Job hopping has become the new norm these days. If you are also planning to change your job for better career prospects, you may better do so. But while doing so, apart from other things related to your career, you also need to keep in mind the tax implications coming along with it, particularly if you have changed or are planning to change your job during a particular financial year.
You should note that the responsibility of preparing and filing the tax returns and thereby disclosing the correct information rests on the employee. Therefore, you should take due care while preparing your tax returns in such cases.
As per the provisions of the Income Tax Act, 1961 ('IT Act), an individual is under an obligation to file his return of income for the entire financial year (ie. 1st April to 31st March of the following year). For the financial year 2013-14, for instance, the period is from 1st April 2013 to 31st March 2014. Therefore, an individual is required to aggregate his salary income received from both employers during a particular financial year and file his personal tax return accordingly.
"Ideally speaking, when an employee leaves his employment and joins a new employment, he is required to furnish information in respect of his salary income and TDS by the previous employer to his new employer," says Vineet Agarwal, Director, KPMG. Subsequently, the new employer is required to take into consideration this information and consolidate the same with salary income paid by it and deduct necessary taxes.
This information is required to be supported by the certificate for tax deducted at source ('Form 16') issued by the previous employer, which is generally issued after the end of the financial year. Thereafter, the new employer issues the Form 16 which includes the salary income of the previous employer and the salary paid by it and the new employer. It also takes into account the TDS by the previous employer and the new employer. Based on the Form 16 issued by the new employer, the employee can file the tax return.
In a case, where an employee has not furnished such information to his new employer, he would have two Form 16s with him, i.e., one from the previous employer and the other from the current employer. In such a case, "both Form 16s should be taken into account for preparing and filing the personal tax return," says Mr Agarwal.
In case Form 16 is not issued by the previous employer as there was no tax deduction or any other reason, the employee should himself consider the salary received and tax deducted. He can take the same from the monthly salary slips or his salary statements. This information along with the Form 16 issued by the new employer can be used to file the personal tax return.
In case any tax was deducted by the previous employer, he should ensure that he obtains the Form 16. It is pertinent to note that the employer is also liable to penal consequences in case Form 16 is not issued within the specified time period. In the personal tax return where details of tax deducted are required to be provided, details of both the employers, tax deduction account numbers and tax deposit amounts should be should be provided.
Thus, just taking care of these small details can help you file your I-T return correctly in case of switching jobs and you would also be able to avoid any scrutiny by the taxmen.