By Abhishek Soni
Imagine this, you have just landed a new job and are relocating to a new city. Everything is going good, and one day you receive a notice from the Income Tax Department (ITD) saying you have paid less tax than required. Isn’t it scary to even think about it? Just keep these few things in your mind and you will have quite a smooth job transition:
1. Submit Form 12B to your Employer:
Upgrading into a higher tax bracket is a matter of pride. However, people forget to submit Form 12B to their new employer. Form 12B gives details on salary paid and tax deducted from all the previous employers. You can fill Form 12B with the help of your salary and investments. This will help your new employer to deduct the amount you should pay as TDS. No more, no less.
2. Don’t Forget to Collect Form 16 from previous employer(s):
Scratching your head and thinking you’ve never got multiple Form 16 before? Every employer has to give Form 16 at the end of the year, giving the details of TDS deducted by them during the year. This Form will help you verify your details at the time of filing your return. So even after changing your job, you will need to collect Form 16 from your previous employer(s) to prove your TDS deduction.
3. Don’t Keep those Deductions and Investments a Secret:
This is the part where you need to be careful. It’s necessary to mention if your previous employer has already taken your deductions and investments into account while calculating your tax. Keeping this information away from your new employer can lead to double effect (duplicacy) and hence the calculation of TDS will be incorrect. This will cause you to pay penalty for short payment of tax. Again, submitting Form 12B is very important.
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4. Transfer of Provident Fund:
All this time you have paid for your Provident Fund and now when you are changing your job, it’s time to take all the money out. Right? Think again! If you withdraw money out of your PF before 5 years of continuous employment, it will be taxable. But, here’s the good news. If your new employer verifies his Universal Account Number, you can easily transfer all your savings in PF. Transfer of PF under job change situation is considered as Continuous Service, so that you don’t have to pay any tax. In other words, if you have worked for an employer for more than 5 years, taking the money out of PF will not be taxable.
5. This is a part of your Salary too:
Oh, so that new employer is paying for your notice period? Or are they giving you a bonus? What about your Joining Bonus? I’ve got news for you. All these are part of your salary income and are taxable. Since these are treated as a part of your salary, all the other provisions of Income Tax Act will apply to it as well.
6. Don’t forget about your Superannuation Fund:
Let me take a wild guess. You haven’t heard of Superannuation Fund. It’s a very common situation. People are not aware that many companies offer retirement benefits through Superannuation Fund. At the time of changing jobs, you have two options, either withdraw all the money and pay tax on it or to save tax, let it accumulate for your retirement benefits. Another trick to save tax is to reinvest that money you withdrew in an approved pension scheme.
Now that you know all the tips, remember these and you are good to go. So, stop waiting and say bye-bye to your old employer and shake hands with the new one. Wish you all the best for your new job!
(The Author is a CA as well as CEO & Co-Founder at Tax2win.in)