Every employee is required to submit to the respective employer, at the beginning of every Financial Year, a list of investments expected to be made during that particular financial year. This list enables the payroll processors to ensure correct TDS deduction on employee salary throughout the period. This declaration is to be made to the employer in Form 12 BB. This Form is only for the internal records of your employer and need not be submitted to the IT Department.
If you think you can escape taxation by declaring huge investments, you are mistaken! Suppose you declare an Investment of Rs 1.5 lakhs for FY 2019-20, you expect zero TDS for the year. But if you fail to make the proposed investment, you may end up with lower in-hand salary or no salary at all for the month of March. Now, say if your employer too does not ensure proper TDS deduction based on your declaration, you end up paying the short TDS as well as Interest for Short TDS under 234B and 234C while filing your IT returns.
Keeping in mind your last year income and anticipated appraisal choose the best tax saving investment options available to you. Also keep in mind the maximum exemption you can avail as investing too much is also bad.
If you invest or spend, you need to keep a record. Your bank statement alone will not be sufficient at times. Records should include proof of payments like rent receipts, loan statements etc or proof of investments like Mutual Fund Statements, FDR, LIC premium etc. This will help you to avoid last minute hurry. Please be aware, submission of fake documents can lead to heavy penalty on scrutiny. It is advisable to prepare a reconciliation of your declared investments to investment proofs