Switching Jobs? Don’t File Your ITR Without Completing These 6 Must-Do Tasks To Stay Ahead of Tax Trouble

Changing jobs is an exciting milestone, but it also brings along its own set of challenges - especially when it comes to tax filing. If you've switched jobs during the financial year, failing to address these key tax tasks could lead to unwanted surprises when it's time to file your Income Tax Return (ITR).

If you've changed jobs this year, don't delay these tax tasks as per Shefali Mundra, Tax Expert, ClearTax: collect Form 16 from both employers, consolidate your salary details to avoid double taxation, update your employer about previous income for correct TDS, verify investment declarations, check for any gratuity or leave encashment taxability, and ensure your PAN details are consistent across records. Getting these right early will save you from last-minute surprises during ITR filing.

To help you navigate this process smoothly, we've compiled six essential tasks you need to tackle right away.

1. Get Form 16 from Both Employers

Each employer is required to issue you a Form 16, which summarizes your income and the tax deducted at source (TDS). If you've worked for multiple employers this year, ensure you collect Form 16 from both. This step is crucial to avoid underreporting your income and to ensure your taxes are accurately calculated.

2. Consolidate Your Salary Details

Once you have Form 16 from both employers, it's time to consolidate your salary details. This will give you a clear picture of your total income for the year. It's vital to do this to avoid double taxation or missing out on deductions. By combining the salary data from both employers, you ensure that your tax calculations reflect your actual earnings, preventing any discrepancies down the line.

3. Update Your New Employer on Previous Income

It's essential to inform your new employer about the income you earned with your previous employer. This ensures that your new employer adjusts the TDS deductions accordingly, preventing you from paying excessive taxes or receiving insufficient deductions. Keeping your new employer informed helps to avoid surprises and allows for more accurate tax withholding.

4. Verify Your Investment Declarations

If you've made investment declarations (for example, for tax-saving investments like PPF or ELSS), ensure that they are up-to-date and accurately reported to both your employers. Sometimes, declaring the same investments twice can lead to TDS deductions being higher than necessary, or it might prevent you from claiming deductions you're entitled to. Verify your investment claims to avoid excess deductions or missed opportunities for tax savings.

5. Check the Taxability of Gratuity or Leave Encashment

Gratuity and leave encashment are important components of your compensation that may be taxable, depending on the circumstances. If you've received gratuity or leave encashment after switching jobs, it's essential to check if any tax exemptions apply. In certain cases, such as when you retire or resign, gratuity may be partially or fully exempt from tax. Understanding the taxability of these benefits can help you claim the right exemptions and avoid unexpected tax liabilities.

6. Ensure Your PAN Details are Consistent

This might seem like a small detail, but it's incredibly important. Ensure that your Permanent Account Number (PAN) is consistent across all your tax records, including your Form 16 and Form 26AS. Inconsistencies can lead to mismatches in your TDS credits, which can delay your ITR processing or even result in the rejection of your return. Make sure all your records align with your PAN details to avoid unnecessary complications.
Proactive planning will save you from last-minute scrambling and give you peace of mind while ITR filing.

Changing Jobs Mid-Year? Submit Form 12B to Avoid Excess TDS

When changing jobs during the year, the first thing you should do is ensure that you provide your new employer with all the necessary details of your income and taxes paid at the previous job.

This includes submitting Form 12B, which outlines the details of the salary received from the earlier employer as per Mr Sujit Bangar, Founder Taxbuddy.com. This step is crucial to ensure accurate computation of your total income for the financial year.

If excess TDS is done by the earlier employer, your new employer shall do less TDS to avoid excess TDS. This helps you to optimise TDS and ensure cash flow.