Everything to know about Form 12BB - Investment Declaration Guide

At the outset of every tax filing period, your employer’s human resources (HR) department will request information about any of your investments that qualify for tax breaks. They need this information to compute your tax deductions at source (TDS) details. An investment declaration allows you to lower your tax burden while increasing your take-home pay. If you are wondering how to disclose your investment, Form 12BB of income tax will come in handy.
 

What is Form 12BB?

Form 12BB is basically a declaration statement detailing the many claims you have filed to obtain tax benefits. The form applies to salaried employees only. According to the Indian Income Tax rules, filing this form is mandatory if you want to receive tax rebates on your investments. You need to submit this form to your company’s HR at the end of every financial year.
 

Form 12BB purpose

 
The Income Tax Act authorises your employer to offer you tax benefits for your investments and deductible expenses made during a financial year. The employer deducts the tax from your monthly salary depending on the declarations provided on Form 12BB.
 
This form serves as a foundation for TDS computation for salaried employees. However, you will not be eligible for relief from TDS if you fail to submit this form.
 

What information is required on Form 12BB?

 
Form 12BB requires the following information:
 

• Your personal details such as name, address, and PAN details
• House rent allowance
• Leave travel allowance
• Interest on home loan
• Deductions available under Chapter VI-A of Income Tax

 

What investment declaration can you make in Form 12BB?

 

1. House Rent Allowance (HRA)

   HRA is a type of allowance your employer provides to cover the cost of your rented accommodation. The HRA exemption is addressed in Section 10(13A) and Rule 2A of the income tax act.
    

   Things you need for claiming HRA tax benefits

   • The actual amount of rent paid
   • Landlord's name and address
   • PAN details of your landlord if the rent you have paid during the year is more than Rs 1 lakh. 
    

   When can you claim HRA?

   • HRA tax benefits under Form 12BB are available only if it is part of your cost-to-company (CTC).
    
   • If HRA is not your CTC’s component and you reside in a rented property, you can file a tax deduction separately under Section 80GG. 
    
   • You will need to furnish a rent receipt if your monthly rent is more than Rs 3,000.
    
   • You cannot claim HRA benefits if you live in your own house. 
    
   • Always have a documented rent agreement on a Rs 500 stamp paper or at the rate fixed in your state.
    

2. Leave Travel Allowance

   A Leave Travel Allowance (LTA), sometimes referred to as Leave Travel Concession, is an allowance provided by your employer you can use when going for a vacation. The LTA amount varies for each employee within the same organisation and is based on their hierarchical rank.
    

   Documents required for claiming LTA

   You might need to provide any or a few of the following documents to claim LTA tax benefits:
    
   • Boarding pass
   • Flight tickets
   • Sales invoice from the travel booking agent
    

   When can you claim LTA?

    
   • LTA tax benefits are available only if it is your CTC's component.
    
   • LTA tax benefits are available for yourself, dependent parents, spouse, children, and dependent siblings.
    
   • You can claim LTA twice in each four-year block period.
    
   • In case you have only claimed one LTA in the previous block period, you have the option to carry forward the second LTA to the next block period. However, you must file a claim in the first year of the new block period to avail tax benefits.
    
   • LTA benefits do not apply to international travel.
    

   Maximum fare eligible for tax exemption under LTA:

   Mode of Transportation	Exemption Limit
   Airway	National carrier's economy class fare for the shortest route to your destination or the actual amount spent, whichever is less.
   Railway	Rail ticket charges for the first-class AC for the shortest route to your destination or the actual amount spent, whichever is less.
   Bus	Bus fare for the deluxe class for the shortest route to your destination or the actual amount spent, whichever is less.

    

Also Read: Confused between Income Tax and TDS? Know the Differences!
 

3. Home loan Interest

   If you have a home loan, the interest you pay on it is tax-deductible. In addition, you can claim tax benefits on the principal repayment.
    

   Details and documents required to claim tax benefits under this subhead:

   • Interest paid or payable to the financial institution during the financial year
   • Name, address, and PAN details of the financial institution from where you have availed the loan
   • Possession certificate or proof of construction completion
   • Self-declaration certificate stating whether the house is occupied or rented
   • Loan statement 
    

   When can you claim tax exemption on home loan interest payments?

    
   • In the case of a joint home loan, the tax benefit is available proportionately.
    
   • If you have availed a home loan from a lender other than a financial institution, you can claim deduction under Section 24 only if the lender provides you with an interest payment certificate.
    
   • Home loans obtained from lenders other than financial institutions are not eligible for section 80C tax benefits on principal repayment.
    

   Maximum exemption limit for home loans:

    

   Tax benefits on interest payment

    

   (i) In the case of a self-occupied house

    
   • Maximum permissible deduction of Rs 2 lakhs if you availed loan for house purchase or construction.
    
   • The construction work must be completed within five years of the loan being taken out.
    
   • In case you acquired a loan for reconstruction or repairs, the maximum allowable deduction is Rs 30,000. 
    

   (ii) In the case where the property is let out

    
   • Maximum interest deduction of Rs 2 lakh.
   • If you paid more than Rs 2 lakhs in interest, you could carry forward the excess to set off in subsequent years.
    

   Tax benefits on principal repayment

    
   • This type of deduction is available under Section 80C, and the maximum deduction limit is Rs 1.5 lakhs.
    
   • The maximum deduction of Rs 1.5 lakhs includes all other investments and expenses that are tax-deductible under Section 80C.
    

List of deductions under Chapter VI-A of the Form 12BB

 

• Section 80C

  This section of the Income Tax Act provides a tax deduction for the premiums paid for life insurance and home loan principal repayment. You can also claim a deduction for the investment made in the National Pension Scheme (NPS), Equity-linked Savings Scheme (ELSS), Public Provident Fund (PPF), etc. The maximum deduction permissible under this section is Rs 1,50,000.
   

• Section 80CCC

  This section deals with the premium paid towards annuity plans. It also includes a bonus or interest levied on the annuity.
   

• Section 80CCD

  If you contribute more than the minimum amount to your NPS account, you are eligible to claim a tax deduction under this clause.
   

• Section 80D

  This section is about health insurance premiums. You can claim a Rs 25,000 tax deduction if you get health insurance for yourself, your spouse, your dependent children, and your parents. If the policy is purchased for senior citizen parents, an additional deduction of Rs 25,000 is available.
   

• Section 80E

  This section deals with the interest paid on the education or student loan.
   

• Section 80G

  In case you have made donations to government-approved NGOs or charitable trusts, you can claim a deduction under this section.
   

• Section 80TTA

  The interest you have earned on the deposits of the savings account is eligible for deduction under this section.
   

What should be considered before completing Form 12BB?

 

• Review your salary breakup to understand if HRA and LTA are components of your annual salary package. 

 

• Ask your financial institution to provide you with the interest certificate or loan statement. You must also request for your recent account statement. 

 

• File all receipts necessary for submitting Form 12BB. Some of these include donation receipts, rent receipts, tuition fee receipts, travel fare invoices, life insurance and health insurance premium receipts, etc.
   

• In case you switched multiple jobs during a year, then avoid claiming maximum tax benefits on the list of deductions/ exemptions available under Form 12BB. It will be considered an incorrect disclosure and you will end up paying taxes on the same with the applicable penalty. 
   

• You cannot submit Form 12BB directly to the Income Tax Department.
   

• Perquisites not covered by Form 12BB can be claimed on Form 12BA of the Income Tax.

 
Also Read: Take Advantage of Lesser Known Income Tax Deductions

Conclusion:

 
Form 12BB is a crucial form for salaried employees. It serves as the foundation for your employer's TDS computation. You can declare your investment along with various allowances that are part of your salary to reduce your tax liability. It is better to prepare this form in advance along with the required document proofs for a given financial year. Otherwise, you might need to apply for excess tax refunds when filing your income tax.