New Employee Can't Provide Form 16 Yet: How Should We Handle 80C Exemption?

Hi,

Recently, one employee joined us in the month of Jan-09. He says that he has not claimed anything under 80C from his previous company. I asked him to submit Form 16 as proof so that we can consider a 1 Lakh exemption under 80C, but he said his previous employer is not ready to issue the Form 16 until Mar-09. Please let me know what I should do in this case.

Thanks.

Let him get Form 16 from his previous employer separately. You can also issue a separate Form 16 reflecting the TDS made by you. If his salary income for the coming three months is not expected to cross Rs 150,000 (or Rs 180,000 if a woman), you need not deduct any tax at the source. But if he has furnished his past income and is willing to have tax deducted for the forthcoming period as well, you can deduct tax and mention the past salary income in your Form 16 as other income furnished by the assessee. It is solely the responsibility of the individual employee to file IT returns after collecting Form 16 from the previous employer and the one issued by you.

Since he has not provided any proof that he did not claim any benefit under section 80C, you cannot assess based on his statement. Therefore, it is better to proceed without considering any investments by him. You need not take the investment details for this year. If any investment is made, he can claim a refund from the Income Tax Department after filing the returns.

Starting from the next assessment year, deductions shall be made from the salary of April 2009 onwards.

Please correct me if I am wrong.

Regards,

Madhu.T.K

Hi,

Thank you for your prompt reply. Also, please clarify for me, can his previous employer provide him Form 16 now, or is there a rule that they have to provide it only after March (financial year-end)?

Please let me know. Thank you.

His previous employer can issue the Form 16 after filing the eTDS return for Q3 by 15.01.09 (already passed), stating the acknowledgment numbers of the e-filing. You may ask him for the Form 16, else deduct the tax and issue the Form 16 from your company before 30.04.09 after filing the eTDS Return.

Dear Madhu,

Sorry for the late reply. I feel that we can handle this simply:

a) Fine, he does not have the Form 16. Don't worry, ask him to produce the proof of investment. If the proof of investment is there, surely he can claim it at either of the places under section 80C. Therefore, look at the proof of investment.

b) Next, to compute the tax, find out the number of months he worked in the previous organization and collect the payslips. If all the payslips are not there, take the latest payslip and multiply it by the number of months worked. Then, you will get the total salary. See whether any tax is deducted in the payslips.

c) The total salary as per the previous employer + current salary in your organization will be the salary for the purpose of income tax. From that, deduct the 80C investment and find out the tax. I think you know the income tax rules and calculations.

Please feel free to reach me at 9986398828 for any other doubts.

Cheers,
Ajay