Could you be asked to pay a hefty tax and interest at the end of the year for using the wrong amount of deductions? Do you know if right amount of TDS is being deducted? Have you held more than two jobs during the financial year? This week's tax tip deals with how avoid complications regarding your TDS if you have had multiple employers during the financial year.
Should I disclose TDS deducted by my old employer to my new employer?
Yes, you must. Otherwise, you might run into problems later on.
What is the big deal? Why should I disclose this information?
Whenever employer deducts tax (TDS) from salary payments the employer takes into account available deductions (e.g., 80C) and income tax slabs that you fall under.
Now when you change employment the new employer also deducts TDS after taking into account available deductions and tax slabs. This has the effect of allowing you tax deductions and slab benefits twice.
When you file your annual tax return your income from both employers shall be clubbed together. The deductions and tax slab benefits shall be allowed only at one place. If you have taken these benefits twice, you will have saved on paying taxes. As a result you will owe taxes. Additionally, there can be a large amount of interest added to your tax liability for late payment, as this tax ought to have been deducted by the employer at the time of your receiving your salary.
OK, so what all should I disclose to my new employer?
It is advisable to disclose the following to your new employer:
If above declarations are properly made, then the new employer will deduct tax accordingly. As a result, there is likely to be nil or negligible tax liability at the time of filing tax return and you will not end up with any surprises.