Form 12B

Under Rule 26A, those who join a new business or organization in the middle of the year must complete Form 12B. In essence, the form makes the individual's prior income information public. According to Rule 26A, an individual who joins a new organization or corporation in the middle of the year must submit Form 12B, an income tax form.

The form's primary use is to provide information about the person's income from their prior Employer. Form 12B must be provided by every new hire to their Employer. Form 12B submission is not required.

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Contents of the Form 12B

Form 12B requires the employee to complete a few fields before sending it to the new Employer. It is crucial that the person complete the form with the correct information.

The information that must be included in Form 12B before submitting it to the Employer is detailed below.

  • Information about the prior Employer, including PAN and TAN numbers, etc.
  • An explanation of how the overall compensation is broken down into components such as the Basic Salary + DA, House Rent Allowance, Prerequisite, Leave Encashment, Leave Travel Allowance, and other similar components.
  • Subtraction for the provident fund.
  • Deduction for housing that is provided for free.
  • Any deductions are allowed by the Income Tax Act's numerous parts, such as Sections 80C, 80G, 80D, 80E, and Section 24.
  • Professional Tax paid by the employee after Tax Withheld at Source on Salary deducted by the prior Employer (if any.)

Importance of Form 12B

The following is a discussion of Form 12B's main significance to the new Employer and employee-

  • For the Employee: By March 31st, new hires must provide Form 12B and other documentation of their investment. However, in order to make the entire process go more quickly, they should file it accurately before submitting it.

  • For the Employer: Given that it contains information about the new employee's prior salary and deductions, it is helpful to the new Employer. As a result, it makes it easier for businesses to deduct TDS accurately from an employee's annual gross pay.

When Should Form 12B be Submitted?

All employees who change employment in the midst of the fiscal year are required to submit it. When they change jobs, they must hand the form over to their new employers.

However, self-employed professionals are exempt from submitting this form to their new employers if they accept a full-time position during the fiscal year. Only salaried employees switching employers are eligible for it.

Details Needed to Fill Form 12B

  • A statement signed by the employee and bearing his or her name, the date, the location, and the information from Form 12B.
  • Employee's name.
  • Employer's PAN or TAN.
  • Value of the employer-provided rent-free housing, with distinct columns for furnished and unfurnished housing.
  • The employee pays the rent.

How to Fill the Form 12B?

While completing this form, the following fields must be filled out.

  1. Name and location of the previous organization.
  2. Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) for the prior Employer [these can be found on the pay stubs].
  3. Length of employment.
  4. Earnings made throughout the fiscal year previous to joining the new organization.
  5. The pay breakdown includes HRA, DA, leave encashment, and other benefits.
  6. If applicable, the sum is credited to the provident fund.
  7. Expenses that can be written off under Section 80C include things like life insurance premiums.
  8. Tax deductions made overall for the fiscal year.

Information about the employers' provision of rent-free housing is required for the first annexure. This contains details on both - furnished and unfurnished apartments, along with any requirements for furnishing. Information from the former Employer, including a conveyance allowance and other similar incentives, is included in the second annexure.

What Happens After the Submission of the Form 12B?

Once the employee gives Form 12B, the new Employer will use the information given by the new employee in Form 12B to generate a combined Form 16 at the end of the year. Verifying the income information and TDS on the Form 16s issued by past and present employers are advised.

TDS should have been collected in the same amount on the previous Form 16 as on the consolidated Form 16 that is issued by the current Employer.

Keep in mind that completing Form 12B is your responsibility as an employee, not the previous Employer's. Both Form 12B and Form 16 from your previous job must be submitted.

How can Form 12B and Form 12BA be Distinctive?

Even though Rule No. 26 of the Income Tax Act governs the issuance of both Forms 12B and 12BA, their respective functions are distinct. The main distinctions between them are as follows-

  • If a salaried person transfers to a new company in the midst of a fiscal year, he or she must complete Form 12B and give it to the new Employer with information about income from salary, TDS deducted, etc. In contrast, Form 12BA provides a thorough breakdown of all perquisites, profits, and other non-salary income.

  • Form 12BA is a statement of benefits that the Employer must give the employee, whereas Form 12B is a statement that the employee must give to a new employer if he or she is hiring over the course of the fiscal year.
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