There are many reasons why people quit their jobs, and it is not always because of salary. Everyone has their reasons for reasons quitting a job where they have been working for a long or short period. The reasons might differ from person to person. Some are getting married and moving; they have an unlikable boss; their goals are changing, and they’re leaving due to inadequate motivation or vision; or, they’re leaving to get an advanced degree.
As a salaried individual, shifting jobs is a part of your professional life. If you’ve switched jobs during FY 2018-19, you can find yourself getting two Form 16s. If you’re worried about how to file your ITR returns, here is a simple description of the whole process.
Form 16 is a certificate issued by an employer to its employees. It contains all the details of the taxes deducted from salaries. The form is divided into two main parts–Part A and Part B. Part A provides a month-wise summary of the income credited to an employee’s account during a year, along with the amount of taxes that got deducted. Also, Part A consists of the details of the employer and employee such as addresses, PAN of the employee and employer, and also the TAN (Tax Deduction and Collection Account Number) of the employer. Part B provides a detailed break-up of salaries paid and helps a taxpayer fill his taxable components in the ITR (Income Tax Return) form.
The following are a step-wise approach to consolidate the numbers, under various circumstances.
Now that you have switched jobs, you need to share your previous salary details with your new employer, then your Form 16 will have the computed number from your previous salary. However, in case if you haven’t informed your current employer of your previous salary break up, you may have to pay some extra tax. Adding two salaries hikes up a tax slab or if deductions were considered by both of your employers.
Your employer calculates your TDS (Tax deducted at source) on the basis of the salary they pay during the year. So the employer will first give you the benefit of a minimum exemption limit and then add tax slabs on your income. If the new employer is unaware of your income from the previous employer, you may still end up receiving this minimum exemption again or apply slab rates incorrectly. When you’ll finally merge your incomes – you will then be able to see a tax payable, since exemption was granted twice some income may not have been taxed properly.
If you being an employee have only one Form 16, you can still file your ITR return. Firstly, you need to get details of the breakup of your salary and TDS deducted from the pay slips received from the employer. Secondly, you need to aggregate your total income and deduct the exempt allowances and additional benefits. Thirdly, you also need to claim the deductions allowed under section 80C, 80D, 80G etc. Calculate the total tax liability and deduct the TDS deducted by the employers mentioned in Form 16 or pay slips issued by them. And If any tax is still due, you need to clear out all of it. Also, crosscheck the number of TDS deducted with Form 26AS.
It is mandatory for an employer to issue Form 16, one may still file the income tax return. However, you can calculate the tax without the Form 16.
In case you have switched jobs during your financial year and when the income from all the employers is added up, there is a possibility of tax due. If your new employer is unaware of how much you used to earn in your previous job, his tax computation may be inaccurate. Also, the benefit of deduction may have been allowed by more than one employer while calculating tax. All of this concludes that you will see tax due while filing your IDR returns.
Usually, companies pay to join bonus with some strings attached, if you happen to leave them before the signed up period, such a joining bonus might be recovered from you. In some cases, TDS (Tax deducted at source) on such a bonus amount may be eligible to be refunded or adjusted, depending on the terms and conditions of the document the company had initially offered.
Once you have received Form 16 from one or more employers or have arrived at your tax liability by following the steps above, get ready to file your taxes.
When you’re filing income tax returns personal loans are not taxable, since the loan amount is not considered as a part of your income. This means payment of any income tax is not required on personal loan. However, it should be noted that the loan has to be availed from a valid source, like a bank or another financial institution.
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