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T. Banusekar

WHAT is the role of an employer in obtaining form 12B from employees who have joined the service of the employer in the middle of the previous year after having worked with a previous employer? Can the employer take the particulars as given by the employee without looking into supporting documents in this regard?

In our company, if an employee joins in the middle of the previous year and does not give us form 12B, we do not take into account rebates under Section 88 in computing the tax to be deducted at source since we are not sure whether the gross total income will exceed Rs 5 lakh in which case rebate under Section 88 is not available. Is this correct? - Ramnath Subramanian

Reply

If the employee does not furnish the prescribed form 12B, the employer need not ensure that the same is collected from the employee. Similarly, the employer does not have to verify with supporting documents the particulars given in form 12B by the employee. There is no need for the employer not to allow the benefit of rebate under Section 88 merely on the doubt as to the particulars of the other income from the other employer unless the same is furnished by the employee to the employer.

Form 12B deals with the requirement of an employee to furnish details of income from the previous employer where the employee works with more than one employer in the previous year. This declaration from the employee is to be given to the employer to facilitate tax deduction at source. The requirement arises under Section 192(2) read with rule 26A.

Section 192(2) specifically provides that the employee "may" give particulars of his income from previous employer as also the tax deducted thereon.

On the furnishing of such form by the employee to the employer, the employer "shall" take into account the details so furnished in determining the tax to be deducted at source.

The language used makes it clear that the employer needs to take the particulars into account only if the employee gives the same to the employer in form 12B. The language used as can be observed is, the employee "may" give particulars while the employer "shall" take into account the same.

The use of the words "may" and "shall" is no doubt that the employer is not obliged to collect the form 12B but only take into account particulars given therein if the same is furnished by the employee.

Section 192(2), Rule 26A and form 12B do not require the employee to furnish proof in respect of any particulars given in the form. This being so, the employer cannot also be obligated to verify proof of particulars given in the form.

For the aforesaid reasons, it can be said that the employer can give the benefit of rebate under Section 88 and does not have to be concerned about the other incomes of the employee if the same is not furnished by the employee in deducting tax at source on the salary.

The employer does not have to disallow the benefit of rebate under Section 88 in computing the tax to be deducted at source merely on the doubt that the income of the employee may exceed Rs 5 lakh when the employee does not give particulars.

Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.

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