Have you worked for 2 companies in last Financial Year? Then there are chances that you may need to pay the tax beyond the TDS (Tax deducted at source) deducted by your employers.
Whenever an employee joins any Company, the Company’s account/tax guys asks him/her to submit a declaration with respect to their investments/incomes so that they can make a fairly accurate tax computation. One component among those details is “Salary earned from previous employment”. If you mention the same, there is no issue, as the Company deduct the TDS by clubbing the previous employment income also for that particular Financial Year.
Let say, you ignored the option. If so, you may need to pay the extra taxes while filing the tax return.
Read through the case study to understand better:
Mr X worked for ABC Company for first 8 months and earned a taxable income (i.e after all allowable deductions) of Rs. 2, 35,000. The Company also deducted the exact TDS on 2, 35,000 i.e., Rs. 3,605 (10.3% as per current tax bracket). After working for 8 months, Mr X shifted to Company PQR Limited. Also Mr X missed out on filling details under tax declaration for the component “Salary earned from the previous employment”.
X earned the taxable Income of Rs. 2, 30,000 and the Company also deducted the exact TDS on 2, 30,000 i.e., 3,090(10.3% as per current tax bracket). Mr X was quite happy that the tax was properly collected and deposited to the credit of Central Government.
However, the real deal begins now. Mr X visited a tax consultant (say, www.chaireturn.com) to file his/her Income tax returns. As usual, the tax consultant gathered all the information and prepared the tax return and gave a summary to the client stating that client needs to pay the Rs. 20,600/-. The tax expert explained the entire ordeal to the client Mr X and he eventually paid the taxes along with interest dues.
Now, the big question is this: Why did Mr X have to pay taxes even after Tax at source was deducted and deposited?
The reason is that while filing the income tax returns, Mr X is required to club all his incomes earned in the year and then apply the tax rates i.e., 10%/20%/30%. In this case, Mr X’s total taxable Income is Rs. 4, 65,000 (2, 35,000+2, 30,000).
Now, on the above mentioned amount if we apply the tax rate of 10.3% (above 2, 00,000 and below 5, 00,000) the tax payable is Rs. 27,295 but the total of tax deducted by the both companies amounted to Rs. 6,695 (3,605+3,090). Hence he need to pay the additional tax of Rs. 20,600 along with the interest.
Hence, if Mr X would have declared his previous company earnings after being employed by the new company, then he would have been spared from the interest amount as the new company would have deducted TDS accordingly. So please do remember to declare your income with the previous employer.
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