ITR Filing: What Is Form 12BAA And How Salaried Employees Can Use It To Lower Their Tax Liability

The new tax regime was introduced as a part of the Union Budget 2020–21. The new tax regime discontinued the tax benefits which were available to taxpayers under section 80C of the Income Tax Act under the Old Tax Regime. Since the introduction of the new regime, salaried employees have been on the lookout for ways to gain tax relief.

Keeping the demand for tax relief in mind, the CBDT introduced a new provision in October 2024. The Central Board of Direct Taxes (CBDT) introduced a new measure to offer relief to salaried employees in the form of Form 12 BAA.

What Is Form 12 BAA?

The Form 12 BAA is aimed at helping salaried taxpayers offset the tax deducted at source (TDS) and tax collected at source (TCS) from non-salary income against his or her salary’s TDS. The form was introduced with the aim of enabling the reporting of both TDS and TCS details in a simplified manner.

The form can be used by salaried taxpayers to report the deductions which have been made on various sources of income other than salaries such as the interest earned from fixed deposits, insurance commissions, dividends from ownership of stock and other such incomes. By submitting the form taxpayers can potentially reduce the overall amount of tax deducted and increase their in-hand salary.

Details Required To Fill Form 12 BAA

Some general details such as the name and address of the employee, PAN or Aadhaar number, and the Financial Year for which the tax needs to be deducted. The taxpayer also needs to specify the details of the TDS deducted and TCS collected such as:

• Section under which the TDS has been deducted

• Name of the deductor

• Address of the deductor

• Tax Deduction and Collection Account Number of the deductor

• Tax amount deducted

• Income credited or received

• Any other relevant details

• Section under which the TCS has been collected

• Name of the collector

• Address of the collector

• TAN of the collector

• Amount of tax collected

How Does Form 12 BAA Reduce Tax Liability

Before the introduction of Form 12 BAA employees did not have the option to declare taxes paid or deducted from additional sources of income to their employers. Since the tax could not be declared for additional income sources the TDS was calculated only on the basis of the reported income. This would result in higher TDS deductions since the taxes which had already been paid on additional income were not deducted.

After the introduction of the new form, employees can declare their additional income to employers to adjust their calculations in order to reduce the overall TDS liability and increase their take-home pay. Additionally, the Form 12BAA also simplifies the process of reporting non-salary income.