With the start of the new financial year in April, your company's account department would have sent you an email asking you to submit your proposed investment declaration to compute taxes on your salary based on the tax regime opted. You will be required to inform them about the new tax regime you are planning to opt for FY 2022-23 and if the old tax regime has opted, then deductions are tax exemptions that will be claimed by you.

The taxes deducted at source (TDS) are covered under section 192 of the Income-tax Act, 1961 making it the obligation of the employer to withhold taxes at the time of payment of salaries.

Effective from FY 2020-21, an individual salaried person has the option to choose between the new tax regime and the old/existing tax regime. If an individual has opted for the new tax regime, then he/she is not required to submit any document or investment proof to the employer. On the other hand, if an old or existing tax regime is opted for, then investment proofs must be submitted before the deadline specified by your employer to avoid higher taxes.

Individuals opting for a new income tax regime should keep in mind that the contribution to your NPS account by your employer will be taken into account while computing taxes on your salary. Deduction under section 80CCD (2) of the Income-tax Act is available under both tax regimes.

You must keep in mind that for FY 2022-23, there is no tax payable if your net taxable income does not exceed Rs 5 lakh under both tax regimes. Therefore, no tax will be deducted by your employer till January 2023, on the basis of the proposed investment declaration submitted now.

Once the investment declaration is submitted, the accounts department will compute the taxes based on the proposals made by you. Later on i.e., in the last three months of FY 2022-23, you will have to furnish the documentary evidence of having actually made the investments as per the investment declaration made now.

Do note that an individual can make tax-saving investments different from those declared by him/her earlier but the deduction from taxable income will be given only on the basis of the actuals submitted and not on the basis of the proposed declaration made earlier.

The last date for such submissions varies, but most organizations would expect you to submit them by April 15. If the proposed investment declaration is not submitted then your employer will deduct higher TDS on salary income till the time actual proof or investment declaration is submitted.

Do keep in mind that none of the investment proof documents are required to be submitted to the income tax department. It is the employer who receives them and deducts taxes on salary accordingly.

What happens if excess TDS cannot be adjusted?
It may happen that you submit the investment declaration in June but your employer deducts excess TDS while paying April and May's salary due to non-submission earlier. In such a case, any excess tax deducted will be reflected in Form 16 and an income tax refund has to be claimed while filing one's income tax return.

Under the old tax regime, important tax-saving investments/expenditures include:

Investments - Under Section 80C
When it comes to investments under section 80C, there are many options available. These include Equity Linked Savings Schemes (ELSS) of mutual funds, life insurance premiums, public provident funds (PPF), Employees' Provident Fund (EPF), ULIPs etc. It is important to analyze the pros and cons of each investment option before an investment is made.

Tuition fees
You can also claim a deduction under section 80C for the tuition fees of your children that will be paid during the FY 2022-23.

Tax-saving on affordable houses (Section 80EEA)
Announced in Budget 2019 (extended till March 31, 2022), an additional deduction on interest paid on the affordable house was introduced. An individual can avail the deduction of up to Rs 1.5 lakh on the interest paid. This will translate to tax -savings on interest paid on housing loans for a maximum of up to Rs 3.5 lakh.

To avail of tax benefits following criteria must be satisfied:
a) Loan must be sanctioned by a financial institution during FY 2021-22 i.e., between April 1, 2021, and March 31, 2022.
b) The stamp value duty of the house should not exceed Rs 45 lakh
c) Individual should not own any other house property on the date of sanction of loan
d) An individual should not be eligible to claim a deduction under section 80EE (mentioned below)

You can mention this deduction in your investment declaration and submit a home loan statement to claim this deduction.

First-time home buyers
For loans sanctioned between 01.04.2016 to 31.03.2017, Section 80EE allowed tax benefits for first-time homebuyers under which the benefit can be claimed on home loan interest. This deduction is over and above the Rs 2 lakh limit under Section 24 of the Income-tax Act. Hard copies of all the relevant documents have to be submitted. The deduction is allowed up to Rs 50,000 per year starting from FY 2016-17 and subsequent years until the loan is repaid.

House Rent Allowance (HRA) Exemption
For those who claim HRA relief, the PAN of the landlord is mandatory. This condition is not applicable for those whose rent payment is less than or equal to Rs 1 lakh per annum, i.e., Rs 8,333 per month.

A copy of the lease rent agreement or declaration by the landlord in a prescribed format is to be submitted. Further, ownership proof of the landlord of rented premises, which can be house tax receipt or the latest electricity bill or share certificate in case of co-operative society houses has to be submitted. In the month of April, you are required to submit an investment declaration. However, during the end of the financial year, you will be required to submit the original rent receipts for the period of April 2022 to date have to be provided.

Housing loan repayment (principal)
A deduction under section 80C can be claimed for principal repayment done on a housing loan. Later in the year, an individual will be required to submit the certificate from a financial institution specifying the principal paid from April 2022 till the date for FY 2022-23 needs to be submitted.

Interest on housing loan - self-occupied
Interest paid on a housing loan can be claimed as a deduction under section 24 for a maximum of up to Rs 2 lakh. As proof, the individual will be required to submit the interest certificate from the bank or financial institution, specifying the break-up of interest and the principal amount for FY 2022-23 would be required.

A possession/construction completion certificate is a must for availing of the relief by some employers. Further, the date of the loan taken and the date of possession is mandatory to avail the benefit.
 

Loss from housing property - interest on housing loan - let out on rent
If the house for which the loan has been availed is let out, the same should be submitted with a certificate from a financial institution specifying the principal and interest paid from April 2022 to March 2023.

New Pension System (NPS)
There is no need to submit proof of actual Investments in case the investments in NPS are made via the Corporate Model as the same is recovered and deposited by the company in your NPS account. However, if you have opted for the investment of Rs 50,000 under NPS on your own, i.e., outside salary, then submission of copies of the PRAN card, and NPS Transaction Statement for Tier 1 Account is necessary at a later date.

Health insurance premium
Call up the insurer and ask them to send the statement for tax purposes under Section 80D. The premium should not be paid by cash and should be paid by cheque or digital transfer from the bank account.

Conclusion
It's better to get a confirmation on the actual requirement from your accounts department. Not all will be asking for all the above-mentioned documents, while a few others might have their own set of requirements. The declaration, if not submitted within time, may make you end up with excess TDS which would have to be claimed as a refund by filing ITR.