1. Inform your current employer about the previous employment
There are several individuals who do not inform their new employer about their previous salary structure. As a result, the new employer calculates income tax based on the income earned from him in the FY. This will lead to a miscalculation of taxes for the financial year.
For instance, Mr Raj has left ABC company in December 2019 and joined a new company, XYZ in January 2020. He has not informed his previous salary to XYZ. He earned Rs 6.5 lakh from the previous employment and Rs 2.4 lakh from XYZ. Now that he has not informed XYZ about Rs 6.5 lakh, they will calculate his tax based on Rs 2.4 lakh only.
Now, according to XYZ, Mr Raj will not pay tax during the same year as his income is below the basic exemption limit of Rs 2.5 lakh. But, he will have to pay taxes on Rs 9 lakh (Rs 6.5 + Rs 2.4 lakh) while filing his tax returns.
To avoid this miscalculation of taxes, you should declare your previous salary to your new employer as soon as you join the company.
2. Include information of every employer in your tax return
Make sure you receive your Form 16 from all the employers you have worked in a particular FY. Form 16 is the most vital document you will need to file your income tax returns. Details such as PAN of the employer, TAN of the employer, name and address must be reported for each employer in your tax return.
ClearTax allows you to upload multiple Form 16s and file your tax returns accurately.
3. Consolidate salary from all employers
You will have to consolidate the salary earned from all the employers while filing your tax returns. In case you miss reporting any such salary, the department might send you a notice about the non-reporting of income.
Remember your salary is always taxable irrespective of whether TDS is deducted or not, so include this amount in your return.
4. Adjusting exempt allowances
Usually, with every job change, the salary structure changes. This also leads to changes in your allowances such as house rent allowance (HRA). Do remember to claim HRA exemption from all your employers. You just have to submit the rent receipts, in case you live in a rented apartment.
If you have missed submitting rent receipts to your employers on time, you can claim HRA while filing your income tax returns also. In such a case, you will have to recalculate your HRA exemption for the entire year, adjust your salary accordingly and get a refund if excess tax was deducted.
5. Claim all the tax deductions
The employers usually begin the exercise of collecting proof of tax-saving deductions around February or March every year. Many individuals quit their job before this period and the employers fail to provide them with the benefit of various deductions.
Don’t worry. Once you have consolidated your income earned during the financial year from various employers, you will have to sum up your deductions, in case you have invested in tax-saving avenues. You can claim the deductions under Section 80C, 80G, 80D and so on while filing your income tax returns. Just remember to safely keep the proofs for future reference. Keep in mind that deductions are allowed against your total income earned in an FY, so the benefit of the deduction for tax calculation must be taken only once for a year.
6. Check your Form 26AS
Form 26AS is the tax credit statement which consists of details of TDS by various deductors. A salaried individual can get the details of his salary credited every month and tax deducted thereon from each employer in the Form 26AS. This form is very important for filing your income tax returns as you can take the credit of all the tax deducted against your total tax dues in a financial year.
One must always cross-check the TDS entries appearing in the Form 26AS with his payslips or bank statements. In case of any mismatch in the entries, he must report the same to his employer and resolve it before filing the tax returns.
7. Check your tax due
When your salary income from different employers is aggregated, there are chances that you might see a tax due.
Why does this happen? If your new employer does not know how much you earned from your previous job, his tax computation may be inaccurate. Generally, the basic exemption limit and standard deduction may be allowed by all your employers.
The benefit of tax-saving deductions might be allowed by more than one employer while calculating tax. Also, it may happen that after summing up all your salary income, your income tax slab may have gone up.
For instance, Mr Kumar has left ABC company in December 2019 and joined a new company, XYZ in January 2020. He has not informed his previous salary to XYZ. He earned Rs 9.5 lakh from the previous employment and Rs 2.4 lakh from XYZ. According to his previous salary, his salary was under the tax slab of 20%. After summing up the salaries from both the employers, the tax slab has been moved to 30%. This situation will lead to a tax due for Mr Kumar while filing his return.
So, it’s prudent to recheck all the salary details from different employers and pay the tax due before submitting income tax returns.