I would like to know whether is it mandatory for the employer to get income tax declaration from the employees before 30 April 2023?
Greetings from CA Agnel Pereira.
Pls note, the TDS investment/expenses/deductions declaration is an opportunity available to the employees to ensure their employers do not wrongly deduct taxes where not required to. Which means, if you have any genuine, known exemptions/deductions available, you need to inform the employer. It is not a MANDATORY requirement - meaning, there are no penalties or fines, but there may be excess TDS by employer because you havent given the declaration.
Why the first declaration in April 2023? This is because, it sets up the TDS computations by the employer for the whole year. Remember, the employer is required to ESTIMATE an employee’s full year TAXABLE INCOME FROM SALARIES and deduct tax on the applicable average rate of tax, regularly on a monthly basis.
Now, the question is, how accurate will be the estimate made in April 2023 to be applicable for the full year 2023-24? Also, just like your income flowing over 12 months (throughout the year), you can do your investments/expenses also throughout the year. For example, your Medical or life insurance premium may be due in March 2024, Or you may be planning to invest in PPF in the last quarter etc - all of which are relevant for the full year tax computation. But you may be aware of your Rent expense (for HRA exemption/deduction) now itself, or your interest on housing loan on your self occupied house (eligible Rs200000) also is known to you.
So, you may disclose all known and unknown (but likely to be made during the year) investments/ expenses/ deductions as of date, which will be required to be update towards the end of the year with more accurate estimates or real figures.
Therefore, it is in your best interest to declare YOUR ESTIMATED MAXIMUM INVESTMENTS/DEDUCTIONS now, so that your employer does not start deducting more.
Some employers want to do this process just once in April and later once in March - though they are duty-bound to revise the same throughout/during the year, whenever an employee gives an updated declaration or whenever situations change.
So, in effect, even if you do not give now, you can still give one later during the year, but the employer will deduct TDS till that time considering your total estimated income without any investment/deductions.
Most people who are above the salary level of around Rs9 lakhs (including HRA), generally invest fully in 80C (1.5L) plus NPS (0,5L), 80D (around 0.5L for family/parents) so they give a declaration for all of these, plus for the Rent amounts and interest on housing loan as stated above and int on education loan etc.
Remember, these deductions are not available in the New Tax Regime.
Hope this helps.
You may contact me for any further clarifications by email at abp235[at]gmail.
It will ease your work for TDS deduction from the salaries of employees effective new FY.