New Form 12BB for LTA, HRA and Home Loan Interest Proofs to be furnished to Claim Tax Rebate
The new form of CBDT which is known as 12BB , states that you need to show the proofs of travel, house rent and home loan for claiming the tax benefits. The employers shall make a complete assessment of the evidence that are submitted by employees and according to that the tax benefits shall be decided for a certain individual. It is not like that the employees were submitting the information to their employers for the tax declaration at source. But the new format is a statutory form has been prescribed which will spell out the type of declaration along with the details of evidence of claims for tax deduction.
The aim of the new form 12BB
These proofs has been brought for bringing a consistency regarding the tax benefits and make sure that the necessary documents and evidence as stated is maintained while making the claims. But at the same time, some people are of the opinion that with the introduction of this new format, it is going to increase compliance burden on both the employees and employer.
The purpose is to offer a statutory prescription for furnishing evidence by the employees and also aids the employer in offering benefit of exemption to the employees. The move is aimed at the all round compliance where any employer is able in deducting the tax appropriately and this can happen when the employees offer true disclosure of income.
Things to know about House Rent Allowance
- If you want to claim for the house rent allowance, then you have to furnish the details of landlords, like his/her name, address, the PAN number, and this will also be valid in case the rent is more than rupees one lakh, which is paid by the employee in previous year. Now, let us have a look about how the HRA is calculated.
- The first thing you need to remember is HRA is calculated within section 10(13A) of the income tax act and the HRA is limited to the three following factors.
Actual house rent allowance received from the employer
The rent that is paid, is 10% more than the salary that includes dearness allowances
And finally, 50%of the salary where the house is situated in the Metro cities like Mumbai, Delhi, Chennai or Kolkata. The allowance shall be 40% if house is situated in any other cities. In this case, the salary shall include only the DA and any other allowances are not offered.
The Home loan Interest
Now, if the employee is claiming for the tax deduction for home loan interest, then he/she has to furnish the address, names and PAN number of lender. According to the section 24, the interest on home loan is actually eligible for reduction if amount has been borrowed from financial institutions or from relatives. But for claiming the reduction of home loan principal repayment within section 80C, the loan has to be taken from any financial institutions.
In what ways are the Home Loan tax deduction calculated?
- For the claim of home loan interest the taxpayer has to be the owner/co-owner and the borrower/co-borrower. A deduction amount upto Rs 2 lakh can be claimed if the house property has been self occupied and in any other cases, full interest can be claimed without any limitation. Also, in case of the joint borrowing, each borrower is liable of claiming Rs 2 lakh that adds up to Rs 4 lakh of a total amount of tax deduction.
- The deduction of interest that is attained for the reconstruction or renovation of a self occupied home is also eligible for reduction. But at that time, the amount shall be limited to Rs 30000. For the houses that are rented or that is not occupied, there is no limit for tax deduction.
- According to the section 24, the interest on home loans is actually reduced on the accrual basis, i.e. the deduction shall be claimed even if there is no payment that has been made. But the section 80C allows you in getting the deduction if only there is actual repayment of home loan principal.
The details of tax reduction claims for leave travel allowances
- Considering the leave travel allowances, it has been made compulsory that employees need to submit the travel expenditure proofs for their employers to get the reduction. Now, let us check out how the leave travel is actually calculated.
- The leave travel is exempt within section 10(5) upto the amount that is received by the employee for himself or for the family for visiting any place within India. The taxpayer is liable to claiming any exemption for the journeys taken by him within 4 years, which means the exemption, can be claimed twice within four years. The present block is from 2014-2017.
- A lot of people believe that he amount spent on leave travel, like lodging, ticket fare, taxi fare is completely exempt. But according to the law, it mentions specifically that exemption is only valid for travel expenses, which is ticket fare. There are certain rules that are considered while calculating the travel allowances.
A tabular overview of tax deductions can be claimed
|SL NO||Factors to know||Brief details|
|1.||House Rent Allowance||It is exempt within section 10(13A) of the income tax. It is availed if rent paid is 10% more than salary that includes dearness allowances. And for the metro cities, it is available if rent is 50% more than the salaries.|
|2.||Home loan interest||To claim the home loan, tax payer needs to be both owner and co-owner. A deduction of Rs 2 lakh can be claimed if the house is the property is owned by the employee, in any other cases a full interest can be claimed without limitation.|
|3.||Leave travel Allowance||The leave travel concession is exempt within section 10(5) for the employee or for his family if he/she undertakes a leave to any place within India. The tax payer is liable for claiming exemption for any two journeys within India in a block of 2 years.|