• Notification Date: 13-01-2022
• Notification No: N/A

Employees who have Switched Jobs are Responsible for TDS Shortfall

An employee is responsible for paying penal interest in case of a job change. He should make up for the shortfall in the tax deducted at source (TDS) against the salary. This shortfall is to be covered by the employee as it is not covered by the new employer. The employer of the previous company calculates the TDS based on income tax for that financial year. The investments are considered along with provident fund contributions under section 80-C. the former company decides the TDS hat is to be deducted from the salary. The new employer considers the employee’s income from the joining date and includes the tax deductions. The new employer will deduct much lower TDS than the tax liability of the employee. As the Bombay Chartered Accountants’ Society (BCAS) has stated in its pre-budget memorandum, this short deduction by the employer the tax has to be paid as self-assessment tax by the new employee. But sections 234B and 234C states that these charges are not supposed to be paid by the employee. The new employer is required to submit Form 12B to the employer who is not aware of it.

The tax is to be paid in four installments, from which 15% is to be paid within 15 June. Another 45% is to be paid within 15 September. 75% is payable by 15 December and the entire amount is payable by 15 March. If the employee fails to pay the tax within the due date, then an additional 1% interest will be charged per month under Section 234C of the Income Tax Act.

If 90% of the tax is paid at the end of the financial year then the interest amount will be charged against the employee even if he pays the advance tax. The interest rate is 1% for each month and it is counted from 1 April till the month in which the employee pays the income tax return.