March is the month where many of us reconcile our tax position…
March is the month where many of us reconcile our tax position. If you have worked for two employers, you can report your income from the previous employer to the current one so that the latter can compute your taxes and deposit any differential amount from your March salary. This will help avoid the administrative hurdles of re-computing and depositing taxes later.
Why does this problem arise? Employers calculate tax liability on the basis of the salary paid by them, thereby, not taking into account the salary paid by the previous employer. This results in underpayment of
taxes as both employers would have provided the benefit of slab rates/investments.
What could this result? The income tax office is aware about all the income and tax deposited as employers are required to file quarterly salary returns, which have details of your income and PAN number. As most of the returns have got automated, any unpaid tax liability can result into a notice from the tax office to pay the tax liability.
Provisions in the IT Act. As per Section 192 of the IT Act, a person may furnish to the new employer details of his income/taxes in Form 12B and the current employer is required to deposit tax on salary paid by the previous employer if no taxes were paid.
The current employer can
also adjust any excess or shortfall.
If the employee chooses not to provide the Form 12B, then the current employers? obligation is limited
to depositing taxes only on salary paid by him.
Form 12B procedure. Form 12B is a declaration of income by an employee and it contains the tax deduction account number (TAN) of the employer, PAN of the employee, period of employment in the previous company, the total amount of salary, and allowance and perquisites received from the previous employer. It will also have details of the amount of taxes deducted by the previous employer, details of investments made or expenses incurred that were eligible for deductions and were declared to the previous employer, etc. It?s a simple declaration and your salary slips will help in filling this form. You can request your employer/finance department for help.
Alternative procedure. If you have kept your salary confidential or you don?t want to opt for the Form 12B route, there is an alternative. You can wait for the Form 16 to be issued by your previous and current employers, which you will get after March. You can take both the forms and compute the taxes by applying the slab benefits to the total income. This may result in some tax payable, which can be deposited as self-assessment tax, along with interest as applicable.
The author is director, tax and regulatory services, KPMG
