Effective June 1, all employees will have to fill in a new form 12BB issued by the central board of direct taxes in order to claim a tax deduction on LTA (Leave Travel Allowance), HRA (House Rent Allowance) and Interest paid on home loans. There were no such forms prescribed earlier and the employers generally collected a declaration or documentary evidence from the employees prior to allowing such deductions/exemptions. Now the new form 12BB will be mandatory.
As per the new provision introduced in the Finance Act 2015, there is a mandatory requirement for the employer to obtain proofs from the employee in a form and manner as prescribed, prior to allowing deductions or exemptions.
Now for claiming the deductions for HRA where the aggregate rent paid during the year exceeds Rs 1 lakh, the employee will need to furnish the amount in rent paid to the landlord along with his/her name, address and Permanent Account Number (PAN).
For claiming deductions on LTA, the employees will need to produce evidence of expenditure. And in order to claim the deduction of interest under the head 'income from house property', the employees will need to furnish the name, address and PAN of the lender along with interest paid/payable to the lender.
Role of EmployersAccording to Deloitte Tax and Regulatory Tea, in addition to Form 12BB, the employers should also refer to the salary circular for the documentation/details to be obtained from the employee as the same requires the employer to collect additional details such as rent receipt for claiming HRA, computation of loss from house property and interest certificate from lender in case of interest on housing loan etc. "Hence it is necessary for the employers to align the documentary requirements with the salary circular in addition to Form 12BB, while allowing exemption/deductions," it said.
However, for the LTA norms, Deloitte said the form does not provide for the type of evidence which can be submitted by the employee for claiming LTA, thus leaving room for ambiguity.
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