Payroll & statutory · Updated October 2026
A tax declaration is the form in which an employee tells payroll, at the start of the year, which tax regime they want and which exemptions and deductions they expect to claim. Proof of investment (POI) is the set of documents they submit later, usually in December to February, to confirm those claims before the employer finalises TDS on salary for the year.
The cycle has three beats. In April or at joining, the employee declares the regime and projected investments. Payroll builds a full-year tax projection from that and spreads the TDS over twelve months. In the last quarter, the employee uploads proofs, and payroll replaces every projection with a verified figure.
The paperwork changed name with the new Act. For FY 2025-26 the claim statement was Form 12BB. For tax year 2026-27 under the Income-tax Act, 2025, secondary sources and software vendors describe Form 122 as the regime and prior-employer declaration and Form 124 as the claims statement that replaces 12BB. Salary TDS itself now sits under Section 392 instead of Section 192. If you are unsure which form your portal expects, check the current form list on the income tax portal.
Most of these only matter in the old regime. Someone staying in the new regime can usually skip the proof round, apart from items such as employer NPS, which are still allowed there.
Unproven claims are dropped and the full-year tax is recomputed. Because only a few months remain, the whole shortfall lands in the February and March payslips, and that is the usual cause of a sharp take-home drop. The employee does not lose the benefit for good: the claim can still be made in the income tax return, and the refund arrives after assessment, not through payroll.
Many employers treat the regime chosen for TDS as fixed for the year, but the final choice is made when the return is filed, and the difference settles as refund or extra tax. Check your own payroll policy before promising a mid-year switch.
The employer applies the default new regime with its standard deduction and no other claims. The employee can still pick the old regime and claim deductions at return time.
Under the existing HRA rules the landlord’s PAN is needed when yearly rent is above Rs 1,00,000. Some vendor summaries say the new claims form asks for more landlord detail, so confirm against the form your payroll uses.
Estimate the effect of each declaration in the TDS on salary calculator, or compare regimes with the income tax calculator.