Have Form 16 from two employers? Be careful not to claim tax benefits twice

A mistake in calculating tax liability could lead to a notice from the tax department

If you switched jobs in 2021-22, you will get two Form 16s — one from the current employer, another from the previous one. Filing income-tax return (ITR) with two Form 16s can be confusing at best.  

Form 16 comprises two parts — A and B. Part A has taxpayer and employer details, service period, tax deducted, etc. Part B contains detailed computation of tax, as calculated by the employer.

Suresh Surana, founder, RSM India, says, “The computation provides details of salary income, including allowances and exemptions, other incomes, deductions, and tax payable.”

Collect all forms

The first step to filing ITR is to collect Form 16 from current and previous employers. Next, consolidate all heads to arrive at gross salary earned from both employers during the previous financial year. 

Maneet Pal Singh, partner, IP Pasricha & Co, says, “Consolidate salary from all employers by adding the amount shown under Section 17(1) of Form 16.”

Avoid mistakes while calculating your total salary. 

Suvigya Awasthy, associate partner, PSL Advocates & Solicitors, says, “If there is misreporting of salary, you could end up receiving a notice from the tax department regarding non-reporting of income.”

Subtract house rent allowance (HRA), leave travel allowance (LTA), standard deduction, and other deductions under Sections 80C, 80D, 80G, etc from the salary for the entire financial year.

Various exemptions and deductions should be claimed only once. 

Ashutosh K Srivastava, senior associate, SKV Law Offices, says, “When you have multiple Form 16s, you need to club certain information from both forms and claim various exemptions and deductions only once.”

Salaried employees are eligible for a standard deduction of ~50,000. Sometimes, if you have two Form 16s from two employers, both could have factored in this deduction.

“Don’t aggregate the two and arrive at a standard deduction of ~1 lakh. An individual can claim a maximum of only ~50,000 as standard deduction from his/her total salary income,” says Surana.

After carrying out the above computations, calculate the tax liability after factoring in the tax deducted at source (TDS) taken off by both employers.

It so happens that both employers would have given the employee the benefit of standard deduction, tax-saving investments, and slab-rate benefits. As a result, the employee may be liable to pay additional tax.

  

“This is specifically applicable to employees whose annual salary is ~12 lakh or more,” says Ankit Jain, partner, Ved Jain & Associates. 

If you have any tax liability, pay it first and then file ITR.

Use the portal, but double-check  

The tax department has eased the task of employees who have Form 16 from two employers.

“The employee can use the facility provided in the tax-filing portal. He/she can simply fill out the details available in Form 16 from each employer individually. The portal will combine the incomes and determine the appropriate tax liability,” says Jain. 

However, the calculations done by the software must be double-checked for discrepancies (if any).

If you don’t have a single Form 16  

Taxpayers can file ITR even if they have not received Form 16 from either employer.

Get details of salary, allowances, deductions, and TDS deducted from salary slips, and calculate gross taxable income. Don’t forget to look up Form 26AS. 

“Prepare a computation of income and tax liability based on such details, and claim eligible exemptions and deductions like standard deduction, HRA, 80C, etc. Pay tax liability and then file ITR,” advises Singh.

If you have Form 16 only from current employer

• Collect salary slips and salary break-up from your previous employer  

• Compute total gross salary by adding income from Form 16 (from current employer) and income from salary slips (from previous employer)

• Deduct tax exemptions (HRA, LTA, etc) and standard deduction from salary income

• Claim deductions under Sections 80C, 80D, etc from total taxable income (salary income, interest income from savings and term deposits, etc)

• Once net taxable income is calculated, calculate income-tax liability, and deduct TDS

• If there is any additional tax liability, pay it first before filing return