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A big relief for salaried employees is that it is the employer’s obligation to compute tax (based on the inputs provided by the employee) and deduct tax at source on a monthly basis. However, this does not relieve the employee of his obligation to review the tax computation, ensure correct payment of tax and maintain relevant supporting documents.
Documents required
Some of the documents that you may need to preserve include your employment contract and increment letters, pay slips, a copy of tax returns, the original Form 16 and Form 16A, Form 26AS and leave travel bills in support of LTA claims. In addition, the lease agreement and rent receipts from your landlord, purchase/sale agreements for your house, if any; a lease agreement with the tenant in case an owned property is let out, interest certificates for loans on your house or property, property taxes paid, wealth tax payments, equity/debt investment details, bank statements and communications received from tax authorities need to be filed away.
Why the need? These documents not only serve as relevant proof to be given to the employer for claiming deductions and exemptions, but also support your tax return filed with the tax department, which is subject to audit.
Additionally some of the documents, such as past tax returns, TDS certificates and bank statements, are also required at the time of applying for visas, bank loans, etc. Based on the declaration and necessary proofs, the employer will compute necessary exemptions and deductions and deduct tax at source. The documentary evidence needs to be presented for deductions claimed for payment towards life insurance premiums, medical premiums, housing loan payments, Provident Fund investments and investments in the Rajiv Gandhi Equity Savings Scheme. Furthermore, these documents will support any exemptions or deductions claimed during the financial year, such as interest deduction on a housing loan, house rent allowance exemption, leave travel allowances, medical reimbursements, 80C and 80G deductions, etc.
The tax authorities may ask for these documents at the time of scrutiny for up to six years from the end of the relevant Assessment Year. Poor documentation is likely to increase the amount of time, money and stress that goes into preparing your tax return or resolving any queries from the taxman.
You may need to approach your employer, bank, credit card relationship managers and other institutions if the documents are not appropriately maintained. The problem would be further compounded if you have changed jobs and do not have data provided by your earlier employer on record. Taking these small proactive steps will help you be better organised and prepared to respond to any information requested.
The writers are Senior Manager and Assistant Manager, respectively, Deloitte Haskins & Sells LLP
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