while the IT Act guarantees various benefits, ensure that you claim them without fail by submitting the Form 12G with the Income Tax department. 

Victoria Reed

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