Finally, some clarity on TDS by employers…

The tax season for the salaried has been quite regular. Around December they are required to submit their proofs for deduction to their employers. Typically, the employer accepts documents in case of certain exemptions like HRA, Section 80C, Medical Insurance Premium, Interest on home loan etc. In such cases, the employer accepts the documents submitted by the employee which are then evaluated and considered for the purpose of deciding the amount of TDS. But the problem arises since there is no standard documentation procedure. This creates last minute rejection of exemptions by the employer or the auditor. Let me illustrate some of them.

Some grey areas in submitting documents:

While submitting proofs for claiming HRA, there is a lack of clarity on the procedure for claiming rent paid. Is a registered lease agreement required or an unregistered agreement on stamp paper will do? Should the receipts be in a particular format and do they require a revenue stamp? In case the landlord is located abroad, is a scanned copy of the rent receipt sufficient?

What is the ideal document for insurance proofs? Is a downloadable receipt from the website of the insurer sufficient? Or is a stamped and signed receipt from the insurance necessary? How can an employee manage these documents if the premium is paid online? There are also some peculiarities pertaining to claiming Interest deduction on home loan. Typically, the bank issues a certificate of interest around December along with a provisional certificate for the rest of the year. Is that sufficient or will an updated certificate have to be submitted in March? Are online downloads of interest certificates good enough?

What has the Union Budget addressed?

For the first time the Union Budget has agreed to come out with a comprehensive list of documents, formats and design that will be acceptable as proof by employers. The government will not only define the list of documents that will be acceptable, but also define the format, the design and the structure of the proof. This may be a minor issue but it will remove a lot of confusion regarding TDS deduction and refund claims. The issue of comprehensive guidelines in this regard will be a welcome step and it is expected in the next one year. The task of filing returns and the task of deducting TDS by employers surely becomes a lot simpler.

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