Have you switched your job in FY 2015-16? If yes, don’t forget about the tax implications that can arise due to more than one employer/Form 16. In case you fail to disclose your income from all the employers while filing returns, you may get a notice from the Income Tax Department. This will not only result in paying the tax shortfalls, but also interest at the rate of 1% or 2% per month as a penalty.
Here are few pointers to keep in mind while switching jobs:
Club Income From All The Employers :
When you switch jobs, you will have more than one Form 16, so you should include both while filing the return. If you don’t, the tax authorities can catch you since your Form 26AS will have entries from previous as well existing employers for the financial year under consideration.
Collect Interim Form 16 :
The final Form 16 is available after the end of the financial year. Make sure you collect interim Form 16 from the previous employer at the time of leaving the job. This interim Form 16 will give you details about salary paid, taxed deducted and paid to the government; and also, make tax calculations easier for you while filing returns. A better option is to declare this interim form 16 to the current employer so that the current employer includes these enteries in their Form 16 and deduct TDS accordingly.
Include Accrued Salary From The Previous Employer :
Salary is taxed on an accrual basis, i.e. when it is due and not on a paid basis. Generally, there is a delay in the payment of the last salary when you leave the job due to final adjustments. So, even if you did not receive your last salary from previous employer till 31st March, it has to be included in the income of previous year 2015-16 while filing the return.
Fill Form 12BB Carefully :
Make sure you fill all the correct details in the Form 12BB while joining a new employer. On the basis of this form, the new employer will compute monthly deduction and will deduct tax accordingly. Also, include the details of salary, TDS and deductions from previous employer for avoiding any hassles.
Prevent Your Current Employer From Double Exemption :
You previous employer must have deducted tax after taking account of all the exemptions that you have claimed under Section 24, 80C etc. Make sure that your new employer does not double count these exemptions.
Transfer, not withdraw PF :
You can transfer or withdraw your provident fund while switching jobs. But, if provident fund is withdrawn within 5 years from the date of joining, then it is taxable as the income of the previous year in which it is withdrawn. So, it is advisable to transfer the provident fund if it is less than 5 years.
Switching Jobs From One Country To Another :
If you were previously employed abroad, then you should remember that if you come back to India before 1st October, then you may get resident status (unless you fulfill the conditions of not ordinary resident) as per Income Tax Act. In that case, you will have to pay tax on your income earned abroad. If India has a Double Taxation Avoidance Agreement with the country you left, then you can claim credit for the taxes paid in that country.
As per a survey conducted by the ET Wealth, 5.5% of the people did not disclose income from the previous employer and also claimed basic deduction as well deduction under Section 80C from both employers. Though it is not mandatory to disclose your income and deductions from previous employer to the new employer, the Income Tax Department can pull records of all transactions through your PAN number and then you may end up in trouble.
Filing accurate returns is crucial aspect of tax compliance and claiming refunds. It is advisable to make proper disclosures to avoid tax hassles and notices.
In case you need assistance in filing returns arising from the income earned from more than one employers for FY 2015-16, feel free to contact us at email@example.com.