Guide on Employee Investment Declaration — Explained

This document covers

1. What is Employee Investment Declaration?
2. Time of Employee Investment Declaration
3. How to do Declaration?
4. What is 📜Form 124 of IT Act 2025 (Form 12BB of IT Act 1961)?
5. What is 📜Form 123 of IT Act 2025 (Form 12BA of IT Act 1961)?
6. Importance of Employee Investment Declaration
7. Common Mistakes to be avoided by Employees
8. Filing Income Tax return after declaration

1. What is Employee Investment Declaration?

• Employee Investment Declaration is a formal statement submitted by an employee to employer.
• Employee Investment Declaration will have the details of employee's other income, investments, type of regime
• Employee Investment Declaration is used for tax calculation and deduction of TDS by employer.
• The employee investment declaration primarily consists of
  
  
  • Salary structure details
  • House rent allowance, Leave travel allowance etc
  • Investments like 123 (80C), 126 (80D), 129 (80E) etc
  • Home Loan details
  • Any other income details and any other tax deduction details

2. Time of Employee Investment Declaration

Employee Investment Declaration will be submitted at the beginning of financial year or whenever employee joins any new organization.

3. How to do Declaration

• The companies will provide a payroll portal for the employees, and it will have the option which will enable the employees to submit declaration.
• There would be some difference between the procedure how the private employees and Govt employees submit the declaration.
• Govt employees might need to submit the declaration through manual process whereas the private employees are required to submit declaration through software.

4. What is 📜Form 124 of IT Act 2025 (Form 12BB of IT Act 1961)?

• Employee needs to submit the declaration in 📄Form 124, aka Form 12BB
• 📄Form 124, aka Form 12BB is a declaration form submitted by employees to their employer to claim tax benefits on various deductions and exemptions.
• New Tax Regime is the default tax regime. If the employee doesn't submit any declaration, the employer will consider New Tax regime as default tax regime and deduct the taxes accordingly. The employee cannot change this in between the year.
• 📄Form 124, aka Form 12BB contains the following details
  
  
  • House Rent Allowance (Rent paid to the landlord, Name of the landlord, Address of the landlord and PAN of the landlord)
    NOTE

    ---

    W.e.f 01st April 2026, the employees are required to furnish the "relationship with landlord" to claim HRA exemption under the old tax regime in Form 124 (Form 12BB earlier)

  • Leave travel concessions or assistance
  • Deduction of interest on borrowing (Interest payable/paid to the lender, Name of the lender, Address of the lender, PAN of the lender)
  • Deduction under Chapter VIII (aka Chapter VI A) (Section 123 of IT Act 2025 (Section 80C of IT Act 1961), Section 126 of IT Act 2025 (Section 80D of IT Act 1961), Section 129 of IT Act 2025 (Section 80E of IT Act 1961), Section 127 of IT Act 2025 (Section 80DD of IT Act 1961) etc.)

5. What is 📜Form 123 of IT Act 2025 (Form 12BA of IT Act 1961) ?

• 📜Form 123 of IT Act 2025 (Form 12BA of IT Act 1961) is a statement showing details of perquisites provided by an employer to an employee and is required to be furnished along with 📄Form 130, aka Form 16. It is applicable when employee's salary includes the non-monetary perquisites
• 📄Form 123, aka Form 12BA contains the Value of perquisite, amount recovered from employee and amount of perquisite chargeable to tax.
• Types of perquisites mentioned in 📄Form 123, aka Form 12BA: Generally 📄Form 123, aka Form 12BA contains the details of following perquisites
  
  
  • Accommodation
  • Cars/Other automotive
  • Sweeper, gardener, watchman or personal attendant
  • Gas, electricity, water
  • Interest free or concessional loans
  • Holiday expenses
  • Free or concessional travel
  • Free meals
  • Free education
  • Gifts, vouchers, etc.
  • Credit card expenses
  • Club expenses
  • Use of movable assets by employees
  • Transfer of assets to employees
  • Value of any other benefit/amenity/service/privilege
  • Stock options allotted or transferred by employer being an eligible start-up referred to in section 80-IAC
  • Stock options (non-qualified options) other than ESOP in col 16 above
  • Contribution by employer to fund and scheme taxable under section 17(2)(vii).
  • Annual accretion by way of interest, dividend etc. to the balance at the credit of fund and scheme referred to in section 17(2)(vii) and taxable under section 17(via) of IT Act 2025 (section 17(2)(via) of IT Act 1961).
  • Other benefits or amenities
  • Total value of perquisites
  • Total value of profits in lieu of salary as per Section 18 of IT Act 2025 (section 17(3) of IT Act 1961)

6. Importance of Employee Investment Declaration

• Employee Investment Declaration helps in deducting correct TDS by employer
• It helps the employees in reducing the chances of tax liability at the time of filing income tax returns
• It helps the employer in generation of 📜Form 130 of IT Act 2025 (Form 16 of IT Act 1961).

7. Common Mistakes to be avoided by Employees

• The employees should submit only those investments for which they are having valid proofs. The employees should not provide any inflated or incorrect investments.
• The employees should not miss the deadline given by employer for submitting declaration.
• The employees should plan for the investments during the year to minimise the taxes. Contact EZTax.in for tax consultation

8. Filing Income Tax return after declaration

• Most of the employees think that they are not required to file Income tax return as they have already submitted the declaration to employer, and they have already deducted TDS.
• However the employees are required to file income tax returns mandatorily.
• If there is any excess TDS deducted by employer, the employees can claim refund by filing income tax return. In the same way, if TDS is deducted less due to change of job or any other income, the employees are required to pay balance tax by filing income tax returns.