After six months of tireless search, Jaya had finally landed a new job with an attractive salary package. She was excited about her new salary and tax implications were the last thing on her mind. That’s when a friend told her that she must look out for Form 12B on the first day of her new job to avoid any confusion and loss while filing her tax returns next year. She had recently decided to avail a housing loan through Finserv MARKETS and wasn’t sure how her tax implications would shape up as she was starting this new job in September, right in the middle of a fiscal year.
So, if you are in a similar situation as Jaya’s or are going to be, this post might be of some help to you. Here are a few points to remember if you are switching jobs, especially in the middle of a financial year.
What is Form 12B?
Now, as your previous salary was lower than your new salary, your tax burden was lighter, and maybe completely exempt. So, to avoid incorrect calculations, your new employer will provide you with Form 12B in which you need to declare your PAN details, previously drawn salary and any tax-saving investments on your part.
For these details, you can also refer to the salary slip of your previous organization or check Form 26AS online.
These details give your new employer clear knowledge of your taxable income taking into tax-saving investments whether already done or planned for. This makes it easier for you and your employer to calculate your total tax liability for the remainder of the financial year.
Documents you need to disclose at your new place of work
- Rental details for HRA exemption
- Any interest you pay on a housing property, education loan etc
- Deductions under Section 80
- Medical expenses
A few important things to remember:-
Though filling out Form 12B is not mandated, you should remember that if you don’t declare these details your new employer will then calculate your income tax liability only on the new salary. Now, this can likely be lower than the tax actually payable.
So, when the time comes to file your tax returns, you may find yourself paying more tax than you should have. Moreover, there would also be interest chargeable on the outstanding tax liability if you had not paid any tax during the financial year. It should be noted here that any default or delay in paying the advance tax attracts interest under Section 234B and 234C.
You can either choose to declare income from other sources to your new employer if you want the tax deducted from your salary itself. If not, you can very well declare it in your income tax return form and pay the tax you are liable for.
Also, remember that if you have received any income from your previous employer like the provident fund that is tax free, you are required to declare it in your income tax returns under exemptions.
If you have taken any kind of a loan are or planning to, you must inform your employer about it without any inhibition. Today, taking a loan isn’t something that people resort to only under dire circumstances because we can now avail a bouquet of loans in a jiffy. For instance, you can check out the range of loans available on Finserv MARKETS. These loans cater to a wide variety of financial requirements and come with advantages like instantaneous approval and disbursal, and zero collateral. You can avail a Personal Loan of upto Rs. 25 lakhs on Finserv MARKETS and enjoy various pre-approved offers too.
Often companies offer you a joining bonus but with “conditions apply”. If you leave the organization before the period you had signed up for, they may recover the bonus given to you. While that is sad news, remember that in many cases the TDS on such a transaction can be adjusted. So, you should remember to claim the tax deducted on any such transaction.
Remember to collect your Form 16 from the previous employer. Having Form 16 from both your employers will make filing tax returns so much easier for you.
Gone are the days when people used to stick to one job until retirement. In order to climb the ladders of success, most of us tend to keep exploring greener pastures. Therefore, it is important for us to better verse ourselves with the tax implications so that we do not add on to our tax liabilities out of ignorance.
You can also read about how HRA can be claimed with interest on home loan.
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