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Your tax situation if you have worked for 2 employers

Do you understand the tax implications of changing jobs? Do you want to change your job? Have you changed jobs during the tax year?

If you have worked for 2 employers during the tax year, or are planning on changing jobs, its advisable to let your new employer know the taxable salary that you had at your previous employer. Here we explain why.

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How does income tax get deducted at source?

The Income Tax Act offers every employee certain deductions from his/her taxable income. These deductions, such as 80C or 80D among others, reduce the employee's tax liability.

You need to inform your employer (the payroll department) about the deductions that you intend to claim so that correct amount of tax, according the applicable tax slab, is deducted at source from your monthly salary payments.

Why should I tell my new employer about my past income?

When a company deducts tax, it takes into account your deductions and tax slab.

1. Can't claim tax deductions twice: However, if you have already been given the benefit of these deductions and tax slabs at a previous employer, then unless you inform your new employer the latter might also take into account deductions after available deductions. This could enable you to claim the available tax benefits twice over, which obviously is not permissible.


2. Risk of high tax liability and penal interest at year-end: Additionally, this could create a problem for you when it comes to preparing and filing your tax return. Your income from both your employers will be clubbed, and only one set of deductions and tax slab benefits will be allowed. You might find that at this time you are left facing a hefty tax liability that you need to pay off to the tax department because of taking the benefits twice over. If you are delayed in paying off your dues, you might have to pay penal interest owing to late payment of taxes.

What details should I disclose to my new employer?

Its best for you to share the following with your new employer:

1. Total salary received from old employer
2. Tax deducted at previous employer (TDS)
3. Tax savings and investments eligible for deduction already declared to previous employer

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Narender Singh Yadav said : 07/08/2010	I found your income tax related information expained in a simplified manner which could be easily understood by a lay man. Could you please send such information for NRI? Whether an NRI also gets rebate on home loan interest paid? How much is the TDS for NRO A/C. Thanks.