Tax proofs ensure that the right amount of tax is deducted from your paycheck. An individual should never over or underpay his taxes. The income tax of an employee is deducted by his employer in the form of tax deducted as source (TDS). Therefore in order to make a correct evaluation of all the deductible investments that the individual has done, the employers need the tax proofs.
Every employee has to submit a declaration from the employee stating that deduction and exemption to which he or she is entitled in the beginning of the year itself. Some of these examples are House Rent Allowance (HRA), Leave Travel Allowance (LTA), Section 80C deductions etc.
An Employees annual tax liability is calculated by keeping in mind this declaration. Thereafter the employer deducts taxes on a monthly basis from his salary. In order to substantiate the claims made by the employees, the employers need the documentary evidence for the investments done.
The tax liability is adjusted to account for any deviation in actual expenditure incurred or investments done as compared to the original declaration.
Your tax liability will go down if your tax saving investments turn out to be higher than what you initially declared which will result in a lower tax paid that year. On the contrary you will be liable for additional tax payments at year-end incase your tax saving investments are lower than what you declared and your employer has given you a tax benefit on that.
