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Wednesday, June 22, 2016

INCOME OF Previous JOB and IT Returns

 EVERY TIME an individual switches jobs, he is in danger of falling foul of the tax laws. This is because the new employer doesn't take into account the income earned from the previous job and offers tax exemption and deduction to the employee all over again. Instead of `2.5 lakh basic exemption and `1.5 lakh deduction for tax saving investments under Section 80C, he gets `5 lakh basic exemption and `3 lakh deduction. Obviously, he will be paying much less tax than he ought to.

But this discrepancy won't remain hidden for long and would eventually be discovered when the tax payer files his return. The incomes in the two Form 16s would be added but he would get basic exemption and deduction only once.This also means a large tax payment at the time of filing returns because the duplicate benefits would be rolled back. The last date for paying the tax is 15 March. After this, if the unpaid tax exceeds `10,000, there is a penal interest of 1% per month of delay. The employee will have to pay the balance tax along with interest at the rate of 1% per month for delay.

This is a common problem faced by people who switch jobs without keeping an eye on their taxes. They are saddled with a huge tax liability when they sit down to file their tax returns in June-July.

Don't think you can get away by not mentioning the income from the previous employer in your return. If some tax has been deducted on the income from the first employer, it will be reflected in your Form 26AS. So if you don't report that income, the discrepancy will immediately get picked up by the computerised scrutiny system and you will get a tax notice.

 

Inform your new employer about income from previous job so that the TDS is cut accordingly.

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