Switched jobs? Here's how to deal with Form 16
Form-16 is basically a TDS Certificate that lists taxable income and TDS. One can still calculate that without the Form 16.
Anytime soon the employees would be handed Form 16 by their employers. Form 16 is a summary of the total amount (basic salary and other allowances) paid to the employee and the taxes deducted in the previous year i.e. the financial year 2016-17. This document will help an employee file the income tax return by 31st July, 2017.
But, what if an employee had switched jobs in the last FY and has more than one Form 16 from all employers or only from the current employer but not from other employer previous employers.
Here's a step-wise approach to consolidate the numbers, under various circumstances :
A. Received Form 16 from all employers
When an employee has more than one Form 16, then tax computation should be made after considering every Form 16 document. As an employee one has to prepare a revised statement of income and revised tax liability to make sure that the tax is calculated as per the correct slab. Here is how to consolidate the figures when one has more than one Form 16.
First, consolidate salary earned from all the employers for the financial year.
Secondly, deduct the value of exempt allowances and perquisites for e.g. HRA, travel allowance etc. It may be possible that since you have not submitted the proof of rent receipts to the employer, so he may not have given you HRA exemption. But an employee can claim this while filing the return.
Thirdly, claim the deductions allowed under section 80C, 80D, 80G etc. There may be a possibility that same deductions is allowed by all the employers in Form 16. But keep in mind that benefit of deductions can be taken only once against your total income.
Fourthly, now calculate the tax liability and deduct the TDS deducted by all the employers mentioned in the Form 16 issued by them. You can also crosscheck the amount of TDS deducted with Form 26AS.
B. Received only one Form 16 and not from the previous employer
When an employee has only one Form 16, he can still file his return. Here's how :
First, He can get details of the breakup of the salary and TDS deducted from the pay slips received from the employer.
Secondly, He should aggregate his total income and should deduct the exempt allowances and perquisites.
Thirdly, 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 the Form 16 or pay slips issued by them.
Fourthly, If any tax is still due, he should pay that. He can also crosscheck the amount of TDS deducted with Form 26AS.
C. Not received Form 16 from any of the employers
Although it is mandatory for the employer to issue the Form 16, one may still file the income tax return.
Your Form-16 is basically a TDS Certificate that lists your taxable income and TDS. You can still calculate that without the Form 16. Here's how you can file your Return :
Collect your payslips and figure out your Taxable Income.
Your tax credit / 26-AS will help you find the exact tax deducted.
Renting? Don't lose out on HRA if you're eligible.
Claim your deductions.
Income from other sources.
Pay additional tax if necessary.
Finally, file your income tax return
Is any tax due?
In case one has switched jobs during one financial year and when the income from all the employers is added up, there is a possibility of tax due. If your new employer does not know how much you earned from your previous job, his tax computation may be inaccurate. Minimum income exemption may have been allowed by all your employers. Also, benefit of deduction may have been allowed by more than one employer while calculating tax. All of this means, you will see tax due while filing your return.
Here's how to keep the current employer informed
To avoid such a situation, it's better to inform one's current employer with the income earned and deduction availed with the previous employer. So, as and when one joins a new employer, submit Form 12B to the new employer with details such as break up of salary like Basic Salary, HRA, LTA and other perquisite and allowances, deductions such as sec 80c, 80D etc. availed earlier, TDS on salary deducted by the previous employer etc. Once the employee furnishes the Form 12B, it helps the employer to furnish a consolidated Form 16 at the end of the year based on the details provided by the new employee in form 12B.
Conclusion
Once you have received the Form 16 from one or more employers or have arrived at your tax liability by following the steps above, get ready to file you taxes latest by 31st July. At times, tax related issues can be very specific and complicated. It's therefore better, depending on the complexity of your case, to get in touch with a chartered accountant who can help you navigate through the tax maze.