Quitting job: Reduce your Income-Tax arrears

Most companies assume that you would be employed for the full financial year when you file the income tax returns. However often because of higher education (MBA), marriage or due to foreign opportunities the Income tax computation goes haw-wire. What makes things worse is that getting a refund is practically impossible and takes several years. So here are few tips to help you.

1. Be proactive: One of the primary reasons why Income Tax deducted by the employer is high is because the person had not communicated his/her intentions to the accounts department well in advance.
2. Collect all bills. Certain expenses like communications and medical reimbursements, LTA, company expense account etc which were incurred are tax deductable only if the employer’s form 16 reflects it. So don’t be lazy in submitting these bills.
3. India is in a progressive taxation environment. As a result as the income rises, so does the taxation rate. As a result if you are employed for only 6 months, don’t be surprised if your IT goes down by not 50% but 60-70%. This is the major source of IT arrears. There are 2 ways around it.
1. Inform your company well in advance that you would be terminating your employment in the mid year.
2. Reduce your IT projection so that the income tax gets revised downwards. This can be done by claiming for all the tax reliefs possible, even if it is fictitious. You can file that you intend to take a home loan (50,000/- tax relief) or donate money in one of the tax exempt funds. This will reduce your tax liabilities and IT arrears.

PS: Please consult your tax consultant.

 

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