Investment goals: Declare, stick to it


Mumbai: The first month of the financial year 2019-2020 is about to end and most of you must have been asked to declare your investments. If you are in your first job and wondering why it is important to declare your investment now, here we tell you why.

If you are a salaried employee, your employer will ask you to declare your investments that you plan to undertake at the beginning of the financial year. This helps your employer calculate your taxable income and deduct tax deducted at source (TDS) accordingly. “The most common form of investment declarations is for sections 80C, 80D, home loan interest and principal and house rent allowance,” said Melvin Joseph, a Mumbai-based financial planner.

Tax-saving investments such as equity-linked savings schemes, public provident fund and approved mutual fund schemes are a few investments you can declare to save your taxes. Some tax-saving expenditures that you may undertake throughout the year are home loan interest and principal, house rent allowance, medical insurance premiums, tuition fee for children and repayment of education loan. “Once you inform your employer investments you plan to undertake, your tax obligation will be reduced accordingly, and TDS will be evenly spread out throughout the year and deducted every month,” said Shyam Sunder, founder of Peakalpha Investment Services.

A discrepancy can happen when you either declare more tax-breaks or less, which means you have either paid lesser or more taxes throughout the year. “This is the reason why your company asks you to file your investment proof in January and not In the last month of a financial year. In case of a shortfall in your targeted tax-saving investments, your taxes for the last three months of the financial year will be calculated again and the TDS deducted will go up,” Sunder added. As a result, your monthly take-home comes down in the last three months.

Declaring your investments at the beginning of the financial year leaves you with more disposable income in the coming months. “The need to do investment declarations stems from your company’s requirement to deduct the right amount of TDS from your salary,” said Sunder. Your employer would not want the amount to be too low because then they would not meet their statutory obligations, whereas too high a TDS would imply extra monetary burden on you.