By the mid of January is when most employers ask their employees to submit tax-saving proof. This helps employers estimate the extent of TDS deductions to be made on the employees’ salary in the last quarter of the financial year.
If you fail to provide your tax-saving proof within the deadline given by your HR, then your take-home salary for the last quarter of the financial year may be reduced by a significant amount due to higher TDS deductions.
You might be wondering as to why your employer asked for your tax-saving proof. As per the income tax laws, employers are required to collect most of the tax payable by their employees in the form of TDS deductions on their salary and deposit the same into the government’s account against the PAN of the employees.
This provision of TDS deductions is in place to curb tax evasion and drive tax compliance among the salaried individuals. If you have not yet saved enough taxes, then it’s high time to take all the necessary steps to optimise your tax outgo now. You have to look at the deductions and exemptions you are eligible for and save taxes under them.
Here’s what happens if you don’t submit your tax-saving proof to your HR within the deadline:
i) Your HR may inform the payroll team to deduct higher TDS from your salary in the last quarter of the financial year. This may result in your take-home salary being reduced significantly. This deduction will be spread across January, February and March.
ii) If you depend entirely on your salary to cover your monthly expenses, then your finances and budget for the last quarter of the financial year may take a hit. You may even have to redraw your budget, depending on the TDS deductions made on your salary.
iii) If the extent of TDS on your salary is on the higher side, it may impact your investments. You may have to pause your ongoing investments to meet your living and other unavoidable expenses.
iv) Furthermore, you may even be required to access your emergency corpus despite having your regular salary, which is reduced due to the delay in planning your taxes.
You can still save on taxes for the financial year even after the deadline to submit your tax-saving proof has gone by. You have to make tax-saving investments under Section 80C, avail a Mediclaim insurance policy to claim tax deductions under Section 80D, and so on to save on taxes. However, higher TDS deductions may still be made by your HR.
Nevertheless, you can claim a refund of the excess taxes paid in the form of TDS on your salary. This can be done while filing your tax return in the relevant assessment year. Yet, it is not advisable to leave your tax planning until the last minute and let your HR deduct a higher TDS in the last quarter.
You can claim all tax deductions and exemptions that you are eligible for while filing your ITR. You are not required to furnish any tax-saving proof while filing your taxes. You have to safely retain all your tax-saving documents relevant to the financial year. They will be needed if you receive a notice from the IT department. You will then have to submit those documents to the assessing officer.
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Engineer by qualification, financial writer by choice. I am always open to learning new things.