The CBDT (Central Board of Direct Taxes) has introduced a new form
(Form 12 BB) for claiming tax deduction towards LTA, LTC, HRA &
interest paid for home loans. The new form mandates people to furnish proof of
travel while claiming LTA, LTC, and details of landlord in case of HRA claims.
Let us understand this in detail.
Why this Rule?
The main reason behind introducing this rule is to plug the loopholes under tax
laws by tightening the entire procedure for claiming these tax exemptions. This
becomes more important because there was no standard or prescribed format until
now for filing these declarations. And in the Budget 2015, the Finance Act had
already introduced Section 192(2D) of the Income Tax Act mandating employers to
collect all necessary evidences, but the rules and form were yet to be
prescribed. The same has been done now.
What is this form about?
The declaration needs to be filed for claiming deductions in a prescribed
form i.e. Form 12 BB as set up under rule 26C.
What is the obligation on the Employer?
Earlier the employers were not under any statutory obligations for
collecting bills or other proofs in order to prove the fact that their employees
have actually utilized the money they are claiming towards these claims.
But, the current amendment with the introduction of this rule will now make
all the employers obligated to collect all the relevant information in the
prescribed format apart from collecting the proof of evidence, before they can
allow the respective benefits under various tax benefits to the employees.
Details needed to furnish LTA, LTC and HRA claims
The circular as issued by the government has not specified the documents
required to be submitted for claiming deductions but the existing documents
that employees used to provide should hold good. Following are the documents
which are required to claim these benefits:-
HRA:
As per the notification issued by the government, a person claiming HRA
(Housing Rent Allowance) for over Rs. 1 lakh needs to furnish name, address and
PAN i.e. Permanent Account Number of the landlord, apart from giving the rent
receipts. With this the government can start tracking the fraudulent claims and
can also verify whether the rent received by the landlord has been duly
disclosed in their tax-return.
LTA/LTC:
To claim LTA (Leave Travel Allowance) or LTC (Leave Travel Concession),
people need to provide the evidence of expenditure, and submit boarding pass
and tickets for claiming LTA or LTC.
Housing Loan
To claim deduction on the interest on a housing loan, people need to provide
PAN of the lender and their name and address.
Deductions u/s Chapter VI-A
People need to submit relevant proof for claiming deductions under chapters
VIA(A) and VI-A that cover Sections 80C, 80CCC, 80CCD, 80E, 80G, 80TTA.
Sections 80CCC, 80CCD and section 80C allow a deduction of Rs. 1.5 lakhs on
specified investments.
What will be the impact of this new Rule?
The new rule and the forms will make it really easy for both the taxpayer
and the employer because it brings standardization which will help employees
and employers both. Moreover from the government's point of view, the new
format will ensure collection and maintenance of information, and will assist
them in streamlining their assessment process and curb the malpractice of fake
claims.
When will this rule come into effect?
The rules will be applicable from June 1, 2016.
Shared by -Sindhu Riju, +sindhu riju , Manager - HR, CGH Earth Group of Hotels
