Switched jobs this year? Don’t let these 6 tax mistakes burn a hole in your pocket

A job change often comes with its set of challenges. As one gets preoccupied with adapting to the new environment and colleagues, in addition to navigating the workflow, an important task that is often overlooked is the process of tax filing.

“If you’ve switched jobs during the financial year, failing to address key tax tasks could lead to unwanted surprises when it’s time to file your Income Tax Return (ITR),” says Shefali Mundra, tax expert at ClearTax. The consequences could come at a cost–of missed deductions and double taxations.

From collecting Form 16 from both employers to verifying investment declarations, the following are Mundra's checklist of six important tasks that will save you from last-minute scrambling while filing tax returns after a job change:

1. Get Form 16 from both employers

Each employer is required to issue you a Form 16 that summarises your income and Tax Deducted at Source (TDS). If you’ve worked for multiple employers in a single year, ensure you collect Form 16 from all of them to avoid underreporting of income and to ensure your taxes are accurately calculated.

2. Consolidate salary details

Once you have Form 16 from the employers, consolidate your salary details. This will give you clarity of your total income for the year. It is vital to do this to avoid double taxation or missing out on deductions. By combining the salary data from the employers, you ensure that the tax calculations reflect your actual earnings, preventing any discrepancies later.

3. Update new employer about previous income

It is essential to inform your new employer about your previous income. This ensures that your new employer adjusts the TDS deductions accordingly, thus preventing you from paying excessive taxes or receiving insufficient deductions. Keeping your new employer informed helps in accurate tax withholding and avoid undesirable surprises.

4. Verify investment declarations

If you’ve made investment declarations (for example, on tax-saving investments like PPF or ELSS), ensure that they are up to date and accurately reported to the employers. Sometimes, declaring the same investments twice can lead to TDS deductions being higher than necessary or prevent you from claiming deductions you're entitled to. Verify your investment claims to avoid excess deductions or missed opportunities for tax savings.

5. Check taxability of gratuity or leave encashment

Gratuity and encashed leave may be taxable, depending on the circumstances. If you’ve received gratuity or leave encashment after switching jobs, it is essential to check if any tax exemptions apply. In certain cases, such as when you retire, gratuity may be partially or fully exempt from tax. Understanding these can help you claim the right exemptions and avoid unexpected tax liabilities.

6. Ensure consistency in PAN details

A tiny but crucial task is to ensure that your Permanent Account Number (PAN) is consistent across all your tax records, including Form 16 and Form 26AS. Inconsistencies can lead to mismatches in your TDS credits, which can delay your ITR processing or even result in the rejection of your return. Make sure all your records align with the PAN details to avoid unnecessary complications.

Getting these right early will save you from last-minute hassles while filing ITR.