“With great power comes great responsibility”. Since you got a new job, it is evident that it came with a great hike in your salary. Well, this major change in your life also has some tax implications on the calculation of your tax liability as well as the Income Tax Return filed by you. Let’s discuss the various kinds of tax implication this change in job brings with it.
- When you receive a higher salary package, your income tax slab is also bound to be increased and your in-hand salary becomes less due to the heavy tax burden. Calculate your in-hand salary after making all the necessary deductions like Provident Fund (PF), Gratuity and the other deductions as per tax laws.
- When the taxpayer changes his job, then he will provide the details of the Salary earned from the previous employer along with the details of TDS to his new employer. This aids inaccurate calculation of tax liability.
- If your salary is credited after deducting the tax at source, then it will not be taxed again, when you receive it. Also, after resigning, when you receive your previous dues that are already taxed, then you don’t need to pay any tax on said dues.
- At the time of retirement or leaving a job, part of leave encashment is not taxable.
- Do not withdraw your EPF balance if you are resigning from a company before completing a term of 5 years. This amount, at this stage, will be taxable. It is advisable to transfer the existing EPF account to the new employer. When you transfer the account, the balance in the account is not taxable.
- Salary received in the notice period is taxable.
- Make sure to get a copy of Form 16 by the end of the Financial and you have the copy of all your monthly salary slips as well as Form 12B, while collecting your dues and experience letter from your previous employer. These documents are a huge aid to your new employer to calculate your TDS.
- Keep in mind, while filing your income tax return, TDS deducted by both the employers is supposed to be mentioned separately.
As discussed above, a hike in salary also leads to certain Tax implications. Read on to know how you can use your salary efficiently.
- A higher salary automatically means an increase in the amount of taxes you.
- Even if you didn’t receive a significant raise in your salary, but received a big fat bonus that is taxable, it adds to your total annual income and will lead to more taxes.
- To save the outflow of how much tax you pay, make sure to invest wisely especially if you fall into a higher tax slab.
- If you are eligible to receive some perks as part of your salary, consult your HR Dept/ Accounts Department, regarding the same, so that you can manage your salary more efficiently and maximize your tax exemptions.
Congratulations on landing your dream job. Our tax experts at All India ITR will be more than happy to help you with filing your tax return when you buy our CA Assisted Plan.