Salary refers to the compensation that an employee receives from their employer for the work they perform. This compensation can be in the form of cash, bonuses, benefits, and/or stock options.
Maintaining proof is especially important in the context of income tax. This is because tax authorities require taxpayers to provide documentation to support the claims made on their tax returns. This documentation, also known as proof of income, can include pay stubs, bank statements, and receipts for business expenses. By maintaining proper proof, taxpayers can ensure that they are accurately reporting their income
It is important to maintain proof of salary documents for income tax return filing because:
- Salary income is taxable: Salary is one of the main sources of income for most individuals, and it is taxable under the Indian Income Tax Act. Hence, it is important to maintain proof of salary documents to correctly calculate and report taxable salary income.
- Form 16: Form 16 is a certificate of TDS (tax deducted at source) provided by the employer. It contains details of the salary paid, tax deducted, and other deductions made during the financial year. Form 16 is considered a crucial document while filing income tax returns as it provides proof of income and tax deductions.
- Verification: The income tax department may verify the information mentioned in the tax return with the information available with the employer. Hence, it is essential to maintain proof of salary documents to avoid any discrepancies or disputes.
- Eligibility for deductions: Maintaining proof of salary documents is also important to claim various tax deductions and exemptions that are available for salary income. For example, HRA (House Rent Allowance) and LTA (Leave Travel Allowance) can be claimed as tax-saving deductions if proper proof is submitted.
In India, the following documents are important for employees to maintain while filing their income tax returns:
- PAN card
- Bank statements
- Form 16 (provided by the employer)
- Salary slips
- Investment proofs (e.g., LIC, PPF, etc.)
- Rent receipts (if claiming HRA)
- Proof of any tax-saving investments made during the financial year.
It’s always a good idea to keep all financial records organized and easily accessible for smooth and hassle-free income tax filing.