It’s that time of the year when you start thinking about the tasks of collecting, submitting, and verifying the employees’ proof of investments. The process can be a breeze. It can also be a nightmare! Everything depends on how well HR team members handle the process.
At a recent Parichay webinar, CA Kamal Tejwani of Jaikumar Tejwani & Co LLP simplified the entire process of proof of investment (POI) submission. He also delighted the attendees by patiently and meticulously addressing a wave of questions. Missed it? No worries. We’ve recorded the session for you.
In this post, we have summarized the answers to 10 common questions about proof of investments (POI). Read on and watch the webinar for answers to 50+ questions! 👇
Most of the time, employees who join us from other companies don’t submit Form 12BB. What is the responsibility of our company in this case? If Form 12BB is unavailable, we will not be able to know whether the employee wants the new or old regime. In this case, as per the new law, the new regime becomes the default regime. So, the solution is to make sure that Form 12BB is a part of their joining-document deck.
Can the rent agreement replace the rent receipts? Does a rent agreement ensure that the rent is paid? Yes. The employees can submit either the rent agreement (on a stamp paper) or the rent receipts. However, they need to submit the same in the prescribed format. If the rent is INR 8,333 per month (or INR 1 lac per annum), the employee has to collect the landlord’s PAN card details.
What are the inclusions and exclusions in the tuition fee component? Tuition fee is the fee for children’s education from school to college. Only the monthly education fee is considered in a composite fee receipt with other components like computer fee, transport fee, etc. Fees for evening classes or private tuition are not covered. Only the receipts with the term ‘tuition fee’ are considered.
What are the deductions and rebates an employee can claim in the new tax regime? Leave encashment exemption and gratuity exemption are two deductions available under the new regime. But both are applicable only when the employee leaves the organization. There is also a VRS exemption if a VRS scheme is in place. Moreover, under Section 80CCD(2), there’s a deduction on the company’s contribution to NPS but this is limited to 10% of the basic salary.
What should we do if an employee has not linked the Aadhaar and PAN? Can we still generate Form 16? This question will certainly arise at the time of IT return filing. As an organization, you must validate the employee’s PAN status on the Income Tax website by entering the PAN and Aadhaar number. The site will also indicate that the PAN is either valid or valid but not linked. So, you need to inform the concerned employee to do the linking.
What is the maximum number of people who are covered in the section under disabled dependents? All the dependents are covered up to a maximum of INR 75,000. But there are some conditions to avail of this benefit. The spouse, children, parents, brothers, and sisters of the employee are considered as dependents.
Many times the landlord refuses to share the PAN card details when the annual rent is more than INR 1 lac. Please suggest what needs to be done. If the landlord does not provide the PAN card, there are two options for the employee: either forgo the HRA exemption or change the house.
Is there any option to change the tax regime in the middle of the financial year? As per the circular, an employee has opted for a specific regime with the employer, it is not possible to change later during the financial year. However, the employee can switch to a different regime at the time of filing IT returns.
Can an employee claim the exemption for both HRA and loan interest for a house in the same city? The employee cannot claim both even if one of them is occupied by family members. If the houses are in two different cities, the claim will be considered valid. The maximum limit for home loan interest is INR 2 lacs under Section 24. This is subject to certain conditions.
Is the gratuity paid to a resignee considered for exemption under Section 10(10) of the Income Tax Act? Yes. Gratuity is exempted under Section 10(10). This exemption is applicable to both old and new regimes.
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