What Are the Top 3 Problems People Face with Tax Returns after a Job Change?
To live a great life, it is important to accept change. And one important change that we may constantly seek in our adult life is that of a new, more challenging job. A new opportunity often brings with it great experiences, new friends, and maybe even a higher salary. However, we cannot ignore the fact that it also brings with it problems with regards to our tax returns.
As we know, an income tax return (ITR) is a statement that reveals the income that we have earned through the financial year as well as the taxes paid against them. The ITR has all the information about your investments made during the year. It is compulsory for every individual and business to file their income tax returns annually.
When an individual decides to take up a new job, things change swiftly. While changing jobs does come with certain tax benefits, there are a few setbacks as well. The most obvious being a possible change in your income tax rate, which could now fall into a higher bracket. Besides this, here's a look at some other issues you may have to face with your ITR after switching jobs:
1. Basic Tax exemption considered twice :
The employer calculates the estimated salary for a financial year, while deducting tax at source. So, if any employee has newly joined any organisation, during the financial year the employee has worked with 2 employers and both the employers while calculating his estimated salary income and deducting tax at source in variably considers the basic tax exemption slab and the TDS to that extent gets incorrectly deducted on a lower side. So when the employee files the tax returns and considers his total salary income earned from the employers, there is a lower TDS. In this employee ends up paying self assessment tax along with interest.
The only way out for the employee is to declare the 'income earned from his previous employer'. As a part of his full and final settlement , the employee can get the entire details of his income earned, tax deducted and submit the same to the new employer
2. Standard deduction and Chapter VI A deduction considered twice:
Similar to the basic exemption limit as stated above, standard deduction and Chapter VIA deductions (80C, 80D, 80CCC, 80E etc) get considered twice. So the only way out is as stated in the point no.1 above.
3. Having Multiple Form 16s
Filing your return once you have switched your job during the financial year can become extremely difficult. Moreover, if you have invested money during the year in tax-saving products, it could be a tedious task to file your returns. In such cases, you have to collect a Form 16 from both your current employer as well as your previous employer. Thus, having multiple Form 16s can be quite challenging.
4. Having to Check Form 26AS
Form 26AS, is a form that gets generated basis the PAN of the deductee. So total tax deducted at source from various sources of income get summarised in Form 26AS. So if the individual has switched job during the financial year, there will 2 form 16s and details of the tax deducted from both the employers will appear in the Form 26AS. Apart from the salary income any income earned where tax has been deducted at source gets captured in the Form 26AS. Therefore, it is required that every person while filing his return of income check his Form 26AS and reports his income correctly. You can access your Form 26AS from the income tax website, www.incometaxindiaefiling.gov.in. One needs to register the Login on this website and thereafter one can get the Form 26AS on this website. with the help of your PAN.
If there are any discrepancies, they should be mentioned to your accountant immediately so that the required changes can be made. This should be done in order to avoid any inquiry from the Income Tax Department over mismatched tax figures. It is necessary for the taxpayer to ensure that the tax figures claimed in the returns are similar to those in Form 26AS. This form contains details like the taxes paid, tax refunds due, TDS on sale of immovable property, TDS on rent or property, high-value transactions as well as advance tax payments and self-assessment payments.
- Companies and individuals must file their income tax returns for the income they've earned in the financial year. Apart from the common issues mentioned above, you might face a number of other ITR filing challenges. A few of them are as follows:
- You might find it difficult to keep a track of your taxable income and its various sources. Income could be generated in the form of rent, interest from fixed deposits, savings accounts and so on.
- Since there are seven ITR forms issued by the Income Tax Department, it might be quite a hassle for the taxpayer to select the accurate form.
- The deadlines are a lot stricter when it comes to filing the returns on your income. If you miss the deadline to file your tax returns, you could forfeit capital loss exemptions and have to pay a huge amount as a penalty. In case of excess tax payment, it can be claimed back in the form of a refund.
- Forgetting to submit tax proofs to your employer can also cause a hassle while filing an ITR. Ensure that you submit each and every relevant document on time. Failure in doing so will take away your tax benefits from your salary income or some other exemptions.
- Forgetting your login credentials is another common problem that many taxpayers face. Since you tend to handle your account only once a year, you might forget your ITR account password. Recovering your password could be a huge task. In most cases, taxpayers are dependent on their CAs to file their income tax returns. In case the CA doesn't work for that person any more, they will not be able to further operate the account without the credentials.
- Inability to pay your advance taxes on time can also be a challenge while filing your ITR. If a taxpayer's liability is above INR 10,000 in a financial year, they will have to pay advance taxes for that year. A penalty is charged for failure to pay these taxes.
If you're filing your tax returns online, don't wait till the last minute. Many individuals file their returns online in the last few days before the deadline. This can cause the server to slow down, which could lead to further delays. Instead, try filing your taxes 15-20 days before the deadline so that you have enough time to check that all your documents are correct before you submit your ITR. Remember, a job change doesn't necessarily have to complicate your tax filing process – with a little bit of planning, you'll be able to file your ITR on time.
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