Switching Jobs? Here's What You Need To Know About Its Implications On Tax Planning

Outlook Money

Switching Jobs

While switching jobs has become a trend among young professionals, it has a lot of tax implications as well.

Switching Jobs

Form 16

During every financial year, a new form 16 is presented that summarises salary income and the tax deducted at source. If one has worked with two or more employers, then income from both needs to be filled for the ITR.

Form 16

Underreporting

If one does not report properly on the incomes from both employers, then after verification from the Income Tax Department, it can lead to one getting legal notices.

Underreporting

No Tax Owing

If the income from one of the employers does not owe tax and is not included in the return, it can still result in compliance problems.

No Tax Owing

Deductions

Job changers sometimes also claim tax deductions twice. Section 80D which is in the old tax regime has options like EPF and PPF etc which can be claimed during the financial year. Failing to adjust and merge these properly, the last ITR might show an overstated deduction.

Deductions

Gaps in TDS

A new joinee in the middle of the financial year, must submit the Form 12B, that gives information about previous employer income and TDS. Failing to do this can lead to a deficiency in tax deducted.

TDS

Tax on Gratuity and Leave Encashment

Changing jobs with resignations can have gratuity payments or encashment of leave, both subject to tax treatments. Gratuity is exempt up to Rs 20 lakh under specified conditions, while leave encashment is exempt under restrictions. 

Tax on Gratuity and Leave Encashment

Keep In Mind

In order to prevent mistakes, one must keep a record of all Form 16s, payslips, and evidence of deductions. 

Keep in mind

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