Outlook Money
While switching jobs has become a trend among young professionals, it has a lot of tax implications as well.
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.
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.
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.
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.
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.
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.
In order to prevent mistakes, one must keep a record of all Form 16s, payslips, and evidence of deductions.