How to file income tax return with two or more Form 16s

The last date for filing income tax return (ITR) for FY 2021-22 is July 31, 2022 (unless extended by the government). This deadline is applicable for individuals whose accounts are not required to be audited. As per income tax laws, employers are required to issue Form 16 to employees by June 15. The TDS certificate will be issued by the employer if tax on salary has been deducted during the financial year.

Now, let us say someone changed jobs during FY2022. In such a scenario, Form 16 will be issued by the current as well as the previous employer. In such a scenario how should you go about filing your ITR? Having two Form 16s lead to confusion regarding calculating total taxable income, total tax exemptions on house rent, LTA etc.

Here is a step-by-step guide on how to file ITR if an individual taxpayer has two or more Form 16s.

  • Collect Form 16 from all employers

The first step to file ITR is collecting Form 16 from all the employers (current and previous). Part B of Form 16 will show the break-up of gross salary received by you, allowances that are tax-exempt and deductions that can be claimed by you. Further, it will show the break-up of the gross salary which is required to be filled in the tax return form, as applicable.

An individual must consolidate the total number for each head to know the gross salary earned by him/her during the FY 2021-22 from all employers.

You will also be required to calculate the amount of exemption you can claim from your salary income. Tax exemption on house rent allowance (HRA), leave travel allowance (LTA) etc. can be claimed from your salary income only.

Individual will be required to club the HRA, LTA numbers from both Form 16s to know the total amount of exemption he/she can claim. It is important to cross-check the amount you are claiming and amount you are eligible to claim. Tax exemption on HRA can be claimed even if an individual has not submitted rent proofs to the employer. One can use HRA calculators online to know the tax-exemption amount he/she is eligible to claim. Click here to use our ET Wealth’s HRA calculator.

Dr Suresh Surana, founder, RSM India, a tax consultancy firm says, “The tax exemption on LTA can be claimed only if travel has been undertaken by an individual and proofs accompanied with declaration for the same has been submitted to the employer. The tax-exemption will be reflected in Part B of Form 16 under the head ‘Allowances exempt under section 10’. If no exemption is mentioned, then it will be fully taxable. The taxable amount will be reflected in the gross salary mentioned above.”

A salaried individual is also eligible for standard deduction of Rs 50,000 from salary income. It may happen that both the Form 16s mention standard deduction of Rs 50,000. An individual is eligible to claim maximum deduction of Rs 50,000 from total taxable salary, not Rs 1 lakh (Rs 50,000 + Rs 50,000) mentioned in both Part-B of both Form 16s. Thus, once gross salary is estimated from the step mentioned above, then individual will be eligible to claim standard deduction once for Rs 50,000.

The next step would be to claim deductions allowed under sections 80C, 80D etc. from total taxable income. Total taxable income would include salary income, interest earned from bank accounts, fixed deposits (FDs), dividends from equity shares, mutual funds etc. Here also keep in mind that all the employers may have taken the same deductions. But as per income tax laws, these deductions can only be taken once against your total income.

Do note that these tax-exemptions and deductions can be claimed only if you opt for the old tax regime while filing ITR. Surana says, “If you opt for new tax regime while filing ITR, then you will not be eligible to claim tax-exemptions and deductions. The income tax amount you are required to pay will be calculated on the total taxable amount where no deductions have been claimed.”

Once the total taxable income is calculated, an individual will be required to calculate the income tax liability. Deduct the taxes that are already deducted and deposited against your PAN. The TDS amount can be seen in Part-A of Form 16. One must cross check that the same amount is mentioned in Form 26AS and AIS (annual information statement) as well claim credit of taxes that are already deposited against PAN.

  • What if you have Form 16 from only current employer

It may happen that you have received Form 16 from only your current employer. To file tax return in such a scenario, an individual taxpayer will need to have salary slips from the previous employer. An individual will also need break-up of salary as required in the ITR form.

An individual will be required to compute total gross salary by adding income from Form 16 and income from salary slips.

Once the total salary income has been computed, then the same steps will be followed as mentioned above. These include deducting tax-exemptions (HRA, LTA etc.) and standard deduction from salary income and claiming deduction under section 80C, 80D etc. from total taxable income (salary income, interest income from bank accounts, bank FDs etc.)

Once the net taxable income is calculated, then taxpayer will calculate his income tax liability and deduct the TDS to know if there are any self-assessment taxes to be deposited.

  • What if Form 16 is not received from any employer

Even if an individual taxpayer has not received Form 16 from the employer, he/she can still file ITR. An individual will be required to collect his/her salary slips and calculate his/her gross taxable salary.

Once the gross taxable salary is calculated, add income from other sources such as interest income, dividends, capital gains etc. to compute your total taxable income. Claim the tax-exemptions and deductions that are applicable to you on your income.

The next step is to calculate the income tax liability depending on the income tax regime chosen by you. Deduct the TDS reflected in your Form 26AS from income tax liability. This will tell if there are any taxes to be paid. Do ensure that TDS reflected in your salary slips matches with that in Form 26AS/AIS.

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