A tax declaration is an official statement that an individual makes to the tax authorities, which helps them in calculating his or her local earned income. It also helps the tax authority to verify and confirm the legitimacy of the taxpayer’s claims and expenditure. Tax declaration is an obligation that the taxpayer must fulfill, and failure to file it may result in fines or other penalties.
The tax declaration can be made in several ways. It can be filed electronically or manually. Electronic filing involves using technological solutions to communicate and exchange information with the tax authorities. This solution is used by many countries, particularly in Europe and Latin America. The process of e-tax declaration is fast and reliable, and it simplifies the communication with tax authorities.
Every salaried employee must make a tax declaration each year, which details the amount of investments he or she intends to make that particular financial year. This is shared with the employer, who then calculates and deducts TDS (Tax Deduction at Source) from the salary in proportion to the declared investment amount. This declaration also influences the net taxable income of an employee, which in turn determines his or her slab rate.
While declaring tax-saving investments is an obligation, the truth is that not all employees can fulfil their commitments by investing the sum they quoted at the start of the year. Hence, it is advisable to keep the declaration updated as and when you make new investments or expenses, so that your employer can update your investment details accordingly.
You can declare investments in a number of different categories. For example, premiums paid towards health insurance qualify for a deduction under section 80D. Likewise, investments in tax saving mutual funds and interest paid on housing loans are eligible under section 80C. Additionally, donations to certain charitable organisations can be claimed as a deduction under section 80G.
A tax declaration must be submitted by the end of January or February each year. Your employer will request you to submit proofs for the investments that you have declared. If the investments prove to be less than what you quoted in your declaration, your employer will deduct a lower amount from your salary each month and adjust your tax liability at the end of the financial year.
If you are a small business owner, consider preparing quarterly estimates of your yearly taxable income. This will help you avoid paying a large tax bill at the end of the fiscal year. Similarly, if you have multiple sources of income, consider submitting a separate ITR form for each one. Bilanz Hattingen