Everything You Need to Know About Form 12BB

Looking for something that can help you claim tax benefits on home loan interest, HRA, Section 80C investments, and more? Then you should surely know about Form 12BB. Since its introduction on 1 June 2016, by the Central Board of Direct Taxes (CBDT), Form 12BB has become a vital document for salaried employees. Apart from salaried individuals, this form is also valuable for non-resident Indians (NRIs). Under section 80C of the Income Tax Act, 1961, this form helps NRIs in saving up to INR 46,800.

Well, for both salaried employees and NRIs, this form isn't optional but vital for claiming tax benefits. Under section 80C, using this form, one can claim up to INR 1,50,000 tax deduction on several saving instruments such as Public Provident Fund (PPF), life insurance premiums, and more. Want to know more about Form 12BB, especially as an NRI? Read on the blog and get all the information that you are looking for.

What Is Form 12BB?

Form 12BB is a standardized tax declaration form that salaried individuals fill out to tell the employer about their investments and expenses that are applicable under tax benefits. On 1 June 2016, the Central Board of Direct Taxes (CBDT) introduced Form 12BB. This form replaced all the inconsistent declaration methods previously used by the employers.

It applies to all salaried taxpayers in India, whether Indian residents or NRIs with Indian income. Once you fill out the Form 12BB, instead of submitting it to the Income Tax Department, you need to provide this to your employer. This form is generally filled in January or February of every year. As mentioned above, this form is not optional but mandatory to fill out by salaried employees. Through this form, employees provide information about their investments or expenses that they have incurred and on which they want to claim tax deductions. Using this form, the employer calculates the applicable tax to be deducted from the salary of the employee. For both employers and employees, Form 12BB is an important document as it assists them in calculating the right amount applicable for tax deduction from the salary of the employee.

It is all about Form 12BB and why it is important for salaried individuals in India. Well, NRIs find tax filing in India often difficult. For this, there are several reasons, like they do not understand their tax liabilities or do not know how to use a section to claim tax benefits. Considering this, let's know how Form 12BB offers tax benefits to NRIs.

Role of Form 12BB in NRI Tax Planning

Being an NRI, do you have an income source in India? Then, in your tax planning strategy, Form 12BB can be a vital component. Through this form, you will be able to connect your tax-saving investment to the tax benefits you get through your company or employer in India. Want to know more about this? Read the next section and get your answers.

Importance of Form 12BB Especially for NRIs

NRIs with salary income in India can use Form 12BB as a tax shield. However, without giving this form to your company or employer, you cannot get tax relief from the deducted TDS on your salary. Based on the declarations you made in Form 12BB, your employer calculates your monthly applicable tax deduction. Through this form, you can streamline your tax planning in the following ways:

• Despite your resident status in India, you can claim key tax deductions through this form.
• This form establishes the foundation to calculate TDS based on your salary in India.
• Removing ambiguity, this form creates a standard investment declaration process.

Components Relevant to NRI Tax Planning

Form 12BB needs specific details that directly impact the tax liability of a taxpayer. The information includes:

• Personal details (name, address, and PAN card number)
• If applicable, house rent allowance
• Leave Travel Allowance benefits (applicable on domestic travel only)
• Home loan interest on Indian properties
• All tax deductions are included in Chapter VI-A

Important Consideration for NRIs

While it is mandatory to submit Form 12BB, submitting this form does not provide a guarantee of tax benefits. To get the applicable tax benefits, it is vital to provide proof of every claim. Also, you cannot directly submit this form to the Income Tax Department; it should be given to your employer. Furthermore, in case you change your job within a fiscal year, do not forget to claim tax benefits from both employers. However, it may be stated as incorrect disclosure, outcome in potential penalties and additional payments of tax.

This was all about the role of Form 12BB in the life of NRIs and how it helps in claiming tax benefits on their salary income in India. Moving ahead, let's know the things to be considered before filling out this form.

Things to be Considered Before Filing Form 12BB

These are the following things you should consider before filing Form 12BB:

• Before filing this form, check whether HRA and LTA are part of your salary or not by reading your CTC structure.
• If these are part of your salary structure, then you can claim tax exemption on these allowances.
• Get your loan repayment schedule and interest certificate from the bank.
• Gather all the expenses and investment receipts on which you want to claim tax deductions, such as life insurance premium receipts, tuition fees, donations, and more.

These are some of the things that you should check before filling out this form. Moving forward, let's know how to fill this form.

How to Fill Form 12BB? Your Complete Guide

Filing out Form 12BB is a straightforward process; it is not as difficult as it looks. Here to give you an idea of this, the below section consists of each section, stating which information should be mentioned and how to claim tax benefits. So, read on and gather all the details.

Part I: Personal Details

Part I of the Form consists of personal details. It includes:

• Your complete name
• Your address
• PAN card number
• Fiscal Year

Part II: Details of Claims and Evidence

According to the Indian tax laws, salaried employees, whether Indian residents or NRIs, who receive a salary income in India using Form 12BB, can claim several tax deductions. It includes the four key sections, which are as follows:

House Rent Allowance (HRA) Claims

If HRA is a part of your salary and you live in rented accommodation, then by submitting the mentioned details, you can claim HRA exemption:

• Rent amount paid to the landlord
• Name of your landlord
• Address of your landlord
• If the yearly rent payment is more than INR 1,00,000, then the PAN card number of your landlord
• Provide evidence: rental agreement or monthly rent receipts

Note: Things to consider when claiming HRA tax benefits:

• If HRA is not included in your CTC, but you live in a rented property, then you can claim tax deduction under section 80GG of the Income Tax Act.
• In case your monthly rent is more than INR 3,000, then you need to provide a rent receipt.
• If you are living in your own house, you are not eligible to claim HRA exemption.
• In case you are living with your parents and paying them rent, ask them to show the rental income on their income tax return.
• Do not try to submit fake rent receipts, as it may result in facing legal issues with tax officials.
• Even if it is not asked by your employer, it is advisable to print out your rent agreement on stamp paper.

Leave Travel Allowance (LTA)

It is the only tax allowance through which you can save tax when you take a holiday. To claim tax benefits under LTA, you need to provide your travel documents, like flight tickets, boarding passes, or invoices you sent to your travel agent, to your employer. Moving further, let's take a quick overview of it.

• Eligibility: It is only available if it is part of your salary structure.
• Who Can Benefit: You, your dependent parents, spouse, children, and dependent siblings.
• Frequency: Within a four-year block, twice, you can claim LTA benefits. Considering this, the current year block is 2022-2025.
• Option of Carry Forward: In case in the four-year block you have claimed only one LTA, then it will be carried forward to the next year. However, it should be used in the first year only.
• Domestic Travel Only: You can claim the LTA benefits on your domestic travel only. Also, no tax exemption is available for accommodation expenses.

Deduction for Interest on Borrowing

According to section 24 of the Income Tax Act, 1961, you are eligible to deduct the interest you pay on your home loan. This tax deduction applies to the paid interest on a loan taken for rebuilding, repairing, building, purchasing, or renovating your home. You need to mention the following details while filing out the Form 12BB:

• During the financial year, interest paid/ payable to the lender
• Lender's name from whom the loan is taken
• Lender's home address
• PAN/ Aadhaar number of the lender

Furthermore, you can also claim other tax benefits such as:

• Interest Payment: Deduct paid interest on buying, constructing, renovating, or repairing a property. In this, you can claim up to INR 2,00,000 tax exemption on all types of houses, whether self-occupied or let out.
• Principal Repayment: Under section 80C of the Income Tax Act, you can claim a maximum of INR 1,50,000 tax benefit during the principal repayment of the loan. It is applicable for both self-occupied and rented property.
• Deduction for First-Time Buyers: It includes the following sections:
  • Section 80EE: Under this section, the first-time buyers can claim up to INR 50,000 extra tax deduction. However, the loan should be INR 35,00,000 or less, and the value of the property should not be more than INR 50,00,000. This is validated for the loans taken till 31 March 2017.
  • Section 80EEA: Under this section, an additional deduction of INR 1,50,000 is available to first-time home buyers. You cannot claim tax deduction under both section 80EE and 80EEA. Additionally, the stamp duty value should not be more than INR 45,00,000, and the loan should be approved between 1 April 2019 to 31 March 2022.

Moving further, these are the following documents that should be submitted as proof:

• An interest certificate showing the loan type and paid interest to the lender.
• Completion or possession certificate for new or renovated properties.
• Self-declaration stated whether the property was rented or self-occupied.

Deductions Under Chapter VI-A

This is the final section of Form 12BB, and it consists of the maximum tax deduction available under Chapter VI-A of the Income Tax Act. It includes several sections like 80C available for investment, Section 80G donations, and more. Look at the table below to get an idea of the available deductions.

Part III: Verification

The last part of Form 12BB is the verification of the provided information. In this, you need to mention your name along with the name of your father/mother, the place where you live (your city), the date of filling the form, and your signature along with your complete name.

These are the different sections available in the Form 12BB that you need to mention along with the proper documents to claim maximum tax deductions.

Final Thoughts

Whether you are an Indian resident or an NRI, it is essential to manage your tax obligations in India. In this, Form 12BB is a vital component to save tax on your investments. Through this blog, we have provided you all the information about this form and how you can claim tax deductions through this. Moreover, if you need more guidance on Form 12BB or are facing issues in filing out this form, consider taking help from a tax expert like Savetaxs. We have a team of professionals who assist you in solving your tax-related queries and help you in filing your ITR on time. So connect with us now.