Switching Jobs Mid-Year? How to Avoid a Tax Bill at Filing Time (Form 122 Explained)

You got a new job with a better salary. Then, at filing time, the tax portal shows tax still due. This happens to many people who change jobs in the middle of the year. Business Standard flagged the issue on 10 November 2026. Here is why it happens and how to avoid it.

Why a job switch can leave tax unpaid

Each employer deducts tax at source (TDS) on the salary it pays you. If your new employer does not know what you earned earlier in the year, it works out your tax as if its salary were your only income.

So both employers may:

• give you the full ₹75,000 standard deduction under the new tax regime;
• start you at the lowest tax slab;
• treat your income as being under the ₹12 lakh rebate limit.

Each employer's TDS looks right on its own. But together they deduct too little. When you file your return, tax is worked out on your total income for the year, and the shortfall falls due at once, with interest if it is large.

The ₹12 lakh line matters most

Under the new tax regime, there is no tax if your taxable income is up to ₹12 lakh, because of the rebate. With the ₹75,000 standard deduction, that means a salary of up to ₹12.75 lakh a year carries no tax.

Many entry-level roles in banks, NBFCs and insurers sit well below this line. On Finploy, the median fixed pay for front-office sales and relationship roles is about ₹3.5 lakh a year, and most are between ₹3.4 lakh and ₹4.25 lakh (Finploy data, October 2026). For most people at that level, a job switch does not create a tax problem.

The risk is real for mid-career staff. Suppose you earned ₹7 lakh at your old job and will earn ₹7 lakh at the new one in the same year. Each employer sees ₹7 lakh and deducts no tax. But your total is ₹14 lakh, which is above the rebate limit. When you file, tax is worked out on the full ₹14 lakh, and all of it falls due then.

Form 122: tell your new employer what you earned

From tax year 2026-27, the Income-tax Act, 2025 and the Income-tax Rules, 2026 apply. Under the new rules, Form 122 replaces Forms 12B and 12BAA, according to the Income Tax Department's FAQ. You use it to give your new employer:

• the salary paid by your previous employer in the same tax year;
• the TDS already deducted;
• other income or losses you want included, such as a loss from a house property.

Filing Form 122 is optional. But if you do not file it, your new employer has no duty to count your earlier salary. Its TDS will cover only its own payments.

Two other forms have new numbers too, according to TaxGuru. Form 130 replaces Form 16 as the annual salary TDS certificate. Employers must issue it for tax year 2026-27 by 15 June 2027. Form 138 replaces Form 24Q as the employer's quarterly salary TDS return.

Faster final settlement under the Labour Codes

The four Labour Codes came into force on 21 November 2025. Under section 17 of the Code on Wages, wages due to an employee who resigns must be paid within two working days. Other dues, such as gratuity, follow their own timelines. Ask your old employer for the final settlement statement and the salary details you need for Form 122 at the same time.

The Codes also count pay as "wages" in a way that has led many employers to keep basic pay and related parts at about half of total pay. That can raise PF and gratuity contributions and change your take-home pay. Look at the salary break-up of a new offer, not only the total CTC.

Five steps when you switch jobs

1. Collect your papers. Get the final settlement statement, the last payslip and the TDS details from your old employer.
2. Fill Form 122. Give it to your new employer's payroll team in your first month.
3. Choose your tax regime with care. Compare the old and new regimes for your full-year income, not for one job.
4. Check your tax credit statement and annual information statement (AIS) on the income tax portal. Make sure the TDS from both employers shows up.
5. Pay any gap early. If you see a shortfall during the year, ask your new employer to deduct more, or pay advance tax. This keeps interest low.

This article explains general rules. It is not tax-filing advice. Check the official forms on incometaxindia.gov.in, or speak to a tax professional for your own case.

Frequently asked questions

What is Form 122?

Form 122 is the form under the Income-tax Rules, 2026 that replaces Forms 12B and 12BAA from tax year 2026-27. An employee uses it to tell the employer about salary from a previous employer in the same year, TDS already deducted, and other income or losses to be included.

Is it compulsory to submit Form 122 to my new employer?

No, it is optional. But if you do not submit it, your new employer has no duty to count your earlier salary, and its TDS will cover only its own payments. You may then have tax to pay when you file your return.

Why do I owe tax after changing jobs?

Each employer may have deducted tax as if its salary were your only income, giving you the standard deduction and lower slabs twice. When your total income for the year is worked out at filing time, the shortfall falls due.

Which form replaces Form 16 from tax year 2026-27?

Form 130 replaces Form 16 as the annual salary TDS certificate. For tax year 2026-27, employers must issue it by 15 June 2027.