IT declaration

IT declaration meaning

IT declaration (Income Tax Declaration) is a formal statement submitted by employees to their employer at the beginning of a financial year (April–March). In this declaration, employees disclose:

• Planned tax-saving investments
• Eligible deductions
• Applicable exemptions
• Chosen tax regime (old or new)

The primary purpose of an Income Tax Declaration is to help the payroll team calculate accurate TDS (Tax Deducted at Source) every month as per the provisions of the Income Tax Act, 1961.

Since employers are responsible for deducting TDS from salary, they rely on the employee’s IT declaration form to estimate annual taxable income and spread the tax deduction evenly across the year.

Key aspects of IT declaration

Understanding the key aspects of IT declaration helps employees submit accurate details and enables HR teams to ensure smooth payroll compliance.

1. Financial year applicability

An IT declaration is valid only for a specific financial year (1 April to 31 March). Employees must submit a fresh Income Tax Declaration at the beginning of every new financial year.

2. Tax regime selection (old vs new)

One of the most important components of the IT declaration form is selecting the tax regime:

• Old regime – Allows deductions and exemptions such as 80C, 80D, HRA, home loan interest, etc.
• New regime – Offers lower tax rates but removes most deductions and exemptions.

Employees must carefully evaluate which regime is more beneficial before submitting their IT declaration. Incorrect selection may impact monthly take-home salary.

3. Declaration of projected investments

The IT declaration is based on planned investments, not actual investments made at the time of submission. Employees declare projected contributions toward:

• Section 80C investments
• Section 80D medical insurance premiums
• Housing loan interest
• Other eligible deductions

Payroll calculates estimated annual taxable income based on these projections.

4. TDS calculation impact

The details submitted in the IT declaration directly affect monthly TDS deduction.

• Higher declared deductions = Lower monthly TDS
• No declaration submitted = Higher TDS (assuming no deductions)

Employers deduct tax as per the provisions of the Income Tax Act, 1961, and incorrect or incomplete declarations may result in excess tax deduction.

5. Mandatory PAN and personal details

Accurate PAN, employee ID, and personal information must be provided in the IT declaration form. Incorrect PAN details can lead to:

• Higher TDS deduction
• Non-compliance
• Payroll reconciliation issues

6. Inclusion of previous employer income

If an employee joins a company mid-year, it is mandatory to declare:

• Previous employer salary
• TDS already deducted
• Form 16 details

Failure to include this may result in under-deduction of tax and penalties during income tax return filing.

7. Other income disclosure

Employees must declare additional income such as:

• Bank interest
• Rental income
• Freelance income

This ensures correct tax deduction and avoids tax shortfall at year-end.

8. Revision facility

Most organizations allow revision of IT declaration:

• Mid-year
• During salary changes
• Before proof submission window

However, frequent changes can complicate payroll calculations.

9. Investment proof submission requirement

The IT declaration is only a provisional estimate. Employees must submit valid investment proofs later in the year. If declared investments are not supported with proof:

• Additional TDS will be deducted
• Salary in the last few months may reduce significantly

10. Compliance and audit importance

For HR and payroll teams, maintaining proper IT declaration records is essential for:

• Payroll compliance
• Tax audits
• Internal financial reviews

Proper documentation protects the employer from non-compliance risks.

Why is IT declaration important?

For employees

1. Avoid higher TDS deductions
   If IT declaration is not submitted, the employer may deduct higher tax assuming no deductions or exemptions.
2. Plan tax-saving investments in advance
   Filing the IT declaration early helps employees structure their investments under sections like 80C and 80D in a planned manner.
   
   
3. Choose between old vs new tax regime
   Employees can evaluate which regime is beneficial based on deductions and income level and declare it accordingly.
4. Prevent year-end tax shocks
   Proper declaration ensures that tax is distributed evenly instead of heavy deductions in the last few months.

For HR and payroll teams

1. Accurate monthly TDS computation
   The IT declaration form allows payroll to compute projected taxable income and deduct correct TDS.
2. Compliance with income tax laws
   Employers must deduct tax correctly under the Income Tax Act. Incorrect deduction can lead to compliance risks.
3. Reduced year-end tax adjustments
   Proper declaration reduces last-minute recalculations and payroll disruptions.
4. Audit and documentation support
   IT declaration records serve as important payroll documentation during internal and external audits.

What is an income tax declaration?

An Income Tax Declaration is a projected estimate of tax-saving investments and eligible expenses that an employee plans to make during the financial year (1 April to 31 March).

It is not proof of investment. Instead, it is a declaration of intended investments based on which TDS is calculated.

It typically includes:

• Section 80C investments (Provident Fund, ELSS, LIC premium, PPF, tuition fees, etc.)
• Section 80D (Health insurance premium for self and family)
• HRA details (rent paid, landlord details, city of residence)
• Home loan interest under Section 24(b)
• Education loan interest
• Other applicable deductions
• Income from other sources (if any)

This information helps determine estimated taxable income for the year.

IT declaration form – What does it include?

An IT declaration form is a structured document provided by the employer to capture all relevant tax information. It may be shared digitally or physically.

A standard IT declaration form includes:

• Employee details (name, PAN, employee ID, designation)
• Financial year details
• Tax regime selection (old or new regime)
• Section 80C investment declaration (up to prescribed limits)
• Section 80D medical insurance premium
• HRA and rent details
• Home loan interest certificate details
• Other income (bank interest, rental income, etc.)
• Previous employer income (mandatory if joined mid-year)

HR teams usually collect the IT declaration through:

• Payroll software
• Excel templates
• HRMS portals
• Internal employee self-service platforms

Digitizing the IT declaration process reduces manual errors and improves compliance tracking.

IT declaration last date

The IT declaration last date is generally:

• April or early May (at the beginning of the financial year), and
• As communicated by the employer’s payroll team.

Since companies must start TDS deduction from April salary, collecting declarations early ensures accurate tax calculation.

Can it be revised?

Yes, in most organizations employees can revise their IT declaration:

• Mid-year
• Before the investment proof submission window
• During salary revisions or structural changes

However, once proof submission is completed (usually January–February), revisions are typically restricted.

Declaration to whom it may concern format (for tax purpose)

In certain situations, employees may require a declaration to whom it may concern format for tax or financial documentation.

Sample format

To whom it may concern

This is to declare that I, [Employee Name], holding PAN [XXXXX], currently employed with [Company Name], hereby declare that the information submitted in my IT declaration form for the Financial Year [YYYY–YY] is true and correct to the best of my knowledge.

Signature
Date

This format may be required for loan processing, visa documentation, or financial verifications.

Difference between IT declaration and investment proof submission

Understanding this difference is important for both employees and HR.

IT declaration

• Submitted at the beginning of the financial year
• Based on planned investments
• Used for monthly TDS calculation
• Can usually be revised

Investment proof submission

• Submitted at the end of the financial year
• Based on actual investments made
• Used for final tax adjustment
• Requires supporting documents

If declared investments are not actually made and proofs are not submitted, additional tax will be deducted in the final months.

Can IT declaration be revised?

Yes, most employers allow employees to revise their Income Tax Declaration:

• If investment plans change
• If tax regime selection changes
• If home loan or HRA details change
• If additional income is added

However, after the proof submission deadline, payroll adjustments become limited and any mismatch must be adjusted during final TDS calculation.

Common mistakes in IT declaration

1. Declaring investments that are never actually made
2. Forgetting to declare previous employer income
3. Providing incorrect HRA or rent details
4. Missing the IT declaration last date
5. Confusion between old and new tax regime
6. Not declaring other income such as fixed deposit interest

Avoiding these mistakes ensures smoother payroll processing and prevents heavy tax deductions at year-end.