A job switch during the financial year can unexpectedly increase tax liability, even if both employers have deducted Tax Deducted at Source (TDS) correctly. Financial advisor Dev Patel highlighted a case where an employee incurred a tax liability of ₹1.69 lakh after changing jobs, despite both employers fulfilling their TDS obligations.
Key Details
In this instance, the employee received a salary of ₹7 lakh from the previous employer from April 2025 to July 2025, while the new employer paid ₹18 lakh from August 2025 to March 2026. The first employer deducted zero TDS, while the new employer deducted ₹1.51 lakh. Patel explained that employers calculate TDS based solely on the salary they pay and do not account for income received from another employer during the same financial year.
Background
Patel noted that the first employer's zero TDS deduction might appear erroneous but is part of a larger issue. The first employer only considered the ₹7 lakh salary, which did not trigger TDS under the new tax regime due to the Section 87A rebate eligibility. The second employer calculated TDS based on the total salary of ₹18 lakh, applying the standard deduction of ₹75,000, resulting in a TDS deduction of ₹1.51 lakh. However, the tax department views the combined income of ₹25 lakh, placing the employee in higher tax brackets of 25% and 30%, which the employers did not account for during TDS calculations.
This situation highlights potential tax implications for employees switching jobs, particularly in the IT and corporate sectors where such transitions are common. Investors will watch for any changes in tax regulations that could affect employee compensation structures or tax liabilities in the future.