Income Tax: 5 key points to consider before submitting proof of investments to your employer

If you are a salaried employee and have already made investments in some tax-saving instruments, it is imperative that you declare the same to your employer so that your salary in the last two months of fiscal 2025 is not reduced substantially.

For instance, if you have invested ₹1 lakh towards an insurance premium and another ₹50,000 in the equity linked savings schemes (ELSS) then you are eligible to claim income tax exemption for ₹1.50 lakh invesments made.

And if you fall in the 30 percent income tax bracket, you will save income tax to the tune of 45,000 (30% of 1.5 lakh) + 4 percent cess ( ₹1,800) which in total accumulates to ₹46,800. 

However, it is vital to note the following points in order to save tax via investing in the tax-saving instruments.

5 key points to consider

I. Tax regime: Income Tax (I-T) exemption is allowed only in the old tax regime and not in the new regime. Since the new tax regime is the default regime, you need to opt for the old tax regime if you want to claim the tax exemption.

II. Announcement and submission: Your employer must be deducting a lower TDS (tax deducted on source) on your behalf if you have informed your employer about the investment, and now is the time to submit the proof of those investments claimed. 

However, if you fail to submit the proof of those investments, your employer will invariably deduct the TDS on your salary.

III. Section 80C: Typically, taxpayers are entitled to claim income tax exemption upto ₹1.5 lakh on investment made under section 80C. These invesments include NSC, PPF, ULIP, etc.

IV. NPS: Additionally, NPS subscribers can claim tax deduction of ₹50,000 under NPS (Tier I account) under subsection 80CCD (1B).

V.  Changing of job: If you have changed the job during the year, it is incumbent upon you to disclose what income  you have already earned during this fiscal (2024-25) and also the deductions claimed earlier.

“Some employees end up claiming all the exemptions twice simply because they forget to inform the new employer about the deductions already claimed in the previous job,” says CA Chirag Chauhan, a Mumbai-based chartered account.