A Simple Guide to Form 12BB Form for Employee in India
A new form 12BB is introduced by the Central Board of Direct tax. Form 12BB is applicable from June 1, 2016. Every employer and employee needs to know about form 12BB. The Form 12BB is for all salaried employees to claim tax deductions. Earlier there was no standard format for salaried employees in which they could furnish their investment details to their employer.
Form 12BB is a single entity that employees could use to declare their investment and claim tax deductions under HRA (House rent allowance), LTA (Leave travel allowance), Section 80, and interest paid on home loans under Section 24 of the Income Tax Act. It is to submit at the beginning of the new financial year or at the time of joining a company any time during the year. Documentary evidence is needed to be provided at the end of the financial year. TDS (tax deducted at source) will be deducted by the employer on the basis of the declaration made in form 12BB from the monthly salary of the employee.
Employee Basic Details:
The first part of the form consists of basic information about the employee i.e. Name, Address, PAN (Permanent Account Number), and the financial year.
House Rent Allowance (HRA):
House rent allowance is exempt under section 10(13A) of the Income Tax Act. In this part of the Form, 12BB employees can claim HRA deductions. For claiming deductions under this section employee has to provide documentary evidence i.e. Rent receipts. He also has to mention his landlord’s Name and address along with the Rent amount paid to the landlord. Landlord’s PAN card number is also to be mentioned if rent paid during the previous year exceeds Rs. 1 lakh.
Leave Travel Allowance (LTA)
As per section 10(5) of the Income tax act, Leave travel allowance is exempt. The employee has to submit details of the amount spent on traveling and provide evidence of expenses made towards the travel. Earlier it was not mandatory to provide proof of all travel expenses but the new rule makes it mandatory for providing the evidence in form of receipts for claiming the deduction.
Deduction of Interest on Borrowing:
As per Section 24 of the Income tax act, interest paid for your home loan is tax deductible. In past, if any employee seeks a tax deduction for interest paid for his home loan, he had to submit an interest certificate from the concerned bank. But now, he not only has to submit the interest certificate along with Form 12BB to claim tax deductions under section 24.
In Form 12BB he needs to mention the details like interest amount paid to the lender, name, and address of the lender including bank or non-banking financial company (NBFC) and PAN Number of the lender.
Deductions under Chapter VI-A:
All tax deductions under 80C, Section 80CCC and Section 80CCD as well as Other sections like 80E, 80G and 80TTA come under Chapter VI-A of the income tax act. To claim deductions, fill up Form 12BB and provide details and proof of the investments and expenditures incurred related to the relevant section.
Various Deductions under Chapter VI-A:
Since Form 12BB is submitted at the beginning of a financial year and proofs are to be submitted at the end of the financial year, it is possible that an employee might find himself in three different situations that are:
- Investment is less than the declared sum: Employer will compute TDS according to the declaration made. But if overall investments made are less than declaration, employees may end up paying more tax. He needs to file a tax return and seek a refund of any excess tax paid or deducted by the employer. With the new norms, Form 12BB is needed for availing of such refunds.
- Investment is equal to declared sum: If the investment is equal to the declared sum, the employer will be deducting just the right TDS from your salary, thus eliminating chances of any tax refund.
- Investment is more than declared sum: If the investment is more than the declared sum, the employee may be eligible for further tax exemptions than initially sought. For claiming a tax refund employee has to file a tax return using Form 12BB.
Form 12BB is a very simple and easy-to-understand form to help you claim tax exemptions. It is a record of the investments and expenses that you have made or incurred to claim tax exemptions through your employers.
The form is divided into four sections: Section I: Investment and Expenses Section II: Income Section III: Other Income Section IV: Expenses
Section I: Investment and Expenses in Form 12BB:
Section I: Investment and Expenses 1. Property/Property investment 2. Education 3. Medical expenses 4. Transportation 5. Home office 6. Rent 7. Other expenses 8. Income 9. Gifts 10. Dividends 11. Royalties 12. Other income 13. Capital Gains 14. Other deductions 15. Total income 16. Total expenses 17. Taxable income 18. Taxable income minus expenses 19. Deductions 20. Taxable income 21. Tax 22. Tax credit 23. Total tax.
Section II: Income Section in Form 12BB:
Section II Income Section in Form 12BB Losses on sale of assets Gains on sale of assets Interest income Interest expenses Dividend income Dividend expenses Capital gains Capital gains from sale of assets Interest from savings bank account Interest from provident fund Interest from other bank account Interest from personal loan Interest from other sources Interest from shares Interest from bonds Interest from debentures Interest from other property Interest from investments Interest from other sources.
Section III: Other Income in Form 12BB:
The following is a list of other income, which can be claimed as a tax deduction under Section III of Form 12BB.
- Rent received from a business, house, or apartment
- Income from the sale of articles
- Income from the rents of shops, houses, and apartments
- Income from the sale of shares in a company
- Income from the sale of bonds and debentures
- Income from the sale of securities
- Income from the sale of shares in a company
Section IV: Expenses in Form 12BB:
Section IV: Expenses in Form 12BB Expenses incurred for the purposes of the business are deductible. Example: Renting a car for the business is an expense that is deductible under section IV of the Form 12BB. Example: When the business is in a new location, it is an expense that is deductible under section IV of the Form 12BB. Example: When the business is going through a major overhaul, it is an expense that is deductible under section IV of the Form 12BB. Example: When the business sells a product that is used in the business, it is an expense that is deductible under section IV of the Form 12BB.