Tax Payable When You Switch Jobs in India – A Complete Guide

05/08/2025

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Tax Payable When You Switch Jobs in India: What You Must Know

Changing jobs can be an exciting career move — better pay, a new role, and fresh challenges. But amidst offer letters and resignations, one important aspect often gets overlooked: your income tax. A job switch may not change your PAN, but it certainly impacts how your tax is calculated. Let’s break down everything you need to know about tax implications when you change jobs in India.

 Multiple Form 16s: Consolidate Your Salary Details

When you switch jobs in a financial year, both your current and previous employers will issue Form 16 — a certificate showing the salary paid and TDS deducted.

Common mistake: People often assume their new employer will take care of past taxes too. That’s not true. Unless you declare your previous salary to the new employer, TDS may be under-calculated.

 What to do:

·         Collect all Form 16s.

·         Declare total income from all employers while filing your ITR.

·         Use Form 26AS or AIS (Annual Information Statement) +to cross-check TDS credits.

 Tax Slabs Apply on Total Income

 In India, income tax is calculated based on total income in a financial year — not separately for each job.

 For example:

 Employer A paid you ?4 lakhs (April–August)

 Employer B paid you ?8 lakhs (September–March)

 Your total taxable salary is ?12 lakhs — and your tax liability is calculated accordingly.

Double Deduction of Standard Deduction

Every employer may provide a ?50,000 standard deduction (75,000 in new regime), but it’s only allowed once when you file your return.

Tip: While employers may claim it during payroll, you must adjust for one standard deduction only while filing the ITR.

 Missed Tax Deductions & Declarations

When joining a new job mid-year, you may forget to submit proofs for:

 HRA

·        80C investments

·        Home loan interest (80EEA)

·        Health insurance (80D)

 If not declared, your new employer may deduct more TDS.

Solution: You can still claim all eligible deductions at the time of filing your ITR and get refund if excess tax was deducted.                                                                    

Gratuity, Leave Encashment & Other Payments

If you receive:

·       Gratuity

·       Leave encashment

·       Retrenchment compensation

·       Provident Fund withdrawal

These may be fully or partially taxable, depending on conditions like:

·        Years of service         

·       Employer type (private/government)

·       Whether PF is transferred or withdrawn

       Always consult a tax expert to check exemptions under Section 10(10), 10(10AA), etc.

       Avoid Double Taxation or Penalties

       If your total TDS is less than actual tax liability, and you don’t pay advance tax before the due date, interest under Section 234B & 234C may apply.

            Income from Freelancing or Consulting?

       If you took up freelance projects between jobs or along with your full-time job, that  income is also taxable under the head “Profits & Gains from Business/Profession”.

        You need to:

          Maintain records

       Pay advance tax (if applicable)

       Consider 44ADA presumptive taxation if eligible     

 

 Final Checklist for Tax Filing After Job Switch

 Collect Form 16 from all employers

·        Use Form 26AS or AIS to check all income and TDS

·        Declare total income from all sources

·        Claim eligible deductions manually

·        Adjust standard deduction to apply only once

·        Pay advance tax or self-assessment tax if TDS is short

·        File your return before due date (usually July 31st)