All the salaried taxpayers need to fill out Form 12BB. It is supposed to be submitted at the beginning of every financial year by the employee to his/ her employer for the correct deduction of TDS. It discloses all their tax-saving investments of that particular financial year.

Steps to Fill Form 12BB

 

1. Download Sample Form 12BB
   You can download the sample Form 12BB from the Income Tax Department website.
2. Add Personal Details
   This is the first section of Form 12BB, you need to mention your personal Details i.e, Add your Name, Address, and PAN details. Also, mention the current financial year i.e 2020-2021.
3. Add house rent allowance Details
   If you are incurring any rental expenses for your work then that can be deducted under HRA. 
4. Add LTA Details
   Add details of LTA if any.
5. Enter Details regarding Interest on Loan for Borrowings
   If you are paying any Interest on EMI of home loans in this particular Financial year it can avail you benefit up to 2,00,000 for self-occupied property and no limit on rented property.
6. Add Chapter VI-A Deductions
   Add details of tax deductible investments and deductions under 80C, 80CCD (1B), 80D, 80DD, 80E, 80G etc.

It is important to do tax planning to save money on tax. Make sure you completed the below 3 steps to claim tax benefits

1. Invest in section 80C investments, declare home loan principal repayment and collect Rent receipts.
2. Declare the investment and submit documentary proof to the employer.
3. Submit Form 12BB to the employer.

Step 3 is the most crucial step in claiming the tax benefits. Make sure you do not miss this step. Submit form 12BB to your employer and save on tax. Happy investing.

FAQs

When is Form 12BB submitted?

Usually, Form 12BB is submitted at the start of the financial year to estimate the TDS calculations accurately and adequately.

Do I need to submit my Form 12BB to the Income Tax Department?

No, your employer will submit the form on your behalf after computing the TDS.

Can my actual tax-saving investment be different from the declared?

As an investor, understandably so, your investment decisions can vary. Similarly, the actual tax investments can be different from your proposed plans. However, you should collect and have the actual evidence when applying for tax benefits.

Is it essential to keep documentary evidence for claiming tax benefits?

As stated in the above question, yes, you should have actual evidence to attach while applying for tax benefits and TDS to the employer, or your application wouldn’t be accepted.

It is that time of the year when employees of most companies start getting requests for declaring their tax-saving investments to their employers. But before doing so, you first need to choose whether you want to opt for the new tax regime or the old tax regime.

If you are confused about which tax regime to go for, here are two things that can help you make that decision.

1. Consider The Slab Rates

The major difference between the old and the new tax regimes is the different slab rates.

Tax Slab(₹)	Old Tax Rates	New Tax Rates
0 – 2,50,000	0%	0%
2,50,000 – 5,00,000	5%	5%
5,00,000 – 7,50,000	20%	10%
7,50,000 – 10,00,000	20%	15%
10,00,000 – 12,50,000	30%	20%
12,50,000 – 15,00,000	30%	25%
15,00,000 & above	30%	30%

As you can see in the above table, there is no difference between the tax rates for individuals earning up to Rs 5 lakh per annum. The difference in the rates starts showing thereafter. The basic tax rate under both regimes again becomes the same for those earning above Rs 15 lakh per annum. Therefore, as compared to the old tax regime, the new tax regime for high-income earners is likely to make taxpayers pay a higher amount in the long run.

2. Weigh The Benefits of Tax Deductions And Exemptions

While figuring out whether to choose the old or the new tax regime might look complicated, if you approach it in a systematic way, it is not that difficult to figure out. 

Here is what you need to do –

1. Calculate all the exemptions that you are availing of: If you are living on rent, you would be claiming HRA which is the biggest salary exemption one enjoys. Apart from that, other tax-free components include LTA, Food Bill, Phone Bills, etc. All these will become taxable if you choose to shift to the new tax regime.
2. Look at the deductions that you claim: As a salaried employee, two deductions that you automatically get are a standard deduction of Rs 50,000 and your contribution towards your Employee Provident Fund (EPF). In the new regime, you won’t be able to claim these deductions even though you will continue to contribute to EPF. Over and above, you cannot claim deductions against your home loan (if you have one) or insurance policies, which till now has helped to reduce your taxable income.

Now, combine these exemptions and deductions and minus them from your salary to see what is your taxable income and what it would be if you let go of these deductions. This should be the deciding factor for which regime you should go for.

Which one is better? 

Both systems have their own sets of pros and cons. The old system has many exemptions and deductions under numerous sections – availing a few of these required people to invest in tax-saving investment options, which helped inculcate a good habit of investing. On the other hand, the new system gives people more flexibility and tries to simplify the process. If you are someone who was claiming a lot of deductions under the old regime, you can probably save better sticking with the same system, as per the calculations. If you weren’t making any tax-saving investments or claiming any deductions earlier too, then maybe the new system may prove beneficial. It also varies based on which slab you are in as well. However, since the system is new, it makes sense to consult a competent tax expert who can suggest the optimal tax saving route for you.

Wealth Cafe Advice:

It is just not about taxes. A lot of time, as we have seen above, to save taxes one needs to make investments and those investments can dampen your cash flows. It could be possible that everyone is not able to save and invest their money because of financial responsibilities and other needs and hence, could select to opt for New Regime as that would make more sense from an overall financial situation for you.

Do you read your offer letter and see you have the benefit of gratuity but however when you see your salary slip, nothing is mentioned in it? In this article, we will understand all the aspects related to gratuity.

What is gratuity? 

After having served your employer for five years or more you become entitled to a payment called “gratuity". This is a lump-sum tax-free benefit that you are entitled to when you leave for another job or retire. The gratuity amount is totally paid by the employer without any contributions from the employee.

 

What are the eligibility criteria to receive gratuity?

Here is the list to check if an employee is eligible to receive the gratuity amount from the employer or not:

• You should be eligible for superannuation
• You should resign after working for five years with a single employer
• You should retire from work
• In case of any disability or pass away due to accident or illness

 

The formula for calculating gratuity

1. Income tax department website- You can go to www.incometaxindia.gov.in website. Look for the 'Tax Tools' option. Now, search Gratuity from the available options. The given calculator will compute the amount of gratuity paid with respect to the input values such as assessment year, type of employer, gratuity received exempted gratuity and taxable gratuity.
2. Check with your employer- Your employer or the HR of the organization keeps the complete information of all the employees. One can approach his or her HR regarding the gratuity balance or amount.    
3. Formula to calculate gratuity yourself- The formula is 15 X (last drawn salary) X (tenure of working)/26. For instance, employee X's last drawn salary is 50,000 per month and has worked with ABC ltd company for about 30 years. So, his gratuity will be calculated as: (15 X 50,000 X 30)/26= Rs 9,37,500. In this formula, the time period of more than six months is considered as one year.

However, an employer can choose to pay more gratuity to an employee. Also, for the number of months in the last year of employment, anything above 6 months is rounded off to the next number while anything below 6 months in the last year of employment is rounded off to the previous lower number.

Income tax on gratuity

The taxation rules around gratuity amount primarily depend on whether an employee is employed with a government or a private entity.

• For (central/ state/ local) government employees, the entire gratuity amount is exempted from income tax.
• For private employees, the least of the following three amounts is exempted from income tax:

1. a) The eligible gratuity
2. b) The actual amount of gratuity received
3. c) Rs. 20 lakh

FAQs on Gratuity

1. If I resign from a company after 4.5 years of service, am I eligible for gratuity?

No, you have to serve at least 5 years in a company to get gratuity payment. It is best to check with the HR of your company about this. However, if someone dies while in service, the gratuity amount will be paid to their legal heir even if they have not completed 5 years of service. In addition, the amount received by a nominee/heir will not be taxed.

2. I am a contract employee in a company. Will I get gratuity if I resign or retire after 5 years?
If you are on the company rolls and are considered an employee of the company, then you will receive gratuity. However, if you are under a contract that is separate from the company then the gratuity should come from the contractor and not the company.

3. Can I see gratuity in my salary slip? Is it included in my monthly salary?

Gratuity is a monetary benefit given by the employer, but not paid as part of the regular monthly salary nor is it included in your salary slip.

4. What kind of employees does the Gratuity Act, 1972 cover?
Payment of Gratuity Act, 1972, applies to employees of factories, mines, oilfields, plantations, ports, railway companies, shops, or other establishments related to them. All kinds of government jobs have also been included under the purview of this act. It is applicable in all states of India except Jammu and Kashmir.

5. Is there any difference in the calculation of gratuity for employees who are not covered under the Gratuity Act?
Even if you are not covered by the Gratuity Act, your employer may pay you gratuity. The calculation for this is: Gratuity = Average salary (basic + DA) * ½ * Number of service years. In this case, the service years are not rounded off to the next number. So if you have a service of 12 years and 10 months, you get gratuity for 12 years and not 13 years.

6. Is there a cap to the amount I can receive as gratuity?
Yes. A company cannot pay you more than Rs.10 lakh as gratuity, irrespective of the number of years you have completed. This limit is also applicable to gratuity you can receive from different employers during your lifetime. If your company wishes to pay you more money, they can title it under ex-gratia or bonus.

7. How do I nominate someone to receive my gratuity in case of my death?
To nominate one or more heirs for your gratuity amount, you need to fill in Form F when joining a company.

8. How many days will it take for the employer to remit the gratuity amount?
Usually, gratuity is released along with or just before/after your full and final settlement is done. The government mandates employers to pay the amount within 30 days. If there is any delay in payment, the employer has to pay simple interest on the amount from the due date until the date when payment is made.

9. How much time does an employer take to release the gratuity amount? As per government norms, an employer has to pay the gratuity amount within 30 days from the full and final settlement of the employee. If the deadline is missed, the employer will have to pay the gratuity amount plus interest incurred on it from the due date to the actual payment date.