Tax Declaration Vs Tax Return Filing

As we get closer to filing our taxes, it’s important for employees to understand the nuanced difference between income tax declaration and tax return filing. The former involves providing information to an employer, while the latter is when one actually files their taxes.

For salaried employees, tax declaration is the process of sharing their investment intentions with their employers via Form 12BB. This helps them claim tax benefits and influences the final TDS figure deducted from their salary. It is required to be shared at the beginning of a financial year, usually in January or February.

The tax declaration process is a series of steps that includes the preparation of documents and verification of proofs. These proofs include investments (like PPF, life insurance, and annuity plans), allowances like Leave Travel Allowance (LTA) and House Rent Allowance (HRA), interest paid on home or educational loans, and more. Each of these items is accounted for when calculating an employee’s net taxable income and determining their tax slab rate.

The payroll and finance teams must collect, verify, and submit these investment proofs to the employer so that they can be used as deductions and for remitting TDS. The easiest way to do this is to have the employee upload their documents to an online portal that can be easily accessed by both the employer and the payroll team. Alternatively, some employees also provide this information to the company manually, which can also be verified by the payroll team.Steuererklärung