A Practical Guide for Salaried Employees in India
Tax declaration may look like a routine HR activity, but small errors at this stage can lead to higher TDS, reduced take-home salary, or last-minute tax payments. Many salaried employees treat tax declaration casually—only to realise the impact when Form 16 is issued.
This blog explains the most common tax declaration mistakes and how to avoid them, so your tax planning stays smooth and compliant.
What Is Tax Declaration and Why It Matters?
Tax declaration is the process where employees inform their employer about expected investments, deductions, and exemptions for the financial year. Based on this declaration, employers calculate monthly TDS (Tax Deducted at Source).
📌 Any mistake here directly affects:
- Monthly salary credit
- Year-end tax liability
- Accuracy of Form 16
1. Declaring Investments You Don’t Plan to Make ❌
One of the most common mistakes is over-declaring deductions, especially under:
- Section 80C (ELSS, LIC, PPF)
- Section 80D (health insurance)
- Home loan principal or interest
Many employees assume they will “manage later”, but if proofs are not submitted, extra tax is deducted in the last months.
✅ Tip:
Declare only realistic and achievable investments, not ideal numbers.
2. Confusing Tax Declaration with Proof Submission
Tax declaration is not final.
- Declaration → Estimated investments
- Proof submission → Actual evidence
If declared amounts don’t match proof:
- Employer recalculates tax
- Higher TDS is deducted suddenly
This is a frequent reason for February–March salary shocks.
3. Ignoring the New Tax Regime Selection
Many employees forget that:
- Choosing the new tax regime means most deductions are not allowed
- Declaring 80C, HRA, or 80D under the new regime is pointless
Mistake often seen:
Declaring deductions but selecting the new tax regime
✅ Tip:
Always align tax declaration with the chosen tax regime.
4. Incorrect HRA Declaration 🏠
HRA is a major tax-saving component, but errors are common:
- Declaring rent without rent receipts
- Not considering metro vs non-metro limits
- Declaring rent paid to parents without proper documentation
⚠️ Incorrect HRA declaration can attract scrutiny or rejection.
5. Forgetting Income from Previous Employer
If you changed jobs during the year:
- Salary from the previous employer must be declared
- Form 12B should be submitted
❌ Ignoring previous income leads to:
- Under-reporting of salary
- Tax shortfall
- Potential notice later
6. Not Declaring Other Sources of Income
Many employees forget to disclose:
- Bank interest
- Fixed deposit interest
- Dividend income
- Rental income
While employers may not deduct TDS on these, non-disclosure can cause tax mismatch during ITR filing.
7. Declaring Home Loan Interest Without Proper Eligibility
Common errors include:
- Declaring interest before possession
- Claiming both 80C principal and 24(b) interest incorrectly
- Declaring joint loan deductions without proportion
📌 Only eligible interest and principal should be declared.
8. Overlooking ESOPs, Bonuses & Variable Pay
Employees often miss declaring:
- ESOP perquisite income
- Annual bonuses
- Performance incentives
These components are taxable as salary and directly affect TDS calculations.
9. Assuming Employer Will “Fix It Later”
Many employees believe:
“HR will adjust everything at year-end.”
In reality:
- Employers calculate TDS based on your inputs
- Errors often reflect in Form 16
- Corrections after March are limited
10. Missing Deadlines ⏰
Late submission of tax declaration:
- Leads to maximum TDS deduction
- Limits flexibility in planning
- Causes cash-flow issues
✅ Always follow your company’s internal tax declaration timeline.
How JM Financial Services Helps with Smarter Tax Planning
Platforms like JM Financial Services help investors and salaried professionals:
- Understand tax-efficient investment planning
- Align salary, investments, and long-term wealth goals
- Navigate tax regime decisions
- Manage capital gains and portfolio taxation
Tax declaration should not be treated as paperwork—it’s a strategic financial decision.
Key Takeaways
- ✔ Tax declaration impacts monthly salary and final tax
- ❌ Over-declaration leads to last-minute tax stress
- 📌 Always align declaration with actual investments
- 🧾 Maintain documents and proofs properly
- 🧠 Advance planning avoids compliance issues
Frequently Asked Questions (FAQs)
1. What happens if declared investments don’t match proofs?
Employer recalculates tax and deducts higher TDS later.
2. Can I change tax declaration mid-year?
Most employers allow limited changes before proof submission.
3. Is tax declaration mandatory?
Yes, if you want correct TDS deduction.
4. Should I declare bank interest?
Yes, for accurate tax planning and ITR filing.
5. Does wrong declaration lead to penalty?
Indirectly yes—through higher tax, interest, or scrutiny.
- PAN Card
- Cancelled Cheque
- Latest 6 month Bank Statement (Only for Derivatives Trading)
