Form 12B: A Guide for New Employees in India
Are you starting a new job in India mid-year? If so, you'll likely encounter Form 12B. This income tax form plays a crucial role in ensuring your new employer withholds the correct amount of tax from your salary. Let's delve into what Form 12B is, what information it contains, and why it's important for both you and your new employer.
What is Form 12B?
Form 12B is a declaration form mandated by the Income Tax Act of India (Rule 26A). It serves as a tool for new employees joining an organization mid-year to disclose their income details from their previous employer for that financial year. This information helps the new employer accurately calculate Tax Deducted at Source (TDS) on your salary throughout the remaining tax period.
What Information Does it Contain?
- Previous Employer Information: This section captures details like your previous employer's Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN), which can be found on your pay stubs.
- Employment Period: This specifies the duration of your employment with your previous employer for the current financial year.
- Income Earned: This section details your total earnings from your previous employer up to the date of joining your new company.
- Salary Breakdown: This provides a breakdown of your salary structure at your previous job, including components like Basic Salary, Dearness Allowance (DA), House Rent Allowance (HRA), leave encashment, Leave Travel Allowance (LTA), and any other perks.
- Provident Fund Contribution: This section reflects the amount contributed towards your Provident Fund account by your previous employer.
- Tax Deductions under Income Tax Act: This captures any tax deductions you claimed under various sections of the Income Tax Act, such as Section 80C (life insurance premiums), 80G (donations), 80D (medical expenses), etc.
- Total Tax Deducted: This summarizes the total amount of TDS deducted by your previous employer for the financial year.
Importance of Form 12B
- For Employees: By submitting Form 12B, you ensure your new employer withholds the correct amount of TDS from your salary, preventing any tax liability at the end of the financial year. This also helps you avoid the hassle of filing additional tax returns later.
- For Employers: The information provided in Form 12B allows your new employer to accurately calculate the remaining TDS liability on your annual salary. This ensures they comply with tax regulations and withhold the appropriate amount of tax throughout the year.
When to Submit Form 12B
As per regulations, any employee who changes jobs mid-year is required to submit Form 12B to their new employer. This applies solely to salaried individuals; self-employed professionals transitioning to full-time employment are exempt from submitting this form.
How to Fill Out Form 12B
- Employee Details: Fill in your name and contact information.
- Previous Employer Details: Provide your previous employer's name, PAN, and TAN.
- Employment Period: Mention the dates of your employment with your previous company for the current financial year.
- Income Earned: Enter your total salary earned from your previous employer up to your joining date at the new company.
- Salary Breakdown: Detail your salary structure at your previous job, including various components like basic salary, allowances, and benefits.
- Provident Fund Contribution: Indicate the amount contributed towards your Provident Fund by your previous employer.
- Tax Deductions Claimed: List any tax deductions you availed of under relevant sections of the Income Tax Act.
- Total Tax Deducted: Mention the total TDS deducted by your previous employer for the financial year.
- Signature and Date: Sign and date the form to validate the information provided.