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The finance and payroll team is in charge of collecting and validating employee receipts and investment proofs. Employees plan their investments in their IT Savings Declaration forms at the start of the year. Around year-end, financial staff begin collecting investment proofs to check their legitimacy and calculate income tax. Income Tax Investment Declaration Proof Submission Form and Verification.

Importance of Proof of Investment

Every month, employers must compute and remit income tax. Employees can also avoid tax by claiming exclusions and deductions. But only with proper proof.

 

The employer is required to acquire the following evidence:

The DDO shall also guarantee the provision of evidence or particulars in Form No. 12BB in respect of interest deduction as provided in Rule 26C read with Section 192. (2D).

But it’s difficult to demand on proof from staff at the start of the year. After that, the investments and receipts come. Insistence leads to excessive taxation, poorer take-home pay, resentment, and misery.

Every year, companies ask employees to declare their housing rent, savings, investments, and other income eligible for deduction or exemption (typically called an Income Tax Declaration). The declared exemptions and deductions are incorporated into the employee’s tax. After calculating the tax, it is divided into equal monthly installments and withdrawn from the employee’s salary (Tax Deducted at Source or TDS).

Employees must present proof of exemptions and deductions claimed at the start of the year by the end of the quarter. The tax deducted in March is based solely on these proofs and not on declarations. Unsubstantiated claims must be denied by the employer.

For various reasons, employees fail to provide investment proofs. Also, sometimes the declared and actual investments differ. These variables affect the employee’s tax liability, which is changed during the year.

 

Timing for collection of Proof of Investment

It’s a hassle for employees to keep proofs all year and then submit them all at once. Working without a plan causes interruptions, task switching, and stress. Accept entries for one or two months at the end of the year. It varies depending on the company. The employer accepts proofs from employees during the POI window. This window enables a systematic way to collecting investment proofs. A planned POI collection and verification exercise can reduce errors and ensure workflow. Set the start and end dates of the POI window. Decide when and how to inform employees and other stakeholders about the exercise and key dates. Income Tax Investment Declaration Proof Submission Form and Verification.

 

Steps for processing of Investment Proof

Planning

Before collecting and confirming POI, plan out the method and how long staff will have to submit them. Decide on a POI submission deadline and inform your personnel

Gathering Proofs

Collect proofs from employees in hard copy or soft copy during the deadline. Employees can email or upload investment proof forms and supporting papers.

Reply to Queries

Make sure your employees understand the POI filing process. Even a tiny miscalculation can impact your employees’ pay and tax calculations, as well as prompt an IT department alert. Respond to employee complaints by phone or mail.

Verify POI

In this step, the employer verifies the employees’ stated investment. You check the POIs submitted by employees for accuracy and completeness. Once the POI has been verified against the IT declaration, you can accept or reject it.

It’s possible to refuse POI when the proofs don’t match the IT declaration and to hold POI when documents are missing or need to be. In both circumstances; you must collect and re-verify POI from employees.

Recollect POI

Employees’ POIs are sometimes partial, inaccurate, or do not match the IT declared at the start of the year. Receipt POI from such employees with the correct information.

Re-verify POI

Similarly to the previous phase, you must re-verify the POI documents submitted by employees. You can accept or reject a contribution based on POI analysis.

Compose payroll and follow-ups

After collecting and verifying investment proofs, we recalculate the employee’s income tax and deduct it from their take-home pay. Adjust the TDS for employees. After collecting the POIs, there are follow-up duties including filing the proofs for future reference. This is done using a good document management system for easy retrieval.

 

Key Challenges while processing Proof of Investment

 

Organizing proofs is a major concern for any organisation. Because each employee submits three proofs of investment (Our data based on reviews of lakhs of transactions indicate an average number of three documents per employee). When the entire workforce submits these documents physically, the finance team struggles to manage and organise them all. This increases the risk of document loss.

 

Accurate & Missing Proofs

One of the most common mistakes in document collection is inaccuracy and incompleteness. Employees frequently provide inaccurate or incomplete investment proofs, leading to re-collection. This slows down the process and requires the finance team to re-verify the proofs.

Reminding Employees

Reminding employees of important dates is a common challenge. Even after repeated reminders, employees often fail to submit proof. If employees fail to submit proofs within the POI Window, employers may need to follow up with them individually.

Verification Errors

Verification errors are rare but possible. Manual verification is prone to human errors. This can lead to errors in the payroll and tax calculations.

IT Calculation Errors

Similar to POI verification errors, the finance team may miscalculate employee taxes. Incorrect tax calculations can lead to errors in salary calculation and tax submission. The IT department will be notified. Income Tax Investment Declaration Proof Submission Form and Verification.