- January 10, 2018
- Posted by: admin
- Category: Accounting
It’s that time of the year again, where organizations need to collect investment proofs from employees and reconcile against the investment declarations that have been made earlier by them. They need to know the relevant regulations to verify and approve documents that employees are submitting to claim the benefits under Income Tax Act. Once all of this activity is completed, then tax deductions for the months of Feb & March need to be revised to deduct the incremental tax amounts from the employees.
Across organizations, this can easily get out of hand and can lead to sleepless nights for the involved HR and payroll teams. In several mid-sized companies, typically more focus is given to HR-strategic projects, so this task of documents collection, verification and tax adjustments can be very challenging.
While handling the document collection process, here are things that companies need to follow :
- Collect Investment proof : Employees need to submit physical investment proofs within specified dates. Managing the entire communication to employees and getting them to submit all of the required documents in a given timeframe can become a hassle to manage. Also, answering to employee queries related to investment proofs can deviate attention of HR teams from their routine tasks. Employees need to be informed that if investments are not correctly submitted they are liable to pay tax which can create discomfort and frustration among them.
- Verify documents: The Income Tax Department has clearly laid out regulations about what documents can be and cannot be accepted as proofs against specific sections under Income Tax Act. It is necessary to verify the genuineness of each document submitted by the employee. The teams collecting the documents need to be very careful and knowledgeable at this stage.
- Adjust Tax deductions: Based on the collection of documents and revalidation of the Investment declarations, tax deduction adjustments need to be completed during the months of February & March. Excess deductions at this stage affect employee take-home salaries and they cannot get it back till they claim it back via the ITR route.
While this can get challenging for most organizations, fortunately, an outsourced payroll solution can simplify things for you. At Finsmart Solutions, we can manage all your year-end activity (including investment proof collection, tax deductions as well as issuing Form 16)