Income tax investment declaration: When you change job, this is what you should do

This is the time of the year to submit proof of investment with your employer in order to claim tax exemption. If you fail to do so, you may miss out on your tax saving. Although you have perhaps already intimated your company's HR about the amount of investments that you made this year. However, it is imperative that you submit the evidence of your investments too.

Meanwhile, there are some taxpayers who don’t realise that the employer must be told about the previous declaration that you made to your previous employer.

CA Chirag Chauhan, a Mumbai-based chartered accountant says, “It is very common for some people to claim these benefits two times – first with your previous employer, and then at your next employer. Finally, when they file their tax return, they realise that they have a income tax liability. This must be avoided.”

For instance, someone had made an investment amounting to ₹1.25 lakh before Sept 30 and is entitled to claim exemption under 80C and 80D. He declares investment to his employer and claims exemption in TDS (tax deducted at source). 

As a result, the employer does not deduct TDS for this ₹1.25 lakh income.

He changes his job on October 15 and in December, when the new employer’s HR asks him for the investment documents. He submits the documents to the new employer also, thereby claiming the deductions the second time.

Finally, when he will file his income tax return in July next year (2025), the tax calculation will turn out to be more than the TDS deducted by his employer. Therefore, he will have to pay more tax that time since he claimed exemption with both the employers.

These are some of the key tips one should remember

1. Inform: Advise the new employer about the income earned in the previous months of this financial year.

2. Investment declaration: If you have not shared information of investment with the previous employer, then it is fine but if you did then you must share the same information with the new employer as well in order to prevent the claiming the deduction two times.

3. Maximum limit: One is entitled to claim a total deduction of ₹1.5 lakh under section 80C of Income Tax (I-T) Act based on all the investments made such as NSC, PPF, LIC, among others.

4. Additional saving: Besides 80C, one can claim an additional deduction of ₹50,000 under Section 80CCD(1B).

5. Old tax regime: It is noteworthy that most of the tax exemptions are given to taxpayers when they opt for the old tax regime. And since the new tax regime is the default regime, you should opt for the old regime to claim tax benefits.