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How to deduct income tax when previous tax details given

(Guest)

Hello,

When a new employee joins the organisation during mid of the tax year say August/Sept, he gives a form 12B that includes the previous income and tax deducted details in it. How do i work out tax when i compute the salary for this employee in the new organization. How do i calculate the HRA exemptions since his eligibility would change from one organization to other. Please reply. Your response will be highly appreciated.

Regards
Chandrika

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10 Replies

Abhinav Agarwal (M.Com C.A SAP Consultant) (814 Points)
Replied 26 February 2009

HRA is computed on month to month basis. It will not chage with the change in company/package. You calculate HRA as per the new salary structure for the remaining months. In form 16, you can just add total taxable income for that part when he was in previous compay.

There may change in slab rates with new salary structure. Add taxable salary from previous organisation and calculate tax payable. Deduct such tax payable by TDS already deducted. Balance tax you can apportion & deduct from Future month's salary.

(Guest)

Thanks Abhinav for your prompt response. I would need one more help from you. Can u send a sample of 12B form from which form 16 of a new company is generated. so that i will have a better understanding of it. Here is my email id: chandrika.gurudutt @ gmail.com

Abhinav Agarwal (M.Com C.A SAP Consultant) (814 Points)
Replied 26 February 2009

i don't have it right now. So sorry.

(Guest)

Hi,

If these are the details given by the new employee of his previous employment, how do i calculate his income tax in our company? Should i take his previous income also into consideration and tax deducted to calculate the tax for the salary he earns in the new company?

Gross salary of the employee is 147732/- for 4 months i.e Apr, May, June and July.

Earnings

Basic:                                         48000
DA:                                              25600
HRA                                            32000
Conveyance                              11200
Supplementary Allowance     25600
Medical Reimbursement           5332
Total Earnings                         147732

Deductions

Provident Fund                  8832
Profession Tax                     800
Income Tax      5200
Mediclaim                                390
Other Deductions                     0
TOTAL DEDUCTION          15222
NET PAY                             132510

Regards

Chandrika

Sorabh Gupta (Manager ( Taxation )) (877 Points)
Replied 27 February 2009

Hi Chadrika

In reply of ur query when a new employee joins the company , then he have to give the previous employer salary details to his/her new employer. In calculation of tax of a newly joined employee , you should consider the previous salary . In case he submit Form 12B then you should consider all investment at your end for whole of the year & incase he submit Form 16 , then you consider only remaining period investment if he gave his invesment receipts to his previous employer.

In above example you should consiedr the previous salary.

Basic:                                         48000
DA:                                              25600
HRA                                            32000
Conveyance                              11200
Supplementary Allowance     25600

Medical Reimburesement Allowed upto 15000

Less PF 8832

Less Profession Tax 800

Net Taxable Salary 132768

You should consider above salary in ur computation sheet & also consider TDS deducted while calculation total tax liability.

Regards

CA. SORABH GUPTA

Madhavendra (CA Final Student) (99 Points)
Replied 27 February 2009

hi Dear Friend, it is simple. Just find out what is his salary structure in your company.Project it for the remaining part of the year.You will get his annual Salary (that is 12 months salary)Calculate tax on annual salary.Less Tax on 4 months already deducted.You will get tax on balance to be deducted for 8 months.if you divide by 8 you will get per month to be deducted.In other words....Tax deducted of previous employer plus tax you have deduted should match employees total Tax payable.

(Guest)

Thanks a lot Sorabh and Madhavendra for your help.

Regards

Chandrika

Renjith Babu K (Asst. Manager - Finance) (43 Points)
Replied 24 September 2009

Dear Sir, Is it mandatory for a company to collect form 16 for an employee from the previous employer if he joins in the middle of a year? My doubt is on a occasion where a employee joined in Aug and the total taxable salary drawn by him from the previous employer is say Rs 1,00,000. In our company his taxable salary for the financial year is projected as say Rs 1,00,000. in this case the employee is actually have to pay a tax for his total earing 2,00,000. But as per our records the employee's earing is only Rs.1,00,000 from our company. In this case how much tds we have to deduct or not? How we can issue a Form 16 if we are deducting tax on the total amount? since we show the total taxable income one lakhs and tax deducted on 2 lakhs? What will be the major amounts in the form 16 we have to issue, if he is a male employee?

Sorabh Gupta (Manager ( Taxation )) (877 Points)
Replied 24 September 2009

Dear Renjith

As per the provision under section 192 of TDS on salary , it is mandatory for the employer to collect a salary certificate from his new employee if he joins in the middle of year . And at the time of calcutaion of TDS of such employee , employer must consider his previous employer salary on the basis of salary certificate otherwise if employee is not able to provide the salary cetificate of previous employer then current employer must consider his present salary for his past period month & calculate & deduct TDS accordingly . At the time of issuance of TDS certificate employer must issue a TDS certificate only of salary paid by them & TDS deduct by them

Hope you have no doubts regarding that............