As the calendar turns to January 2026, salaried employees should prepare for the annual Form 12BB review, a crucial step in managing their Tax Deducted at Source (TDS) and potentially avoiding higher tax deductions. Form 12BB is a declaration form that allows employees to inform their employers about investments and expenses that qualify for tax deductions under the Income Tax Act. By accurately declaring these investments, employees can ensure that their TDS is aligned with their actual tax liability.

Understanding Form 12BB

Form 12BB requires salaried individuals to provide details of their investments and expenditures made during the financial year to claim tax benefits. This includes information related to:

• House Rent Allowance (HRA): Details of rent paid, landlord's name, address, and PAN.
• Leave Travel Allowance (LTA): Amount claimed for LTA.
• Home Loan Interest: Interest paid on a home loan.
• Deductions under Section 80C: Investments in instruments like PPF, LIC, ELSS, and NSC.
• Deductions under Section 80D: Premiums paid for health insurance.

Submitting Form 12BB is mandatory for employees seeking tax benefits. It enables employers to deduct the correct amount of TDS, preventing overestimation of tax liability.

Why Review in January?

The Form 12BB review in January is essential for several reasons:

• Accuracy: January provides an opportunity to reconcile declared investments with actual investments made throughout the year. This ensures that the declared information is accurate and reflects the employee's actual tax-saving investments.
• Proof Submission: Most employers have strict deadlines for submitting investment proofs, typically between January and March. Reviewing Form 12BB in January allows employees to gather and submit the necessary supporting documents before the deadline.
• TDS Adjustment: Based on the reviewed Form 12BB and submitted proofs, employers can adjust the TDS deductions for the remaining months of the financial year. This helps employees avoid excessive TDS deductions and ensures that their tax liability is accurately calculated.
• Avoiding Higher TDS: If employees fail to submit Form 12BB or provide accurate information, their employers will deduct TDS at a higher rate, potentially leading to a significant reduction in their take-home salary.

Key Changes to TDS Rules in FY 2025-26

Starting April 1, 2026, significant reforms to the TDS system aim to simplify compliance and reduce errors. These changes include:

• Enhanced disclosures: To reduce confusion and ambiguities.
• Direct connection with AIS & Form 26AS: To ensure a smooth flow of data.
• User-friendly and simplified formats: To improve clarity.
• Fully digital filing: To align compliance with modern technology.

These reforms promise a more transparent, efficient, and digital-first system, making tax management less stressful for both employees and employers.

Steps to Take in January

To make the most of the Form 12BB review in January, employees should:

1. Collect all investment proofs: Gather documents such as rent receipts, investment statements, and insurance premium receipts.
2. Review declared investments: Compare the declared investments in Form 12BB with the actual investments made.
3. Update Form 12BB: If there are any discrepancies, update Form 12BB with the correct information.
4. Submit Form 12BB and proofs: Submit the updated Form 12BB along with the supporting documents to the employer before the deadline.

By taking these steps, salaried employees can ensure accurate TDS deductions and avoid unnecessary financial burdens. The January review of Form 12BB is a vital opportunity to optimize tax planning and manage finances effectively.