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As exciting as a new job can be, it can also be very intimidating with so many changes. One of which can be filing your tax returns after the job change. Job changes can lead to some confusion in salary slips. The increase in income, added benefits, allowances, etc., can impact your tax liability. Moreover, when you change jobs within a financial year, you get a form 16 from all of your employers. This can often cause misconceptions and errors in filing tax returns.
Here are some problems that people face when with tax returns after a job change and how they can solve them:
1. Incorrect calculation of tax by the employer: Due to several reasons, some people do not inform their new employer of their previous job’s salary structure. By hiding this information from the employer, the new company is forced to calculate income tax solely based on the salary it pays. There is no acknowledgement of the tax that the previous company has deducted at source. This causes miscalculations for the taxpayer.
Solution: Always inform the new employer about the previous salary structure.
2. Not receiving form 16: Even after quitting a job, the employer is obligated to provide its employees with form 16. This document is essential in filing tax returns. Many people forget to ask their previous employer for this form and face trouble later.
Solution: Ask the employer for a form 16 to avoid last-minute hassles.
3. Not mentioning salary from part-time jobs: Even if a person has worked with a company for only a month, the salary drawn must be accounted for while filing tax returns. Forgetting to add previous salaries and income information can lead to discrepancies in tax filing. The income tax department can also issue a notice in this regard.
Solution: Mention all salary sources, including income from freelance roles and part-time jobs.
4. Rechecking all exceptions and allowances: Allowances can differ from job to job. For instance, not all employers give a house rent allowance (HRA) to their employers. In addition to this, with an increase in income, an individual may like to invest their money in investment and savings schemes. This too can bring some element of confusion while computing taxes.
Solution: Make sure to check the allowances offered by a new employer. In the case of HRA, remember to submit rent receipts of the financial year well in time. Tax deductions can be claimed under Section 80C, 80D, 80G, etc. In case of new tax savings strategies and investments, consult a financial advisor for better advice.
5. Discrepancies in form 26AS: Form 26AS contains information of Tax Deducted at Source (TDS) through the financial year. In the case of multiple deductors, this form will contain TDS by all of an individual’s employers. Any discrepancies in form 26AS and form 16 can result in the incorrect computation of tax. Sometimes, in the case of a job change, there may be a difference in the figures on the two forms.
Solution: In order to be entirely sure, it helps to compare and verify form 26AS with job payslips and bank statements. If there is any inconsistency in numbers, it is crucial to inform the new employer and have it solved before tax filing begins for the concerned year.
Kotak’s tax-saving guide
Kotak’s tax-saving guide helps taxpayers ascertain the right practices when it comes to income tax filing. It can help individuals understand suitable ways to save tax by investing their money in plans that enable them to build their savings corpus.
- A Consumer Education Initiative series by Kotak Life
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