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Industry is always in search of human resources who can add value to businesses. To attract talent, organizations are ready to pay higher salaries. Similarly salaried individuals prefer a job that gives them highest monetary benefits. From taxation perspective, following are the key aspects that should be taken into consideration by an individual who has decided a job switch.
- Calculate your in-hand salary after calculating all the deductions on account of Provident Fund, Gratuity, professional tax, TDS, etc. Many a times when your salary increases, you enter into higher income tax slab. This reduces in-hand salary due to additional tax burden.
- Income from Salary is taxable on the basis of due or received, whichever is earlier. If salary is already taxed at the time it is due, then there won’t be taxation when received or vice a versa. After resigning if you receive any previous dues that have already been taxed on receiving these dues, they won’t be considered for taxation.
- Part of Leave Encashment is exempted from tax only at the time of retirement or leaving a job. Hence it is always advisable to plan retirement or change of job keeping this aspect in mind.
- If you are resigning before completing term of five years with an employer, then it is recommend not to en-cash your EPF balance. Transfer the existing account to your new employer. Encashment of EPF balance before completing term of five years with an employer is taxable. If the account is transferred to the new employer, it will not be taxable.
- Salary in lieu of notice period is taxable on receipt basis.
- While receiving all dues & experience letter from your previous employer, get your Form 16 & Form 12B as well. Submitting copies of these forms to your new employer can assist him in calculating TDS.
- Though while filing returns, income from different employers is bifurcated, both incomes are considered as income under head ‘Income from Salary’.