What Are the Top 3 Problems People Face with Tax Returns After a Job Change?

Double Claim of Tax Exemptions, Deductions or Investments

 

Your current employer will not be aware of the salary you earned in your previous job. However, they are bound by law to deduct TDS (Tax Deducted at Source) before paying the salary. TDS on salaries is calculated by allowing the minimum exemption limit first and then applying tax slabs on your remaining income. Unaware of your previous salary and deductions, your current will allow basic exemption which the previous employer had already allowed. When your employer does not consider the minimum exemption limit claimed through your previous employer, it can lead to legal consequences and penalties.

Similarly, other deductions and exemptions such as standard deduction, Chapter VI A deductions (sections 80 C, 80 CCC, 80 D, 80 E, 80 G etc.)^[1], House Rent Allowance (HRA), Leave Travel Allowance (LTA) will also get considered twice if the new employer is not informed about previous salary and tax structure.

You need to provide your new employer with a consolidated view of your salaries, annual declarations, and tax deductions that were allowed while working with your old employer. Make sure to avail of Form 12B^[2] either from your previous employer or from the Tax Department’s website. This form will give all the details about your previous salaries and tax deducted.

Ask for Form 16 from your employer. Form 16 comprises information regarding your salary income and the taxes paid on your behalf including TDS as well as the PAN (Permanent Account Number) and TAN (Tax Identification Number) details of your employer ^[4]. Although Form 16 certificates will be issued at the end of the financial year^[4], you can ask for an interim Form 16 from your previous employer.

Do not keep your investments and tax deductions a secret from your employer. While calculating tax, your employer must be informed about the investments and deductions that have already been taken into account by your old employer. Keeping this information away from your current employer will lead to incorrect tax calculations. Eventually, you will have to pay penalties for tax shortfall.

 

Managing Multiple Form 16s

 

Filing your Income Tax Return  (ITR) can be a tedious task if you have switched your job in a financial year. You need to collect Form 16 from your current and previous employer(s). It can be especially challenging when you have to factor in the tax-saving investment options  from both forms. You will be required to club all the exemption numbers from individual forms to figure out the total amount of exemption you can claim^[5].

 

Checking Form 26 AS

 

Ensure that you do not wait until the last minute for IT return filing after a job change. Late filing of ITR can result in consequences such as late filing fees, loss of refunds, ineligibility for certain deductions etc. Try filing your taxes at least two weeks before the deadline to ensure that you have to cross-check all your documents, especially when you have switched jobs in a financial year.

 

FAQs 

 

What is the purpose of Form 16? 

 

Form 16 is a TDS certificate issued by the employer to prove that tax has been deducted from the employee's salary. It details the transactions between employer and employee.^[6]

 

What if the employer fails to give Form 16? 

 

 

Although it is mandatory for your employer to issue Form 16, you will still be able to file for income tax returns. Calculate your taxable income using your payslips. Figure out tax deductions using Form 26 AS. Make sure to factor in other eligible deductions and income from other sources before filing your ITR .^[5]

 

Yes, the new tax regime has been the default regime since Assessment Year 2024-25. Every year, you need to inform your employer about the income tax regime (old or new) you are opting for.

 

 

If you are a salaried individual, your advance tax will be taken care of by your employer in the form of TDS. However, other sources of income such as fixed deposits, rental income, savings bank accounts, capital gains etc. can increase your tax liability. If the tax amount is over Rs.10,000 per year, you are required to pay advance tax in quarterly instalments- June, September, December and March.