Now, let’s say someone changed jobs during FY 2022. In such a scenario, Form 16 will be issued by the present as well as the previous employer. So how should you go about filing your ITR? Having two Form 16 creates confusion regarding computation of total taxable income, total tax exemption on house rent, LTA etc.
Here is a step-by-step guide on how to file ITR if a taxpayer has two or more Form 16s.
- Collect Form 16 from all employers
The first step to file ITR is to submit Form 16 from all employers (current and past). Part B of Form 16 will show a break-up of the gross pay you received, tax-exempt allowances and deductions you can claim. In addition, it will show the break-up of gross salary which is required to be filled in the tax return form, as applicable.
An individual has to consolidate the total number for each head to know the gross salary earned by him during the financial year 2021-22 from all the employers.
You will also need to calculate the amount of exemption from your salary income. Tax exemption on House Rent Allowance (HRA), Leave Travel Allowance (LTA) etc. can be claimed by you salary income Only.
One has to add HRA, LTA numbers from both Form 16 to know the total amount of exemption. It is important to cross-check the amount you are claiming and the amount you are eligible to claim. Tax exemption can be claimed on HRA even if an individual has not submitted proof of rent to the employer. One can use the HRA calculator online to know the amount of exemption for which he is eligible to claim. Click here to access our ET Wealth’s HRA Calculator.
Dr. Suresh Surana, Founder, RSM India, a tax consultancy firm, says, “Tax exemption on LTA can be claimed only if the journey is performed by an individual and the evidence for the same is submitted to the employer along with the declaration of tax. -Exemption will be visible under ‘Exempt allowance under section 10’ in Part B of Form 16. If no exemption is mentioned, it will be fully taxable. The taxable amount will appear in the gross salary mentioned above .
A salaried individual is also eligible for a standard deduction of Rs 50,000 from salary income. It may happen that standard deduction of Rs 50,000 is mentioned in both the Form 16. An individual is eligible to claim a maximum deduction of Rs 50,000 from the total taxable salary and not Rs 1 lakh (Rs 50,000 + Rs 50,000) as mentioned in both Part-B of Form 16. Thus, once the gross salary is estimated from the above mentioned step, the individual will be eligible to claim a one-time standard deduction of Rs.50,000.
The next step would be to claim the deduction allowed under section 80C, 80D etc. from the total taxable income. Total taxable income will include salary income, interest earned from bank accounts, fixed deposits (FDs), dividends from equity shares, mutual funds etc. Also note that all employers make the same deduction. But as per the income tax laws, this deduction can be taken only once against your total income.
Note that these tax-exemptions and deductions can be claimed only if you opt for the old tax regime while filing ITR. Surana says, “If you opt for the new tax regime then filing ITR, then you will not be eligible to claim tax-exemption and deduction. The income tax amount to be paid by you will be calculated on the total taxable amount where no deduction has been claimed.
Once the total taxable income is calculated, an individual will need to calculate the income tax liability. Deduct the taxes already deducted and deposited against your PAN. TDS amount can be seen in Part-A of Form 16. One must check that the same amount is mentioned in Form 26AS and AIS (Annual Information Statement) as well as claim credit of taxes already deposited against PAN.
- What if you only have Form 16 from your current employer
It may happen that you have received Form 16 only from your current employer. For filing tax return in such a scenario, an individual taxpayer would need a salary slip from the previous employer. An individual will also require the break-up of the salary required in the ITR form.
An individual would need to calculate the total gross salary by adding the income from Form 16 and the income from the salary slip.
Once the total salary income is calculated, the steps mentioned above will be followed. These include tax-exempt (HRA, LTA etc.) from total taxable income (salary income, interest income from bank accounts, bank FDs etc.) and standard deduction from salary income and claim deduction u/s 80C, 80D etc. .
Once the net taxable income is computed, the taxpayer will calculate his income tax liability and deduct TDS to know whether there is any self-assessment tax to be deposited.
- What if Form 16 is not received from an employer
Even if an individual taxpayer has not received Form 16 from the employer, he can still file ITR. An individual would need to collect their salary slips and calculate their gross taxable salary.
Once gross taxable salary is calculated, add income from other sources such as interest income, dividends, capital gains, etc. to calculate your total taxable income. Claim tax exemptions and deductions that apply to you on your income.
The next step is to calculate the income tax liability based on the income tax regime chosen by you. Deduct TDS from income tax liability as shown in your Form 26AS. It will tell if there is any tax to be paid. Ensure that the TDS shown in your salary slip matches with Form 26AS/AIS.