Form 12C: Purpose, Documents, How to Fill Form 12C?

Form 12C is an essential document provided by the Income tax department. Employees submit this form to their employers showing any other source of income for deducting taxes besides their salary. In this article, get an understanding of the following:

• Usage of Form 12C
• Purpose of Form 12C
• Documents Required To Fill Form 12C 
• How to fill form 12C

Usage of Form 12C

In India, Form 12C is used to claim deductions while filing income tax returns. It is used to claim tax relief, such as interest payable, section 80C deductions, capital gains, etc. The information that goes within this form depends on the claim type.

Who Should Fill Form 12C

• Salaried Employee: Any staff who has income from sources other than salary like rental income, interest income or any other sources and wants the employer to consider this while deducting TDS on their salary must complete Form 12C.
• Individuals with Multiple Income Sources: Employees who have multiple sources of income such as income from house property, capital gains or income from other sources and want these to be taken into account in their TDS calculation.
• Individual Claiming Tax Benefits: Employees who wish to claim tax benefits on investments or expenses like interest on housing loan, savings can report these to their employer through Form 12C so that proper tax calculation is done.

Purpose of Form 12C

Indian citizens use Form 12C, which is an income tax form. Its main objective is to give an individual's employer information about their income from various sources so that the appropriate amount of tax is withheld at source (TDS). Let’s look at some other purposes of this form:

Income Details Submission

Employees with additional income, such as interest on savings, income from other sources, or rental income besides their salaries, must submit their income details through this form to their employers. Form 12C captures details of every other source of income.

Tax Deducted at Source (TDS) Calculations

Through the information in this form, the employers calculate the total tax that should be deducted from the employees' salaries at the source. The employer deducts employee TDS based on the total income and the tax slab.

Assessment of Tax Liability

This form assists in assessing an individual's tax liability by showing all the income generated from any source. This information is essential when filing income tax returns and understanding if any more tax liability is due for the individual.

Facilitating Correct Tax Deduction

By furnishing correct income information through Form 12C, the employees ensure that the right amount of tax is deducted at source from their wages. This prevents under or over deduction of tax, which can result in further tax liability or refund during the assessment stage.

Compliance with Income Tax Regulations

Form 12C assists in complying with the Income Tax Act and Rules in India by ensuring taxes are deducted at source according to the rates and regulations prescribed. Both employees and employers are assisted to comply with their tax liabilities. 

Documents Required Filling Form 12C: 

• Personal Information: Personal information like name, PAN (Permanent Account Number), residence address, contact number, and email address.
• Income Details : 

1. Salary Income: Information on salary received, such as basic salary, allowances, bonuses, etc.
2. Income from HP: Rental income received, and particulars of ownership of property.
3. Income from Other Sources: Income from savings accounts, fixed deposits, dividends, etc.
4. Any Other Income: Income from investments, capital gains, or business/profession.

• Investment Details: Details of investments and deductions made under different sections of the Income Tax Act, including:

1. Section 80C: Investments in instruments such as Provident Fund (PF), Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), etc.
2. Section 80D: Health Insurance Premium Paid. 
3. Section 80E: Interest On Educational Loan.
4. Any Other Deductions Claimed under different sections. 

• Any Other Relevant Documents : Depending on your particular financial circumstances, you might require other documents like receipts for donations given, certificates for tax-efficient investments, information about foreign income/assets (if any), etc .  

How to Fill Form 12C?

Here are the simple steps to fill out Form 12C by the employees:

• Download the form from the official website of the Income tax department. 
• Start filling out the form from the top by mentioning your details.
• Mention income other than your salary in the “Particulars of Income Other Than Salary” section.
• Attach the supporting documents as proof.
• Sign the form and submit it to your employer.
• You can also keep a copy for your reference.
• In the "Part B: Declaration" section, report your investments and deductions made under other sections of the Income Tax Act. 

You may clearly comprehend form 12C, a crucial document for tax computations, by reading the text above. It offers information about each revenue stream that your employer will utilise to determine TDS.

Consequences Of Not Filing Form 12C In Time: 

• In most taxation systems non-payment of 12C Income tax form on due date may have penalties or even fines. These penalties may either be accrued weekly or daily till the time form is filed.
• If Form 12C is not filed or not cleared in time, payer, employer or pay-making entity may be required to deduct taxes at a higher rate rather than the lower rate specified in Form 12C. This may result in increased tax deductions from your salary.
• Along with penalties there could be interest payable on any amount of tax that ought to have been deducted but not paid because of belated filing of Form 12C.

Conclusion: 

Form 12C is necessary for Indian taxpayers to substantiate their income tax claims ensuring that they are in compliance with Income Tax Act. In recording deductions and exemptions it confirms correct payment of taxes and plays a vital role in transparent filing of income tax returns.