Form 12B - Types, Importance & Steps to File
Form 12B - Types, Importance & Steps to File
Are you planning to leave your current job and join a new company? If you want to take this step in the middle of a financial year, then learning about Form 12B is necessary. It is an important document that informs the new employer about your income and tax deductions under previous employment. Filling out this form can help you file income tax returns without hassles.
This article delves into what Form 12B is, its significance, and filing. Let's begin!
Section 50 C of Income Tax Act
Clubbing Of Income Under Section 64
Section 43B(h) Of Income Tax Act
What is Form 12B?
Form 12B is an income tax document that contains information about your income and tax deductions under previous employment. You must complete it as per the rules of the Income Tax Act, 1961 while switching jobs during a financial year. It helps the new employer assess your tax liability and deduct the correct tax from your salary.
Form 12B example: Suppose you join a new company in October 2023. In this case, Form 12B, with complete details for the period between April 01 2023 and September 30 2023, must be furnished. Here’s what Form 12B contains:
Details about the previous employer like Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), etc.
Your name, address and PAN
Your residential status
Duration of employment
Breakup of salary structure from previous employer, including basic pay, bonuses, allowances, perquisites, leave encashment and other salary components.
Tax Deducted at Source (TDS) on the salary.
Deductions on provident fund and rent-free accommodation, if any
Other income tax deductions under various sections of the Income Tax Act like 80C, 80D, 80E, 80G, etc.
Professional tax, if any
Your signature and verification
Why is Form 12B Important?
Form 12B is significant for both the employer and the employee for the following reasons:
Significance for the employer
Form 12B provides information about your salary and deductions from the previous employer. This helps the new employer deduct the correct TDS from your annual gross pay and generate Form 16 at the end of the financial year. Thus, the 12B tax form helps an employer ensure that a new employee adheres to the income tax laws.
Significance for the employee
When you submit Form 12B to the new employer, you can ensure the right TDS deduction from your salary for the remaining financial year. This helps in minimising discrepancies in tax calculations. Filling Form 12B accurately further helps avoid penalties arising from incorrect tax details.
How to Get Form 12B?
Form 12B income tax is typically given to the employee by the previous employer. In such cases, the employer also fills in the necessary details to ensure they are accurate. Receiving the form from the previous employer is beneficial for the employee as well, as it reduces their effort.
However, if you don’t want to contact your previous employer, you can fill out Form 12B yourself. You can download it from the official website of the Income Tax Department. In this case, you are required to fill in all the details yourself.
Moreover, you need to verify that the details are accurate so that your new organisation calculates your new salary based on the details provided in the form.
Who Should Submit Form 12B and When?
- Salaried employees: These individuals must submit Form 12B when they switch jobs mid-year.
- Self-employed professionals: Such individuals don’t need to submit Form 12B when they switch to a full-time salaried position mid-year.
How to Fill Form 12B?
Filling Form 12B accurately is necessary to avoid any issues later. Now that you are familiar with what Form 12B is all about, here are the points you must complete while filling it out:
Step 1: Fill in your previous organisation’s name and address.
Step 2: Enter your previous organisation’s PAN and TAN (these are given on your salary slips).
Step 3: Provide the duration of employment and total earnings in the financial year before joining the new company.
Step 4: Fill in the breakdown of the previous salary structure.
Step 5: Fill in the amount that went towards the provident fund and deductions on rent-free accommodations.
Step 6: Mention the investments and expenses eligible for deductions under various sections of the Income Tax Act 1961.
Step 7: Fill in the total TDS during the financial year.
Form 12B consists of two parts. The first one includes details about rent-free accommodation including furnished and unfurnished accommodations. The second annexure requires information about conveyance allowance or other similar allowances offered by the previous employer.
Before submitting your taxes, it is wise to review a form 12B filled example for reference and to ensure accuracy.
Note: The above information must be provided based on the Form 16 and salary slips issued by your previous employer
What Happens When an Employee Submits Form 12B?
The following actions are taken after the submission of Form 12B by an employee to the new employer:
Verification
Upon receiving Form 12B, the new employer verifies the details with the previous employer to validate the accuracy of the details provided.
Tax deduction
Considering the details provided in Form 12B, the new employer will estimate the employee’s tax liability and deduct tax at source (TDS) accordingly.
Issuance of Form 16
After deducting tax, the employer will issue Form 16 to the employee, mentioning the total salary earned and tax deductions during the financial year.
Key Differences Between Form 12B, Form 12BA, and Form 12BB
Form 12B, Form 12BA and Form 12BB are all income tax-related, but their purposes are different.
| Parameter | Form 12B | Form 12BA | Form 12BB |
|---|---|---|---|
| Purpose | Statement of income from the previous employer. | Statement showing details of perquisites and profits in lieu of salary. | Statement of claims for tax deduction on allowances (HRA, LTA, interest on home loan, etc.) |
| Who submits it? | Employee (when joining a new employer during the financial year). | Employers (as an annexure to Form 16) | Employee (to current employer for claiming deductions) |
| When to use? | When an employee changes jobs in the middle of the financial year, and wants the new employer to consider the previous income for the correct TDS deduction. | At the end of the financial year, along with Form 16, to provide perquisite details. | During the financial year, before the employer calculates and deducts final TDS. |
| Who receives it? | Submitted by the employee to the new employer. | Issued by the employer to the employee. | Submitted by the employee to the employer. |
| Nature of information | Contains details of salary, allowances, deductions, and TDS from the previous employer. | Contains valuation of perquisites, fringe benefits, and non-cash components of salary. | Evidence/claims for deductions such as HRA rent receipts, LTA, interest on housing loan, donations, etc. |
| Relevant rule | Rule 26A of the Income-tax Rules, 1962. | Rule 26A(2)(b) of the Income-tax Rules, 1962. | Rule 26C of the Income-tax Rules, 1962. |
| Frequency | Only when an employee switches jobs in a financial year. | Annually, with Form 16 Part B. | Annually or whenever the employee claims deductions. |
Wrapping Up
Form 12B income tax ensures correct TDS deductions when you switch jobs between two financial years. You are required to submit it along with proof of investments by March 31. It helps the new employer know about your previous income and tax deductions.
Based on the details provided by you, your new employer will issue a consolidated Form 16 at the year's end. Make sure you fill out Form 12B to avoid the hassle of self-computation of taxes to file an income tax return.
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