Rishabh Parakh
Kapil changed his job in the previous financial year, which was a progressive moment in his life. But he received a shock of his life when he went to file his tax return and was informed to pay outstanding tax before he can file his return. This left him wondering as why does he need to pay additional tax as both his employers had already deducted the same. Let’s understand the tax implications in these kinds of cases.
Is this sudden tax liability really an “additional tax”?
No, this is not at all an “additional tax” as it looked like. This happened because of the way your tax gets calculated when you change jobs as both employers deduct tax by taking into account the income given by them only and I’m assuming that you have not given previous employer income details to the new employer.
Under what scenario you may end up paying taxes?
Scenario 1: You failed to provide details of income from previous employer to your new employer.
In such a scenario both employers will consider the income given by them as your annual income and deduct tax on that income only, which may result in less TDS then what should be payable.
Let’s see Kapil’s case in detail. He worked for two companies say “XYZ” & “ABC”. In the following example, I have assumed income to be net i.e. after deducting all available exemptions and deductions under the I-T Act based on employee’s declaration.
For the sake of simple understanding, I have not used the standard way of calculating TDS and payments in monthly installments by these companies. I have considered simple tax liability by taking each company’s income separately so that you can see the main reason why Kapil is supposed to pay “additional tax”.
This Rs18,000 is not an additional tax but it was supposed to deducted by way of TDS and should have been paid round the year had he worked in the same company.
Scenario 2: Claiming exemptions & deductions twice!
All the exemptions say HRA or deductions like section 80C of the IT Act can be claimed only once and subject to specific limits. But many times, these get considered in both Form 16s resulting in double deduction and less TDS. I will write more on this after the tax series.
(Rishabh Parakh is a chartered accountant and a founder director of Money Plant Consulting, a leading Investment &
Tax advisory service provider in Pune.You may mail your queries to him at rishabhca@gmail.com)
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