Form 12BAA: Applicability, Format, Benefits, How to Download?

In the Budget 2024, the Finance Minister proposed that taxpayers could furnish details of tax collected at source (TCS) or Tax deducted at source (TDS) to their employer in addition to their disclosure of other income sources for computing the withholding tax liability. For this purpose, the income tax department issued Notification No. 112/2024 on 15th October 2024, amending the income tax rules and releasing a new form - Form 12BAA. In this article, we will discuss in detail about the following:

• Form 12BAA
• Lowering TDS on Salary
• Applicability
• Required Details
• Advantages
• FAQS

What is Form 12BAA?

Form 12BAA is a new form introduced by the CBDT to enhance the disclosure of other income sources and tax deducted/collected on the same to employers. It allows employees to report deductions made from various sources of income other than their salaries, such as earnings from fixed deposits, insurance commissions, dividends from equity investments, and taxes collected during significant purchases. It potentially reduces the overall tax deducted and increases the take-home pay for the employees.

How Does The New Form 12BAA Help in Reducing TDS on Salary?

Previously, employees could not declare taxes paid, collected, or deducted from other income sources to their employers. They could only report their investments, income from various sources, and eligible expenses, leading employers to calculate TDS based solely on reported income. This would often result in higher TDS deductions, as employers did not account for taxes that had already been paid, collected or deducted. However, with the introduction of Form 12BAA, employees can now declare to their employers about these taxes. This will enable employers to adjust their calculations accordingly, reducing the overall TDS liability and resulting in increased take-home pay for employees. 

Let’s understand the same with an example:

Mr. A has a Salary of Rs. 10,00,000 and a tax liability of Rs. 3,00,000 on the same. He also has an Income from Dividends of Rs. 2,00,000, on which TDS of Rs. 20,000 has already been deducted.

Applicability of Form 12BAA

Form 12BAA is applicable to all salaried employees who have income sources beyond their salary, such as fixed deposits, insurance commissions, dividends from equity investments, taxes deducted or taxes collected during significant purchases (like cars).

Important Note: 

• It must be submitted at the start of the financial year or when joining employment.
• If not submitted, the employer will assume the employee is under the new regime and calculate TDS accordingly.
• The declaration is valid only for TDS purposes – the employee can still choose a different regime while filing the Income Tax Return.Format & Structure of Form 12BAA

The details required to be filled in the Form 12BAA are as follows:

General Details:

• Name and address of the employee
• PAN or Aadhaar number of the employee
• Financial Year

Details of TDS Deducted:

• Section under which the TDS has been deducted
• Name of the deductor
• Address of the deductor
• TAN of the deductor
• Amount of tax deducted
• Amount of Income credited/received
• Any other relevant details

Details of TCS Collected:

• Section under which the TCS has been collected
• Name of the collector
• Address of the collector
• TAN of the collector
• Amount of tax collected
• Any other relevant details

Loss under the head “Income from house property”:

• Amount
• Details

Benefits of Form 12BAA

The benefits of Form 12BAA are:

• Lower TDS on Salary: Employees can report TDS from non-salary income, helping to reduce the total TDS deducted from their salary.
• Increased Cash Flow: As the TDS deducted reduces, the employee gets increased take-home pay.
• Comprehensive Income Reporting: The form requires detailed reporting of various income sources, ensuring accurate tax calculations.
• Easier Tax Compliance: Form 12BAA simplifies the process of reporting non-salary income, making it easier for employers to calculate TDS correctly.
• Fewer Refund Claims: By accurately reporting TDS at the source, employees are less likely to face excess TDS deductions, reducing the need to claim refunds later.

Click here to Download the Form 12BAA.