Investment Declaration: Complete Guide to Form 12BB (now Form 124), Tax Deductions & Submission Process for Salaried Employees in India

Every April, HR teams send the same reminder.

Submit your investment declarations.

A few months later comes another round of emails asking employees to upload investment proofs. Then, as the financial year draws to a close, payroll inboxes start filling with a familiar question:

“Why did my take-home pay suddenly drop?”

For many organizations, this cycle repeats every year. Investment declaration seems like a straightforward payroll process, yet it often leads to missed deadlines, incorrect TDS calculations, last-minute payroll adjustments, and frustrated employees.

The process has also changed. From April 2026, Form 12BB has been replaced by Form 124 under the Income Tax Rules, 2026. Along with the new form came updated legal references, revised terminology, and a shift from “Assessment Year” to “Tax Year.” While the objective remains the same, HR and payroll teams now need to adapt to a new compliance framework.

This guide explains what an investment declaration is, how Form 124 works, what employees need to declare, when proofs must be submitted, and how these decisions affect monthly TDS throughout the year.

Whether you’re an HR professional managing payroll or an employee planning your tax-saving investments, understanding the process early can help avoid unnecessary corrections when payroll closes in March.

What is an Investment Declaration?

Investment declaration is the estimate your employees give you, at the start of the financial year, of the tax-saving investments and deductions they plan to claim. You use that estimate to calculate their monthly TDS.

Employees are telling you what they expect to do with their money over the next twelve months, and you are trusting that forecast enough to deduct less tax from their salary every month. That trust is exactly why the proof window exists later in the year, and exactly why a declaration that does not hold up creates a scramble in March.

Under the current structure, this declaration runs through Form 124, which replaced the earlier Form 12BB. Employees fill in their name, PAN, and employer details, then list out what they expect to claim under:

• House Rent Allowance (HRA)
• Leave Travel Allowance (LTA)
• Home loan interest
• Deductions grouped under Chapter VIII-A and Chapter VIII-B

For payroll, the Form 12BB (now Form 124) is the input that drives the entire TDS calculation for the year. For employees, it can mean the difference between a predictable monthly salary and a painful tax adjustment at the end of the financial year.

This matters most for employees still on the old tax regime, where deductions and exemptions can swing take-home pay significantly.

Now that the purpose of the form is clear, it’s worth looking at what actually changed when Form 12BB became Form 124.

Form 12BB vs Form 124: What Actually Changed

The renaming from Form 12BB to Form 124 is not cosmetic. The legal foundation moved from Section 192 and Rule 26C to Section 392(5)(b) and Rule 205. Chapter VI-A became Chapter VIII-A and VIII-B. Assessment Year became Tax Year.

For payroll teams: If your internal documentation or employee FAQs still reference the old section numbers, update them now. Employees will search those old terms and land on outdated guidance, which only generates more support tickets for HR.

What’s Inside Form 124

Form 124 has two parts, and each does a different job:

• Part A captures the basics like name, address, PAN, tax year, employer name, and employer address.
• Part B is where the real work happens, covering leave travel concession, house rent allowance, interest on borrowings, and deductions under Chapter VIII-A and VIII-B.

At the end of Part B, the employee signs to confirm the figures are correct and complete. That signature is what turns Form 124 into a payroll control rather than a tax form sitting in a folder.

Form 12BB vs Form 124: How Do They Differ

With the form itself covered, the next question employees usually ask is simpler: who actually needs to fill this out, and by when?

Who Submits Form 124, and When

Any employee whose salary is subject to TDS should submit Form 124 at the start of the financial year, typically in April, or at the time of joining for mid-year hires. Remember that this is a declaration of intent, not a record of completed transactions. The actual proof comes later, between December and February, when you reconcile what was declared against what employees actually invested.

This is also where deadlines start to matter more than they seem to. Miss the submission window and the exemption may not reflect in payroll at all, particularly under the old regime, which then shows up as a lower take-home pay and a year-end correction nobody enjoys explaining.

Quick Tip: Build your declaration and proof calendar before the financial year starts. A platform like Keka can send automatic reminders ahead of both windows, which removes a chunk of the manual follow-up that usually falls on HR’s plate.

Once the who and when are settled, mapping out the full-year calendar makes the rest of this process far easier to plan around.

The Investment Declaration Calendar

Here is how the cycle typically plays out across the year:

LTA deadlines tend to be employer-specific, and employees usually need to submit travel proof alongside the declaration for that claim to actually hold.

Don’t forget this: Once the old-regime exemption window closes for the year, the option to claim it through payroll closes with it. The ITR can still capture some of it later, but the employee’s monthly take-home pay has already taken the hit.

With the calendar in place, it’s time to get into the deduction categories themselves, starting with the one every employee asks about first.

Section 80C: The Anchor of Every Declaration

If there is one section every employee asks about, it is 80C. Under the old regime, employees can claim up to ₹1.5 lakh a year across a wide range of investments, and this single bucket usually accounts for the largest chunk of any declaration you receive.

The ₹1.5 Lakh Ceiling

Many employees declare the full ₹1.5 lakh in April assuming they will invest later in the year. When that investment does not happen, you end up recovering the shortfall through higher TDS in February and March, right when employees are least prepared for a smaller paycheck.

Investment Declaration Options Under Section 80C (₹1.5 Lakh Limit)

Flag this early: If an employee’s 80C declaration looks unusually close to the full ₹1.5 lakh ceiling with no clear investment history, it’s worth a quick check-in before April closes rather than a surprise in March.

If this entire bucket is unavailable to an employee, it is only because they chose the new regime, where 80C disappears from the conversation entirely. That regime trade-off shows up again with NPS, which adds its own separate layer on top of 80C.

The Extra ₹50,000: NPS Under 80CCD

NPS quietly pushes the deduction ceiling higher than most employees realize. Section 80CCD(1B) allows an additional ₹50,000 for an employee’s own NPS contribution, sitting on top of the ₹1.5 lakh 80C limit. Combine the two and an individual can reach ₹2 lakh in deductions from their own contributions alone, though this extra room only exists under the old regime.

Employer NPS contributions fall under Section 80CCD(2) instead, and that one survives under both regimes, with the limit shifting based on regime and salary structure. This is worth highlighting to employees who assume switching regimes means losing every NPS benefit. They do not lose all of it, just the part tied to their own contribution.

NPS deductions are relatively clean to verify. Health insurance claims under 80D are where most of the genuine confusion shows up.

Section 80D: Where Health Insurance Claims Go Wrong

Health insurance deductions feel straightforward until reconciliation time, when you discover an employee tried to claim a premium that was never eligible in the first place.

Deduction Limits by Coverage

Section 80D covers premiums paid for self, family, and parents, available only under the old regime.

Preventive health check-ups, capped at ₹5,000, sit inside these same limits. Premiums need to be paid through a non-cash method, while the check-up itself can be paid in cash.

What Doesn’t Qualify

Two claims you will see repeatedly and should reject every time:

• Premiums paid for siblings, grandparents, or other relatives outside the covered list.
• Company-provided group health insurance

If your Form 124 submission instructions don’t already flag this distinction, add a one-line note directly on the form. It’s one of the easiest mistakes for employees to make without realizing it, and a single line of guidance prevents most of them.

Health insurance is one kind of mismatch. HRA brings a different one, built entirely around a calculation employees rarely get right on the first try.

How to Claim Exemption on HRA (House Rent Allowance)

If an employee lives on rent, HRA is usually their single largest exemption opportunity, but only when the calculation is done correctly.

The 3-Way HRA Minimum Rule

Under Section 10(13A), the exemption is the smallest of three numbers:

• The actual HRA received
• 50% of basic plus DA for metro cities, or 40% for non-metro cities
• The actual rent paid minus 10% of basic plus DA

Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad currently count as metro cities for this calculation.

Example: Take a Delhi-based employee earning a basic salary of ₹40,000 a month, receiving ₹18,000 in HRA, and paying ₹20,000 in rent. The exemption works out to ₹16,000 a month, because rent paid minus 10% of basic (₹20,000 minus ₹4,000) comes out lower than the other two figures.

Small changes in basic salary or rent can shift which of the three numbers becomes the binding constraint, which is exactly why this calculation needs to happen before the figure goes into Form 124, not after.

Also Explore: Free HRA Calculator

Documents Required for HRA in Form 124

• Rent receipts
• The rental agreement
• Bank transfer proof
• Salary slips
• Landlord’s PAN (if annual rent crosses ₹1 lakh)

Quick tip: If the landlord is an NRI, the tenant is responsible for deducting 30% TDS on rent before the payment goes out. This catches a surprising number of employees off guard, and it’s worth calling out explicitly in your HRA guidance.

No rent paid means no HRA exemption, regardless of how the allowance line item looks on the payslip. Home loans bring a similar layering effect, except across three sections instead of one calculation.

Home Loan Tax Benefits (Section 24(b), 80C, and 80EEA)

Home loan repayments touch three different sections at once, and conflating them is one of the most common declaration errors often noticed.

Stack 80C and 24(b) together for a self-occupied property, and an employee on the old regime can shave up to ₹3.5 lakh off taxable income in a single year. The new regime removes all three of these for self-occupied property, which is worth pointing out to employees who are weighing a regime switch right after taking out a home loan.

What Goes Where in Form 124

• Interest on borrowing goes in Part B item (iii), using the interest payable for the year, not the EMI amount
• Principal repayment goes separately under the Chapter VIII-A bucket in item (iv)
• Pre-construction interest can be claimed in five equal installments starting from the year construction completes

Common error: Using the full EMI figure instead of just the interest portion inflates the claim and creates a reconciliation gap later. Worth double-checking on any home loan declaration that looks rounder than the lender’s actual interest certificate.

Home loan claims rely on documentation that exists from day one. LTA works almost the opposite way, since the claim only becomes real once the travel actually happens.

Leave Travel Allowance (LTA) Rules, Block Years, and Claim Process

Leave Travel Allowance only works if the travel happens. Under Section 10(5), the exemption covers two journeys within a four-year block, with the current block running 2022 to 2025. If an employee skips a journey, one unavailed exemption can carry forward into the first year of the next block, but only one.

This is a claim payroll should treat with some skepticism at declaration stage. An employee declaring LTA in April has not necessarily booked anything yet. Encourage them to declare it only when travel is genuinely planned, because the exemption depends entirely on proof that materializes much later in the year.

What Qualifies and What Doesn’t?

Eligible:

• Air India economy class fare for flights
• 1st class AC fare for rail travel

Not eligible:

• Local conveyance
• Sightseeing
• Food
• Accommodation

The claim also caps out at two children, and it disappears entirely under the new regime, which makes regime choice part of the LTA conversation rather than a separate topic. LTA tends to get the most attention, but a handful of smaller sections quietly add up too, and employees forget about them more often than you’d expect.

Other Deductions Employees Tend to Forget

This captures the other items employees often forget to include in an income tax declaration or investment declaration, even though the final taxable income. In Form 124, these claims sit in the broader deduction framework and are often supported by separate proofs.

Section 80 E

Covers interest on education loans, with no upper cap on the interest amount, claimable for up to eight years from when repayment begins. The loan needs to be for higher education, in India or abroad, and the benefit exists only under the old regime.

Section 80G

Covers donations to specified funds and charitable institutions, with the deduction running at either 100% or 50% depending on the recipient. Cash donations are capped at ₹2,000, while contributions to the PM National Relief Fund and PM CARES Fund qualify for a full 100% deduction with no upper limit.

Section 80TTA/80TTB

Section 80TTA allows up to ₹10,000 on savings account interest, excluding fixed and recurring deposits, and applies to individuals and HUFs. Senior citizens use Section 80TTB instead, which covers all interest income including FDs up to ₹50,000, and they are not eligible for 80TTA at all. Both sit exclusively in the old regime.

With the deduction categories covered, the next step is putting it all together inside the form itself.

How to Fill Form 124: Step-by-Step

Walking an employee through Form 124 for the first time usually takes longer than it should, mostly because nobody explains why each section exists.

Here is the sequence:

• Fill Part A with employee details: Enter their name, address, PAN, tax year, employer name, and employer address.
• Complete Part B for LTA claims: Declare the estimated amount of Leave Travel Allowance that’s to be claimed, along with related travel evidence such as tickets and boarding passes.
• Add HRA details: Mention rent paid, landlord name, landlord address, and landlord PAN if annual rent exceeds ₹1 lakh.
• Enter interest on borrowing: Include the interest payable or paid to the lender, lender details, PAN, and the loan type, such as housing or education loan.
• Report Chapter VIII-A deductions: List items such as 80C, 80CCC, and 80CCD claims with the amount invested and supporting evidence like premium receipts, account statements, or certificates.
• Report Chapter VIII-B deductions: Add items such as 80D, 80E, 80G, and 80TTA, along with the relevant deduction amount.
• Sign the declaration: Confirm the amounts are correct, and then add date and signature before submitting the form to the employer.

How Keka helps: Employees can complete this declaration online, with built-in validation against statutory limits, which removes a fair amount of the back-and-forth that paper or spreadsheet-based processes tend to generate.

Filling the form correctly assumes the employee has already made one earlier decision that shapes everything else on it: which regime they’re under.

Old vs New Regime: Which One to Choose

This is usually the question that comes before every other question on the declaration form. The honest answer is that it depends on how many deductions an employee can genuinely claim.

Slab Comparison

The old regime carries a ₹2.5 lakh basic exemption and a ₹50,000 standard deduction. The new regime, now the default, comes with a ₹4 lakh exemption and a ₹75,000 standard deduction.

When Choosing the Old Regime is Better?

The old regime becomes better when total deductions and exemptions are high enough to outweigh the new regime’s lower rates. In regular practice, the breakdown point rises with income of up to ₹12 lakh, the new regime is better without deductions, while at higher income levels the old regime can win if deductions are significant.

Below ₹12 lakh, the new regime usually wins without any deductions at all. Above that, the old regime starts winning once deductions cross the threshold in the table.

Simple rule for employees: Choose the new regime for fewer proofs and less tracking. Choose the old regime if HRA, 80C, 80D, LTA, and home loan claims together add up to something meaningful. Run the breakeven check before declaring, not after.

Once the regime and the deduction figures are locked in, the declaration shifts from an estimate to something that needs to be backed up with paper.

Investment Proof Submission

Once the declaration is in, the next stretch of the year is about collecting proof that matches what was declared. This is usually the busiest window for payroll, since every missing receipt changes a monthly TDS number that has already been locked in for months.

Proof Checklist

Here’s a practical checklist of the most common investment proofs employees should keep ready:

HRA

• Rent receipts
• Rental agreement
• Bank transfer proof
• Landlord PAN, if annual rent exceeds ₹1 lakh

80C (Life Insurance)

• Premium paid receipt

80C (ELSS)

• ELSS account statement for the financial year

80C (PPF)

• PPF passbook or account statement

80C (Home Loan Principal)

• Provisional certificate from the lender

80D (Preventive Check-Up)

• Invoice or receipt (cash payment accepted for this item only)

Section 24(b) (Home Loan Interest)

• Annual interest certificate from the lender

80E (Education Loan)

• Lender certificate showing principal and interest breakdown

80G (Donations)

• Receipt with donor PAN and trust registration number

LTA

• Travel tickets
• Boarding passes
• Invoices

Tip for home loans: Ask for the lender’s full loan statement rather than just the interest certificate. It supports both the 24(b) claim and the principal repayment under 80C in one document, instead of two separate requests.

Rather than chasing each proof type through separate emails, HR teams using Keka can centralize submissions and track outstanding documents from a single dashboard instead of a spreadsheet that someone forgot to update in November.

Of course, proofs collected in February don’t always match what was declared in April, which is exactly why revisions exist.

How to Revise Your Investment Declaration Mid-Year

Plans change. An employee cancels an ELSS SIP, moves out of a rented flat, or takes on a new home loan halfway through the year, and the original declaration no longer reflects reality. Most employers allow one or two revisions for exactly this reason.

When a revision lowers the declared deductions, you raise the monthly TDS from the next payroll cycle to recover the gap before it snowballs. Skip the revision, or process it too late, and the same shortfall gets absorbed across whatever months remain, often as a much sharper hit.

Remember: If an employee genuinely misses the proof deadline for something like LTA, the claim is not entirely lost. They can still pick it up while filing their ITR.

The declaration is not a form you file once and forget. Treat it as a live input that should move whenever an employee’s actual financial picture moves. And when it doesn’t move when it should, the same handful of mistakes tend to show up every single year.

Common Investment Declaration Mistakes

Most of the errors you will see come down to the same handful of patterns, repeated by different employees every year.

Over Declaring Investment

An employee declares the full ₹1.5 lakh under 80C in April, fully intending to invest it, and then never gets around to it. TDS stays low through the year based on that declaration, and when proof time comes around in February, payroll has to recover the entire shortfall in one or two pay cycles instead of spreading it across twelve.

Quick tip: Declare only what you will actually invest, not what you hope to invest.

Claiming Group Insurance Under 80D

Employees sometimes assume any health cover counts, including the group policy the company already provides. It doesn’t as Section 80D only applies to premiums the employee pays personally.

Quick tip: Accept only personally paid health insurance premiums under 80D.

Claiming LTA for Food or Stay

LTA looks like a general travel allowance, so employees often try to bundle in hotel stays, sightseeing, or meals along with the fare. None of that qualifies and only the eligible travel fare itself is exempt.

Quick tip: Restrict LTA claims to eligible travel fare only, never accommodation or food.

Missing the Proof Deadlines

An employee declares a deduction in April but doesn’t get around to submitting proof before the window closes in February. Once that happens, the exemption may not reflect in payroll at all, particularly under the old regime, even though the intent to invest was genuine.

Quick tip: Track the proof submission window closely and send reminders before it closes, not after.

Choosing the Wrong Regime

Some employees assume they can declare under one regime and simply switch at the time of filing their ITR if it turns out to be the wrong call. That doesn’t undo the TDS already deducted through the year based on the declared regime.

Quick tip: Run the breakeven check before declaring, not after the year’s payroll has already run.

Claiming 80D on a Reimbursed Premium

If the company reimburses a health insurance premium, that premium was never really an out-of-pocket employee expense, even though the employee technically paid it upfront. Claiming it under 80D anyway is a frequent mismatch at reconciliation.

Quick tip: Claim 80D only on premiums paid out of pocket and never reimbursed.

So, when an employee asks why their March paycheck looks smaller than expected, the answer is either of the two: they declared more than they actually invested, or their proofs didn’t match the declaration closely enough to hold up.

Wrapping It Up

Investment declaration is much more than a once-a-year tax form. Done well, it helps employees avoid unexpected TDS deductions and gives payroll teams a smoother, more accurate financial year. Done poorly, it often results in last-minute corrections, higher March deductions, and unnecessary administrative effort.

The key is to treat investment declaration as an ongoing payroll process. Encourage employees to declare realistic investments, update them when plans change, submit proofs on time, and choose the right tax regime before payroll calculations begin.

For HR and payroll teams, managing this manually across hundreds of employees can quickly become complex. Keka simplifies the entire process by enabling employees to submit declarations online, validating deduction limits automatically, calculating accurate TDS, tracking pending proofs, and giving HR teams real-time visibility throughout the financial year.

Simplify investment declarations and payroll compliance with Keka. Book a Demo

Frequently Asked Questions (FAQs)

Q1. What is an investment declaration?

• It is the estimate of tax-saving investments and deductions an employee submits at the start of the financial year so the employer can calculate monthly TDS. The current form is Form 124, which replaced Form 12BB from April 2026.

Q2. What is the difference between Form 12BB and Form 124?

• The legal basis shifted from Section 192 and Rule 26C to Section 392(5)(b) and Rule 205, and the terminology moved from Assessment Year to Tax Year.

Q3. What is the last date for investment declaration submission?

• No single national deadline exists. Most employers set their own timeline, typically asking for the declaration in April and proof between December and January.

Q4. Can I change my investment declaration after submission?

• Yes. Most employers allow one or two revisions during the year, with payroll adjusting TDS from the next cycle onward.

Q5. Which investments qualify under Section 80C?

• ELSS, PPF, EPF, NSC, tax-saving FDs, life insurance premium, NPS Tier-I, SSY, SCSS, home loan principal repayment, and tuition fees for up to two children, capped at ₹1.5 lakh combined.

Q6. Is investment declaration required under the new tax regime?

• Yes, though employees typically declare far fewer items since most exemptions are unavailable on the new regime.

Q7. What documents are required for proof submission?

• Rent receipts and landlord PAN for HRA, premium receipts or account statements for 80C, premium receipts for 80D, an interest certificate for home loans, and travel tickets for LTA.

Q8. What happens if I do not submit an investment declaration?

• TDS gets deducted on the full salary with no claimed deductions applied. The missed deductions can still be claimed later in the ITR, but monthly take-home pay stays lower throughout the year.