Published 21 October 2026
An employee who changes jobs in the middle of a year usually ends it with two Form 16s and a tax bill. Neither employer did anything wrong. Each deducted tax as if it were the only employer. Each gave the full standard deduction and started from the bottom of the slab table, and each assumed the year’s income would stay below the rebate limit. Added together, the salary falls into higher slabs, the standard deduction is allowed only once, and the rebate may disappear. The law offers a way to avoid the shortfall during the year: a statement of the earlier salary handed to the new employer. It also sets limits on exemptions that apply across all employers together. This guide covers both, under both Acts.
Which Act governs which year
- Financial year 2025-26 (assessment year 2026-27) and earlier. Tax on salary is deducted under section 192 of the Income-tax Act, 1961. The statement of salary from another employer is made under section 192(2) in Form No. 12B, under rule 26A(1) of the Income-tax Rules, 1962.
- Tax year 2026-27 onwards. The provision is section 392 of the Income-tax Act, 2025. The statement is made under section 392(4)(a)(i) in Form No. 122, under rule 204(1) of the Income-tax Rules, 2026.
- Earlier years continue under the 1961 Act by section 536(2) of the 2025 Act.
Why the shortfall happens
Section 192(1) requires the employer to deduct tax “at the average rate of income-tax computed on the basis of the rates in force … on the estimated income of the assessee under this head”. Section 392(1) of the 2025 Act uses the same words. Each employer can estimate only the salary it pays, unless it is told about the rest.
A simple case for FY 2025-26, in the new regime:
| Employer A (April to September) | Employer B (October to March) | Whole year | |
|---|---|---|---|
| Salary | Rs 7,00,000 | Rs 8,00,000 | Rs 15,00,000 |
| Standard deduction | Rs 75,000 | Rs 75,000 | Rs 75,000 (once) |
| Taxable salary as each employer saw it | Rs 6,25,000 | Rs 7,25,000 | Rs 14,25,000 |
| Tax each employer worked out | nil (rebate) | nil (rebate) | Rs 93,750 before cess |
| With 4 per cent cess | nil | nil | Rs 97,500 |
Each employer saw income below Rs 12,00,000 and allowed the full rebate under the first proviso to section 87A. The year’s total income of Rs 14,25,000 attracts tax of Rs 93,750:
- nil on the first Rs 4,00,000;
- Rs 20,000 from Rs 4,00,000 to Rs 8,00,000;
- Rs 40,000 from Rs 8,00,000 to Rs 12,00,000; and
- Rs 33,750 on the Rs 2,25,000 above Rs 12,00,000.
Marginal relief does not help at this level. It applies only where the tax exceeds the amount by which income passes Rs 12,00,000, and here the tax of Rs 93,750 is less than that Rs 2,25,000. The whole Rs 97,500 is payable before the return is filed. The figures are the same for tax year 2026-27 under section 202 and section 156 of the 2025 Act.
The fix during the year: Form 12B, now Form No. 122
Section 192(2) applies where an employee “is employed simultaneously under more than one employer, or where he has held successively employment under more than one employer”. He “may furnish” to one of them, chosen by him, details of salary from the other employer or employers, the tax deducted on it, and other particulars. The employer “shall take into account the details so furnished” when deducting tax.
Rule 26A(1) of the 1962 Rules prescribes Form No. 12B for this. From tax year 2026-27, section 392(4)(a) lets the employee furnish the same particulars “at his option”, and the employer “shall take into account” them. Rule 204(1)(a) of the 2026 Rules prescribes Form No. 122, which covers “any income under the head ‘Salaries’ due or received by the assessee, from any other employer or employers during the tax year”. The same form also carries:
- a loss from house property;
- income under other heads; and
- tax deducted or collected on other income.
Three points follow from the words.
- The statement is optional. The law does not require it. Without it, the new employer has no basis for including the earlier salary, and the shortfall is settled at the year end.
- It goes to one employer. In a job change it is naturally the later one, which still has months of salary to deduct from.
- The employer may then adjust. Section 392(5)© of the 2025 Act lets the employer “increase or reduce the amount to be deducted … for adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the tax year”.
Limits that apply across employers
Some limits apply once a year, whatever the number of employers.
- Standard deduction. Section 16(ia) allows Rs 50,000 or Rs 75,000 “or the amount of the salary, whichever is less”. The 2025 Act gives the same in serial number 2 of the Table in section 19(1). It is one deduction against the year’s salary under the head. Each Form 16 shows it, but the return allows it once.
- Chapter VI-A deductions. Section 80C and the like have annual caps. If both employers allowed the same investment, the return counts it once.
- The perquisite threshold. Under section 17(2)(iii)© of the 1961 Act and section 17(1)©(ii) of the 2025 Act, salary is measured “from one or more employers”. The Rs 4,00,000 threshold in rule 3C of the 1962 Rules and rule 17 of the 2026 Rules is tested on the combined figure. See Perquisites and Form 12BA.
- House rent allowance. The exemption is computed for each “relevant period” with the salary, allowance and rent for that period. A change of job usually also changes the allowance, and sometimes the city. See HRA Exemption and Form 12BB.
- Gratuity and leave encashment. The notified limits are lifetime ceilings shared between employers. Under the provisos to section 10(10)(iii) and 10(10AA)(ii), the exemption for gratuities or leave encashment received from more than one employer in the same year cannot exceed the notified limit, reduced by amounts exempted in earlier years. Section 19(2)(a) and (f) of the 2025 Act express the same rule as “A − B”. See Gratuity, Leave Encashment and Retirement Receipts.
Payments around the move
Section 17(3)(iii) of the 1961 Act treats as “profits in lieu of salary” any amount due to or received by an assessee from any person “before his joining any employment with that person” or “after cessation of his employment with that person”. Section 18(1)(b) of the 2025 Act is in the same terms. A joining bonus paid before the start date, and an amount paid by a former employer after the employee has left, are therefore salary.
Neither section 16 of the 1961 Act nor section 19 of the 2025 Act lists a deduction for an amount the employee pays to a former employer in lieu of notice.
The provident fund on a change of job
The accumulated balance in a recognised provident fund is excluded from income on withdrawal only in the cases listed in rule 8 of Part A of the Fourth Schedule to the 1961 Act. Paragraph 8 of Part A of Schedule XI to the 2025 Act carries the same cases. One of them is continuous service of five years or more. Another, in clause (iii) of rule 8 and paragraph 8(1)©, is where, on a change of employer, the balance “is transferred to his individual account in any recognised provident fund maintained by such other employer”. Where it is transferred, service with the former employer counts towards the five years. This is the Explanation to rule 8 and paragraph 8(2).
The year-end position
Each employer issues its own Form 16, Form No. 130 under the 2026 Rules, for the period it paid. Both appear in Form 26AS and the Annual Information Statement under the employer’s TAN. See Reconciling AIS, TIS and Form 26AS and TDS Certificates: Form 16 and 16A.
The return combines both salaries, applies the standard deduction once, and makes a single choice of regime for the year. It can differ from what either employer assumed; see Old or New Regime.
Any tax still due is paid as self-assessment tax before the return is filed. This is section 140A of the 1961 Act and section 266 of the 2025 Act. Where the shortfall is large enough to have required advance tax, interest under sections 234B and 234C, or sections 424 and 425 of the 2025 Act, may follow. See Advance Tax and Self-Assessment Tax.
The screen-by-screen entries for AY 2026-27 are in How to file ITR-1 when you switched jobs mid-year.
What to have ready
- Both Form 16s, with Part A (tax deducted and deposited) and Part B (salary breakdown), and any Form 12BA or Form No. 123.
- Salary slips for the final month with the old employer, showing leave encashment, gratuity, notice pay and other settlement items.
- A copy of any Form 12B or Form No. 122 given to the new employer.
- Form 26AS and the AIS, showing both TANs and the tax under each.
- Investment proofs, to make sure each deduction is counted once.
- Provident fund transfer confirmation, if the balance moved to the new employer’s fund.
- A challan for self-assessment tax, if the combined computation shows a shortfall.
In order
- On joining, the employee may give the new employer Form 12B (to FY 2025-26) or Form No. 122 (from tax year 2026-27), with the earlier salary and tax deducted.
- The new employer takes it into account and adjusts the deduction for the rest of the year.
- At the year end, both Form 16s are reconciled with Form 26AS and the AIS.
- The return combines the salaries and applies the standard deduction, slabs, rebate and any exemption caps once for the year.
- Any shortfall is paid as self-assessment tax before filing, with interest where the advance tax rules apply.
The next guide, Relief for Salary Arrears: Form 10E, deals with salary that arrives in a later year than the one it belongs to.