Have you failed to report some tax saving investment to your employer or did you make the investment after submitting your investment declaration to the employer. You can claim all the deductions/ exemptions under section 80C,80D while filing of Income Tax Return for the relevant financial year. This article will explain how to claim tax saving deductions not accounted by employer in ITR under section 80 with examples and images.
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Deductions That an Employee Missed and can Claimed while Filing ITR
Missing the income tax proof submission deadline or tax saving investments as declared in the beginning of the financial year, April. Or missing submitting bills for your reimbursements results in higher tax being deducted from Salary in month of Feb and Mar. But many tax deductions and exemptions can be directly claimed while filing your income tax return, even though proofs for these were not submitted to the employer timely. So you can get a refund from the Income Tax Department if more has been deducted then due. Even though these do not show up on your Form 16, since you could not inform your employer about them, you can claim these in your tax return. Have the requisite details at the time of filing your return and claim them in the relevant sections. The deductions that an employee missed and can claim while filing ITR is as follows:
- House Rent Allowance exemption under section 10.
- Claim deductions under section 80C: If you made deposits to PPF or purchased NSC certificates, or made payments for any deductions covered under section 80C, you can claim all of these at the time of return filing.
- Bills for preventive health check-ups:If you have not yet exhausted your deduction limit under section 80D and you have a bill for a preventive health check-up, you can claim this bill and get a maximum of Rs 5,000 as a deduction. This can be filled in ITR under section 80D.
- House Loan Details: If you have missed submitting your loan certificate details to your employer. You can save on Interest on Home Loan while filing ITR.
- Deduction on home loan interest cannot be claimed when the house is under construction. It can be claimed only after the construction is finished.
- To claim Home Loan Interest , The home loan must also be in your name. A co-borrower can claim these deductions too.
- An individual can claim deduction of up to Rs.2 lakhs (Rs. 1,50,000 till AY 2014-15) on his home loan interest if the owner or his family reside in the house property or the house is vacant
Do note that you don’t have to submit any deduction or investment proofs to the Income Tax Department whiling filing ITR. Returns are submitted without attaching any files or physical documents. But you must keep them safely these proofs with you for 6 years, lest you receive an Income Tax Notice and the Assessing Officer calls for them.
Deductions missed by Employee which cannot be claimed while filing ITR
Please note that the following cannot be directly claimed while filing your return. You can only claim it through your employer.
LTA: Expenses on a trip during the year against your LTA can only be claimed via your employer. LTA is allowed to be claimed twice in a block of four years. The current block is 2014 to 2018. There is some relief available as you are allowed to carry forward your unclaimed LTA to the next year, so you can request your employer to not deduct tax on it and allow you to claim it next year. But if you have not made that declaration for FY 2015-16 and TDS has already been deducted on LTA, you cannot get a refund of that TDS.
Medical Reimbursement : if you didn’t submit your medical bills your employer will deduct tax and pay you the remaining amount.
Claiming HRA not accounted by employer
But if for some reason you could not submit Rent Receipts or employer did not consider it , you can claim it while filing ITR. When HRA is not accounted by employer, more TDS is deducted from salary. It may happen that may be eligible for refund if net tax paid is more due from you. So claiming HRA not given by employer in ITR involves changing following steps. Our article How to show HRA not accounted by the employer in ITR discusses it in detail.
- Calculation of HRA
- Filling the Salary Details in ITR with modifications for HRA
- Checking if Refund is due or not.
Note there is no change in Filling in the TDS details as per Form 16 and verified in Form 26AS or other schedules.
In ITR1 To claim the HRA not accounted by the employer in ITR1 you can deduct the amount of HRA exemption calculated from the Gross Salary and enter it as Income from Salary.
In ITR2 : To claim the HRA not accounted by the employer in ITR2 once you calculate the HRA exemption subtract that from 1(a) ie Salary as per provision contained in sec 17(1) and fill the detail.
So for Example your Gross Salary from Form 16 is 5,30,000 and you have HRA exemption. So instead of shoing 5,30,000 in ITR1 fill in 4,90,000.
Process of Claiming Deductions under section 80 from Employer
Declaration of Investments for Tax Exemption/Deduction by Employee
The income tax act puts the responsibility on the employer to deduct tax at the time of payment of salary to the employees every month. The employer has to deposit the tax with the government before the seventh day of the following month. The TDS rules are very strict and the employer faces stringent penal provisions for non-deduction or non-deposition of tax. Employers also have to file the TDS returns at the end of every quarter of a financial year. So the employers asks employees for declaration of the their proposed investments for tax exemptions/deductions from employees in the beginning of the financial (April itself) . This helps them to calculate the taxable income according to the investments proposed and deduct the tax accordingly. Some common exemptions/deductions are:
- House rent and leave travel allowances are the common exemptions that can be claimed,
- Investments in PPF, NSC, ELSS, life insurance premiums, home loan principal repayment etc are some under common deductions under 80C.
- Interest on housing loan is deduction under Section 24.
- Other deductions include medical insurance premium (section 80D), interest on education loan (section 80E), maintenance of disabled dependent (section 80DD), etc.
Thus, after you submit your tax saving investment proposals, the employer starts deducting taxes from your monthly salary.
Submission of Proof for Proposed Investments before due date
By December or January employer asks for submission of the proofs for all proposed tax saving investments. Some employees fail to make the declaration, while some may give the details but fail to provide the relevant documentary proof within the time frame prescribed by the employer. What if employee fails to invest the amounts (s)he had proposed in the declaration made in the beginning. Ex: employee declared he will invest 20,000 in PPF but does not invest by January or does not buy medical insurance proposed. Then employer needs to recalculate the tax liability and recover the shortfall in tax deducted from the salaries in the remaining months of the financial year. This results in the increased tax liability and employee’s salary getting substantially reduced after paying it. As one month’s salary may not be sufficient for the employer to make up for the TDS shortfall, employer prefers to have two-three months in hand.
Employer issues Form 16 to his employees for each of the financial year (April to March of next year). Form 16 provides details of the salary income of the employee along with the Tax deducted at Source (TDS). What if the employee invests after the deadline for submission. Their might also be cases when employee invests more than proposed, in that case also recalculation of tax liability needs to be done which might not be sufficient to get adjusted in remaining months. This may result in extra deduction of taxes by employer. Then the employees can claim tax exemptions /deductions only while filing tax returns.Employee should then calculate the final tax liability, taking care of tax exemptions/deductions in accordance with the tax laws for that year. And If the total tax liability is less than the taxes paid or deducted during the year, they might even be eligible for a tax refund. In any case deduction of TDS and obtaining Form 16 does not sufficient. One is required to file his/her return of income before the due date i.e., 31st July, incorporating other income in addition to salary income, and pay taxes or claim refunds, whatever the case may be. It is important to keep records of tax investments, in case if the employer does not deduct taxes or deducts extra taxes, and then these certificates can be use for claiming refunds.
Claim tax saving deductions under section 80 in ITR
We shall modify our example taken in Filling ITR 1-Form of Mr T Mehta. Let’s assume that Mr. Mehta did not submit any proof of tax saving investments to his employer. To recap details of Mr Mehta income, investments and TDS are as follows:
- Income from salary : Document proof is Form 16. TDS for salary is updated in the Form 26AS.
- Income from other sources: Interest on saving bank account (Rs 5000) and Interest from Fixed Deposit(Rs 20,000). Documents for:
- Interest on saving bank account document is bank account statement. No TDS is deducted for interest on saving bank account.
- Interest on Fixed Deposit: Document is Form 16A which shows TDS cut by bank at the rate of 10% if interest on the Fixed Deposit in the financial year is more than Rs 10,000 . As Mr. Mehta has earned interest of Rs 20,000 bank would deduct 10% of 20,000 i.e 2000. This is updated in the Form 26AS.
- He earned dividend from stocks and equity mutual funds for amount Rs 2,200. Interest from PPF was Rs 672. This income is tax free or exempted income
- Chapter VI-A Deductions: He has made investments which allow him to save income tax.
- Section 80C: He invested Rs 30,000 in Public Provident Fund (PPF), paid Rs 7,000 as premium for LIC policy. These investments allow him to save tax under section 80C.
- Section 80D : He paid Rs 10,000 for premium of health insurance policy for his family.
- Tax Deducted at Source(TDS) is Interest on Fixed Deposit Rs 2,000 shown in Form 16A given by bank.(Note bank gives TDS only when interest on FD is more than 10,000 in an year)
As he has not submitted the declaration/proof to his employer , employer has deducted more tax. Now Employer has deducted tax(including Education Cess and Surcharge) of Rs 53,951. Earlier TDS deducted was Rs 44,269 . Form 16 of Mr. T Mehta has no change in Gross Total income, as shown in image below.
But the total income after deductions of Chapter VI-A is different. Now it 6,01,900 instead of Rs 5,54,900.
So total tax that the employer will deduct will be calculated as follows:
|Income chargeable at 10%||3,20,000||32,000|
|Income chargeable at 20%||1,01,900||20,380|
|Education Cess @ 3% of Income Tax Payable||1,571|
|Total Tax liability||53,951|
Details of TDS by Employer as shown in Form 16 will be as shown in picture below:
Part B of ITR-1 remains the same
Part C for claiming deductions remains the same, it does not matter whether you submitted the proof to employer or not, as shown in picture below:
We need to now compute tax for Mr. Mehta. Mr. Mehta total taxable income is:
= Salary Income – Deductions + Income from other sources
= Rs 601,900 – 47,000 + 25,000 = 5,79,900 There is no change in computation of tax as Mr. Mehta is man below 60 years of age so his exemption limit as per Assessment Year 2012-13 is 1,80,000. So the computation of his income is given below
|Income chargeable at 10%||3,20,000||32,000|
|Income chargeable at 20%||79,900||15,980|
|Education Cess @ 3% of Income Tax Payable||1,439|
|Total Tax liability||49,419|
So though the total tax liability of Mr. Mehta, including income from interest on saving bank and fixed deposit, is only 49,419 Rs his employer has deducted Rs 53,951. Bank also deducted TDS of Rs 2,000 on his fixed deposit. Mr Mehta has paid tax of 6,532 more as shown in calculations
- TDS paid: Rs 53,951 + 20000 = 55,951
- Tax liability is = Rs 49,419
- Tax paid more = Rs 6,532
He can claim that as refund. So Part D of ITR1 will change as follows:
- Bank Details and information about exempt income would not change.
- As he has paid more tax he would not have to pay Advance Tax and Self Assessment Tax, so Sch IT: Details of Advance and Self Assessment Tax would be empty.
- ITR1 Sch TDS2 will not change for TDS deducted by bank.
- What would change are the details of TDS as shown in picture below.
After filling the form in paper or e-filing he needs to submit it.
Please note that inspite of employer deducting more TDS, employee may have to pay tax if his tax liability is more. So employee may not always claim refund.
For example if Mr. Mehta had earned Rs Rs 60,000 as income from other sources. His net tax liability would have been Rs 56,629 (including surcharge and education cess) which is more than TDS deducted 55,951. So he would have to pay the remaining tax Rs 678 (56,629 – 55,951)
Claiming Home loan while filing ITR
If you own a home, an office, a shop, a building or some land attached to the building say a parking lot then you have Income from House property. The Income Tax Act does not differentiate between a commercial and a residential property. All types of properties are taxed under the head income from house property in the income tax return. Our article How to fill ITR1 for Income from Salary,House Property,TDS discusses it in detail.
A self-occupied house property is used for one’s own residential purposes. This may be occupied by the you or your family, parents and/or spouse and children. A vacant house property is considered as self occupied for the purpose of Income Tax. There is no income from your house property. The gross annual value of this property is zero.
A let out house property is one which is rented for the whole or a part of the year. When a property is let out, its gross annual value is the rental value of the property. The rental value must be higher than or equal to the reasonable rent of the property determined by the municipality.
If you own more than one house property, the I-T Department only counts one property as a self-occupied house. It treats all other houses as rented properties even if they are not rented at all. Rental income calculation is based on what rent a similar property in the area would earn.
Income from House property for 1 Self Occupied House = 0 (Gross value of the house) – Payment of Home loan Interest) – 1/5 of preconstruction loan.
Maximum Income form House property for 1 Self Occupied House that you claim is = Maximum of(2,00,000 and Income form House property for 1 Self Occupied House calculated above)
For example Mukund have taken home loan of Rs 40,00,000 (40 lakh) for 20 years @10.5% then his loan EMI is Rs 39,935 For the financial year 2016-17, he paid 4,79,222 which includes a payment of Rs. 65,493 towards principal and Rs 4,13,730 towards interest.
So Total income form House property is= 0 (Gross value of the house) -4,13,730 (Payment of Home loan Interest)=–4,13,730(please note the negative or minus sign)
When you enter this amount in ITR1 as income from house property you will get the error. Loss cannot exceed 2,00,0000 for income from House property. You have to fill in maximum of 2,00,000 irrespective of how much your home loan interest is if it’s self occupied.
If Total Income from House property for 1 Self Occupied House is less than 2,00,000 then you enter that amount as Income from House Property as shown in image below
Please keep all the papers related to income tax (Form 16, bank account statements, proof of investments for tax saving etc) safely whether submitted to the employer or not. Quoting from our article
Since legal proceedings under the income tax act can be initiated up to six years prior to the current financial year, you must maintain such documents at least for this period.
Please plan your tax saving, if possible in the beginning of financial year, and submit proof of investments on time.
Disclaimer: Please do not construe this as professional financial advice. While efforts have been made to provide correct information, this is our understanding of the Income tax law. Apologies upfront for any mistakes. Please let us know and we will correct.Please don’t send us emails asking us to check your income tax detail. But if you have any doubt on the article or some clarification is required or you feel some information is wrong. Please leave it in comment section so that all readers can benefit. For details check our Disclaimer.
- Basics of Income Tax Return
- Filling ITR 1-Form
- Filling Individual ITR Form: Fields A1 to A22
- Filling ITR-1 : Bank Details, Exempt Income, TDS Details
- After filing Income Tax Return