Two Employers, One Tax: Managing Salary Tax During a Job Switch

Two Employers, One Tax! Managing Your Salary Taxation during a Job Switch!

Summary: The content explains the tax and TDS considerations where an employee receives salary from two employers during the same financial year. It states that salary from every employer is taxable, while the basic exemption limit, slab benefit and standard deduction are available only once. Employees are advised to submit Form 12B (Form 122 under the New Income Tax Act, 2025) to the new employer with details of previous employment, salary, deductions and TDS, choose one employer to consider aggregate salary in cases of simultaneous employment, and declare the tax regime consistently. On receiving Form 12B, the new employer should aggregate salaries, allow credit for TDS already deducted, deduct the balance tax, allow exemption and standard deduction only once, and report the details in Form 16 and quarterly TDS returns. The content states that if Form 12B is not submitted, employees should estimate total salary and pay advance tax, as clubbing both salaries at the time of filing the return may result in self-assessment tax and interest under Sections 234B and 234C. It also advises reconciling salary and TDS with AIS and Form 26AS (Form 168) and claiming TDS credit from both employers while filing the income tax return.

Arjuna (Fictional Character): Krishna, nowadays employees frequently change jobs during the year for better opportunities. Some persons even work with two employers at the same time. In such cases, the employee receives salary from two employers in the same financial year. What care should be taken by the employer and the employee in such a situation?

Krishna (Fictional Character): Arjuna, receiving salary from two employers in one year is very common today, but it is also one of the biggest reasons for TDS shortfall, tax notices, and interest burden at the time of filing the ITR. The law is clear salary from every employer is taxable, but the basic exemption limit, slab benefit, and standard deduction are available only once.

Arjuna (Fictional Character): Krishna, what exactly should the employee do when he joins a new employer during the year or works with two employers simultaneously?

Krishna (Fictional Character): Arjuna, the responsibility of disclosure lies first on the employee. The law gives the employee an option to furnish the details of salary received from the previous or other employer to the current/chosen employer in Form 12B (Form 122 as per New Income Tax Act 2025). The employee should take care of the following:

• Submit Form 12B immediately on joining the new employer, giving details of salary paid and TDS deducted by the previous employer.
• Choose one employer for considering the aggregate salary in case of simultaneous employment, so that at least one employer deducts TDS on the total income.
• Declare the tax regime consistently to both employers. Regime opted with the employer should be carefully evaluated, as standard deduction of (₹75,000 New Regime / ₹50,000 Old Regime) is available only once, not from each employer.

Arjuna (Fictional Character): Krishna, what information is to be submitted by the employee in Form 12B?

Krishna (Fictional Character): Arjuna, Form 12B is the bridge between the two employers. The employee has to submit the following details of the previous employment:

1. Name, address, PAN and TAN of the previous employer and the period of employment.

2. Break-up of salary paid – basic salary, allowances, perquisites, and profits in lieu of salary along with allowances claimed such as HRA and value of perquisites, if any.

3. Deductions allowed – standard deduction, professional tax, and Chapter VI-A deductions considered by the previous employer (where Old Regime is opted).

4. Total TDS deducted on salary by the previous employer, as per the salary TDS provisions.

Arjuna (Fictional Character): Krishna, once Form 12B is received, what care should the new employer take?

Krishna (Fictional Character): Arjuna, on receiving Form 12B, the responsibility shifts to the new employer. The new employer should:

1. Aggregate the salary of the previous employer with the salary payable by him and compute tax on the total income for the whole year.

2. Give credit of TDS already deducted by the previous employer and deduct only the balance tax proportionately from the remaining months’ salary.

3. Allow exemption limit and standard deduction only once while computing the TDS on the aggregate salary.

4. Issue Form 16 reflecting the salary paid by him along with the previous employer’s salary considered as per Form 12B and report it correctly in the quarterly TDS returns.

Arjuna (Fictional Character): Krishna, what happens if the employee does not submit Form 12B to the new employer?

Krishna (Fictional Character): Arjuna, submission of Form 12B is optional, but not submitting it creates a trap! Both the employers will independently allow the basic exemption slab and standard deduction, and both may deduct little or no TDS. At the time of filing the ITR, when both salaries are clubbed, a large tax shortfall arises. The employee then has to pay self-assessment tax along with interest at 1% per month under Sections 234B and 234C for shortfall of advance tax. Therefore, if Form 12B is not submitted, the employee must himself estimate the total salary and pay advance tax during the year itself.

Arjuna (Fictional Character): Krishna, how should such salary from two employers be treated while filing the Income Tax Return?

Krishna (Fictional Character): Arjuna, while filing the ITR, the employee should take the following precautions:

• Collect Form 16 from both the employers and report salary of both under the head “Salaries”, even if TDS is not deducted by any one of them.
• Claim standard deduction and professional tax only once against the aggregate salary.
• Reconcile the salary and TDS figures with AIS and Form 26AS (Form 168) before filing, as mismatch is the most common reason for defective return notices and adjustments.
• Claim credit of TDS deducted by both the employers and pay the balance tax, if any, as self-assessment tax before filing the return.

Arjuna (Fictional Character): Krishna, what should taxpayers learn from this?

Krishna (Fictional Character): Arjuna, two employers means double salary but single exemption! The employee should be transparent and submit Form 12B on time, and the employer should diligently consider the previous salary while deducting TDS. Those who hide the previous employment salary do not save tax – they only defer it with interest and invite notices, as every rupee of salary leaves its digital footprint in AIS. Remember, in taxation, honesty at the time of joining is cheaper than interest at the time of filing!