Changing jobs is an exciting step, but it can lead to unexpected income tax problems if you’re not careful. One mistake many employees make is failing to update their new employer about tax-saving investments already claimed with the previous employer. This could result in incorrect TDS calculations and lead to higher tax payments during the filing season. Here’s how to manage your tax-saving investments effectively when transitioning to a new job.
1. Always Inform Your New Employer About Previous Earnings
When you join a new company, it’s essential to let them know about your earnings from the current financial year with your old employer. This ensures that your new employer is aware of any investments or deductions you’ve claimed.
Did You Know You can also claim deductions for donations made to charitable organizations under Section 80G. Many taxpayers overlook this, but contributions to approved charities can provide significant tax relief. Whether it's cash or in-kind donations, ensuring you have the right receipts can lower your taxable income.
If you fail to update them, they may apply the wrong TDS rate, which can result in either over or under-deduction. The key is to keep the communication transparent and up-to-date.
2. Double Deductions Can Lead to Income Tax Liabilities
Some employees unknowingly submit investment proofs to both employers, resulting in double deductions. This not only violates tax laws but also leads to a tax liability at the time of filing returns.
For example, if you declared an investment of ₹1.25 lakh under Section 80C with your previous employer, and then submit the same proof to your new employer, you will be claiming the deduction twice. This causes a mismatch in tax calculations, and you’ll have to pay additional taxes when you file your return.
Here’s a quick summary of investment limits:
| Section | Max Deduction | Eligible Investments |
|---|---|---|
| 80C | ₹1.5 Lakh | PPF, NSC, ELSS, LIC, Tax-saving FD |
| 80CCD(1B) | ₹50,000 | NPS Contributions |
3. Maximize Your Income Tax -Saving Potential
You’re eligible for several tax-saving options, but many people don’t take full advantage of them. Apart from Section 80C, another great option is Section 80CCD(1B) that offers an additional ₹50,000 deduction for contributions to the National Pension Scheme (NPS).
Remember that you can also invest in products like ELSS (Equity Linked Savings Scheme), which are eligible for tax deduction under Section 80C and offer potential capital appreciation as well.
4. Review Your Tax Regime Option Carefully
When changing jobs, you have to decide between the old and new tax regimes. The new tax regime offers lower tax rates but removes the option to claim deductions and exemptions. On the other hand, the old regime allows for deductions under Section 80C, 80CCD(1B), and more, but comes with higher tax rates.
Analyze your financial situation and deductions before choosing the regime that will benefit you the most.
Conclusion: Stay Ahead of Tax Planning During Job Transitions
Changing jobs doesn’t have to mean tax confusion. By keeping your new employer informed about previous deductions, avoiding double claims, and opting for the right tax regime, you can ensure a smooth transition with no unwanted tax surprises. Taking the time to review your investments and exemptions will save you from a large tax bill during filing season.
