When employees quit their job and move to another organisation in the middle of the financial year, the new employer requires certain details before paying their salaries.
This includes information about the income paid by the previous employer, perquisites, and tax deducted at source (TDS) during the financial year.
Section 192(2) of the Income Tax Act, 1961 is related to the documents required for calculating the tax liability of employees who change their jobs during the financial year.
What is Form 12B?
Form 12B is an income tax form that must be submitted as per the guidelines of Rule 26A. It is submitted by employees who move from one company to another in the middle of a financial year.
The primary aim is to provide details of the income earned by the employees from their previous employers. It helps the new employers to deduct the right amount of TDS from the employees' salaries for the remaining financial year.
Any mismatch in this form may result in higher tax liability for the employees and may also cause difficulties to the new employers in deducting the accurate TDS.
What are the components of Form 12B?
Because Form no. 12B is submitted to the new employer, it must be filled based on the salary slips given by the previous employer. The following details need to be included in this form.
- Previous employer details like the tax account number (TAN) and permanent account number (PAN).
- Deductions under various sections of the Income Tax Act, 1961 such as 80C, 80D, 80E, 80D, and section 24.
- A detailed breakdown of the previous salary, which includes basic, dearness allowance (DA), leave travel allowance (LTA), perquisites, house rent allowance (HRA), leave encashment, and much more.
- Deductions for rent-free accommodation and provident fund (PF), if any.
- TDS deduction on salary.
- Professional tax paid, if applicable.
If an individual joined a new company in October 2021, he would have to submit this form to the new company for the period between April 1, 2021, and September 30, 2021.
Why Form 12B is important?
Form 12B in Income Tax is important for the employees and the new employers. Here’s why:
When employees submit this form to the new employer, they may rest assured that the right TDS will be deducted from their salaries for the remaining period during the financial year, which minimises the possibility of any discrepancies.
This form provides information about the new employees’ previous salaries and deductions. This allows the employers to generate Form 16 with the right details to avoid any issues later.
When to submit Form 12B and to whom?
It has to be submitted by all employees who change their jobs during the middle of the financial year. The form must be submitted to their new employers at the time of changing employment.
However, if self-employed professionals take up a full-time job during the financial year, they are not required to submit this form to their new employers. It is applicable only for salaried individuals moving from one company to another.
How to fill Form 12B?
The following points need to be completed while filling out this form.
- Name and address of the previous organisation
- PAN and TAN of the last company (these are available from the salary slips)
- Employment period
- Income earned during the financial year before joining the new organisation
- Salary breakdown like HRA, DA, leave encashment, and much more
- The amount credited to PF if applicable
- Deductions, such as life insurance premium and others as available under section 80C of the Income Tax Act, 1961
- Total tax deducted during the financial year
The form also has two pages of annexures. The first part requires information about rent-free accommodation provided by the employers. This includes details of unfurnished and furnished accommodation including any furnishing perquisites.
The second annexure relates to information, such as conveyance allowance and other similar benefits from the previous employer.
Here is a Form 12B filled example:
What is the difference between Form 12B and 12BA?
Form 12B has to be submitted when salaried individuals change their jobs during the financial year. It comprises details of income earned from the earlier employer and the TDS deducted from these earnings.
On the other hand, Form 12BA is a detailed statement issued by the employer. Includes information related to the perquisites paid to the employees. It has to be issued along with Form 16.
Both these forms are regulated by the same master circular Rule 26.
Applicability of Form 12BA under the Income Tax Act, 1961
The Form 12BA lists down any perquisites received by the employees from their employers and is issued along with Form 16. Some of these include bonuses and commissions, and other monetary and non-monetary perquisites.
The Income Tax Act, 1961 defines the rules for determining the value of these perquisites. This value is shown in Form 12BA along with the applicable tax on these perks.
It is important for employers to issue this form even if the employees do not receive any perquisites.
Example of Form 12B
Below is Form 12B sample:
Frequently Asked Questions (FAQs)
What is Form 12B?
It is an income tax form submitted as per Rule 26A by a salaried individual while joining a new company in the middle of a financial year.
The primary purpose of this form is to provide information about the income earned from the previous employer. To know more about it, individuals may check a Form 12B example online.
What is Form 12BA?
Form 12BA is a detailed statement that lists down the particulars related to perquisites, profits, and other fringe benefits that employees receive from their employers. It is submitted along with Form 16.
What is the use of Form 12B?
The purpose of this income tax form is to ensure salaried individuals switching jobs during the financial year submit accurate details related to TDS deductions on the income earned from their previous employer.
Additionally, it assists the new employers to generate the consolidated Form 16 with the correct calculations.
Who is responsible for completing Form 12B?
The employee is responsible for completing this form and submitting it to the new employer. They have to fill in the declaration and also attach Form 16 received from their previous company.
Can the new employer refuse to deduct TDS on the previous salary after submitting Form 12B?
It is the employer’s responsibility to deduct the applicable TDS on the employees’ consolidated income after taking into consideration any TDS deducted by the previous company.
What is the difference between Form 12B and Form 12BA?
Both these forms have different purposes but are often confused with each other. Here are the differences between the two.
- Form 12B is a detailed statement showing income earned from salary. In comparison, Form 12BA is a detailed statement listing all the perks received by the employees.
- Form 12B comprises information, such as salary earnings and TDS deductions. On the other hand, Form 12BA shows details about fringe benefits, perks, and profits.
- Form 12B is submitted by the employees to their new employers when they switch jobs during the financial year. Form 12BA is issued by the employers to their employees along with Form 16.
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