Modern employees are switching jobs constantly to maximize the benefits they receive from their jobs. With the rising number of employees hopping jobs, ‘Form 12B’ has become an essential document for organizations. However, what is the relevance of Form 12B for the employees and the employers? Why should employees submit Form 12B while switching jobs? How to fill Form 12B? What benefits does the submission of Form 12B provide to the new employer? What happens after the submission of Form 12B? We will be answering all the queries below.
When an employee joins a new organization, they are required to share their previous salary and tax details such as tax deducted at source (TDS) with their new employer. This process is undertaken with the submission of Form 12B, which comes in handy for those staff members who switched their jobs in the middle of the financial year.
Since it is an essential part of employee payroll, you should be aware of Form 12B and its significance.
What is Form 12B?
Form 12B is the document that informs the new employer of the salary and tax details of the employee by the previous employer. Having this data enables the new company to calculate the employee’s taxes accurately and deduct the right TDS amount. Along with Form 12B, the employee is also required to submit their proof of investments before 31st March of the current financial year.
Form 12B is relevant to the new employer as they are made aware of the tax structure of the employee, and hence, the new company’s payroll manager can allocate the right amount for TDS and IT deductions, ensuring accuracy in their payroll management system. Moreover, Form 12B is applicable only for those salaried individuals, who have switched jobs in the middle of a financial year.
Once an employee submits Form 12B, the payroll team is required to consider the provided details while sharing Form 16 with their employee. At their end, the employee is required to verify the details shared by the payroll team, as any errors in Form 16 shared by their current and new employers will result in tax-related issues in the future.
When should Form 12B be Submitted and to Whom?
Form 12B should be submitted by an employee who has joined a new company in the middle of a fiscal year. However, one should note that the previous employer is not obligated to share these details with the employee and hence, if they decline to provide the details, the employee will have to collect the required information from their payslips or using their HRMS software. Similarly, you should note that if an individual has been self-employed, they are not required to submit Form 12B as they were not employed with any organization.
How to fill Form 12B in the middle of financial year?
To fill out Form 12B and ensure its intended usage, you need to enter the following details to fill Form 12B:
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- The complete name and address of the previous employer.
- The Permanent Account Number (PAN) of the previous employer.
- The Tax Deduction Account Number (TAN) of the previous employer.
- The Aadhar Number of the previous employer.
- The duration of employment with the previous organization.
- The previous fiscal year’s earnings information, before joining the new company.
- The exact salary components such as House Rent Allowance (HRA), Dearness Allowance (DA), Leave & Travel Allowance (LTA), Leave Encashment, Commissions, Incentives, and other benefits.
- The expense details of the employee, which come under deductions.
- The overall deductions made for the previous fiscal year such as Provident Fund (PF), rent-free accommodation, Professional Tax (PT), etc.
- The deductions under Sections 80C, 80D, 80E, 80G, 24, etc.
- The exemptions claimed under various sections of the Income Tax Act.
- Income details from other sources apart from salary.
How to get Form 12B?
Usually, the previous employer should provide the employee with Form 12B. In such cases, they also fill in the required details to ensure the accuracy of the information contained within the Form. It also makes the process easier for the employee requesting the Form.
However, the employee also has the option to skip contacting their previous employer and filling out the Form themselves. They can download Form 12B from the Official Income Tax Department website. In this case, they will have to fill in all the required details.
Form 12B Download PDF: Form 12B Sample
It is essential to ensure that the information filled in Form 12B is verified to be accurate by the employee to ensure that their new organization can calculate their new salary according to the details provided in the Form.
What is the relevance of Form 12B to the new employer?
Form 12B is relevant for both the employee and to the new employer as it is essential for processing their payroll accurately. For the employee, Form 12B helps in sharing their existing payroll and income tax details with the new employer. It helps them effortlessly inform their new employer of their existing salary and associated tax details without having to prepare a separate document manually.
On the other hand, Form 12B helps the new employer understand their new employee’s existing salary details, which helps in calculating their TDS amount from their current gross salary. It makes the process of calculation easy for the payroll team as the standardised format enables them to seamlessly compute their recruit’s details.
Hence, Form 12B is essential for both the employee and the employer to make the process of payroll calculation seamless for both parties, using their HRMS payroll software.
Conclusion
Form 12B is as essential to the employer as much as it is valuable to the employee. It enables the HR teams to understand the existing tax details of a newly appointed staff member, helping them make accurate statutory deductions from their salary.
On the other hand, Form 12B enables the recruit to share their existing salary details with their new employer, streamlining the process of informing them about all the relevant details of their payroll with their previous employer.
Hence, employees must fill out Form 12B and submit it to their new employer at the earliest. They are also required to submit their proofs of investments before the last date of the financial year, which helps in verifying the authenticity of the claims and exemptions provided in Form 12B.
FAQs on Form 12B
1. What details must be provided in Form 12B?
The employee should provide all details about their current and previous salary in Form 12B such as the basic pay, income tax details, the various deductions, any allowances, extra earnings such as commissions, incentives, etc. and others.
2. Does Form 12B only apply to salaried professionals?
No, retirees who are being paid private pensions from their previous employer should also declare their income and TDS data with Form 12B. It ensures that the tax computation is undertaken accurately for every financial year.
3. What happens after Form 12B is submitted?
Once the Form 12B is submitted, the current employer will verify all information and issue Form 16 to the employee. The employee will have a robust idea of their taxes for a financial year ensuring accuracy.
4. Whose responsibility is it to fill Form 12B?
It is the responsibility of the employee to fill in Form 12B. If required, they can get the help of their current and previous employers in filling it; however, the responsibility of filling in the data rests solely on the employee.
5. Is Form 12B mandatory?
Yes, it is mandatory to submit Form 12B to the new employer as it helps them understand the employee’s salary from their previous organization.
6. What if Form 12B is not submitted to the new employer?
Since your taxes include income from all income sources – including salary from previous employer – not reporting this salary can result in a notice from the Income Tax Department. Hence, it is essential to submit Form 12B to the new employer.
7. Where can I download Form 12B?
Form 12B can be requested from your previous employer. While Form 12B can be obtained by contacting your HR, the exact steps might vary depending on your previous organization. Alternatively, you can download Form 12B directly from the Indian Income Tax website.
