Switched jobs mid-year? Reconciling TDS from two employers before you file

Someone I know switched jobs in Poush, six months into the fiscal year, moving from one Kathmandu firm to another for a modest raise. Her new employer's HR asked for a joining form and little else. Neither employer ever asked what the other was paying her. Every payslip showed tax deducted, so she assumed the matter was closed. It wasn't, and she found out only when a friend mentioned filing an annual return, something she'd never had to think about with a single employer.

That gap, between "tax was deducted" and "the right amount of tax was deducted," is exactly where a mid-year job switch quietly creates a bill most people don't see coming.

Why two employers break the math

Section 87 of the Income Tax Act 2058 requires a resident employer to withhold tax on the payments it makes to you. The obligation is scoped to "payments made by the employer," full stop; there's no mechanism in the section for one employer to find out what another employer paid you in the same year and adjust accordingly. In practice, that means each employer computes your withholding as if their paycheque were the entirety of your annual income, restarting the calculation from the bottom of the slab structure regardless of what you earned before you joined them.

This works fine if you have one job all year. It breaks the moment you have two, because your true combined income can land in a materially higher tax bracket than either employer's individual, partial-year payments would suggest on their own. Two employers each withholding correctly for "their" six months can still add up to less than what the whole year, taxed properly as one number, actually owes.

The exemption that stops applying

Nepal has a genuinely convenient rule for most salaried people: if you have a single employer, resident in Nepal, and meet a short list of conditions, the tax that employer withholds under Section 87 is treated as your final tax liability under Section 4(3), full stop, no annual return required. This is why a huge share of salaried Nepalis never file anything beyond what their employer's payroll department handles.

That safe harbor is explicitly conditioned on having "only one employer at one time," a phrase that, read narrowly, could mean only holding two jobs simultaneously breaks it. In practice, tax practitioners treat any second employer within the same fiscal year, sequential job switch included, as enough to move you out of the safe harbor and into the group required to file a full annual income return, itemizing income from each employer separately, under Section 96. Treat that practitioner reading as the safer assumption rather than betting on the narrower one. This return must be filed within three months of the fiscal year's end, the familiar Ashoj-end deadline, and must show the assessable income from each employer, the tax withheld against each, and, critically, whatever additional tax is due once both incomes are combined and taxed correctly. The income tax filing walkthrough on this blog covers who else needs to file and the portal mechanics; a two-employer year is one more entry on that "who must file" list.

What a mismatch actually looks like

There's no single published number for how big this gap tends to be, because it depends entirely on your own two salaries and when in the year you switched. Here's the mechanism, illustrated with simple, made-up figures rather than a sourced statistic: say Employer A paid you for the first six months of the year and withheld tax as if that were your full annual income; Employer B paid you for the remaining six months, at a higher salary after your job change, and did the same. Each employer's math was individually defensible. Add both incomes together, though, and the combined total can push you into a slab bracket higher than either employer used on its own, meaning both under-withheld relative to what the full year actually owes once computed correctly.

The only way to know your actual number is to add up every payslip from both employers for the fiscal year, get each employer's TDS certificate, and compute the tax on the combined total yourself, or have a chartered accountant do it, rather than assuming two sets of "correctly taxed" payslips add up to a correctly taxed year.

The paperwork you actually need

Get the TDS certificate, commonly called Form 25-Ka, from every employer you worked for during the fiscal year, not just your most recent one. Employers are expected to issue this within 30 days of the fiscal year's end, or within 15 days of a specific request from you, whichever comes first. It summarizes what that employer paid you and how much tax it withheld, and it's the document you'll reconcile against the combined income figure when you file.

If you're the one switching, it's worth requesting this certificate from your old employer proactively rather than waiting for Ashoj to arrive and realizing you need a document from a company you left months ago and may no longer have an easy line to. The TDS deposit verification post on this blog covers a related, separate check worth running for each employer: confirming the tax they withheld from you was actually deposited with IRD, not just deducted from your payslip.

Your final settlement is a smaller complication than you'd expect

Gratuity, leave encashment, and similar retirement-linked payments from the employer you left are usually taxed as a final withholding payment at the point they're paid out, not folded back into your annual salary reconciliation. A tax-free band applies up to Rs 5,00,000 or 50% of the retirement deposit, whichever is higher, with the remainder taxed at 5% when it moves through an approved retirement fund. Because this is typically settled and closed at the point of payment, the reconciliation headache in a job-switch year sits almost entirely in your ordinary monthly salary from both employers, not in the one-time exit payment. The final settlement post and the gratuity calculation post cover that exit-cheque math in full if you want the detail separately.

What it costs to skip this

Ignoring a two-employer year doesn't make the underlying tax liability go away; it just adds two more costs on top of it. A late or missing return draws a filing penalty under Section 117, and unpaid tax separately accrues interest under Section 119 for every month it stays unpaid, a clock that keeps running even if IRD grants a filing extension, since an extension covers when you must file, not when you must pay. The late tax filing penalty post walks through the exact fee structure and the current amnesty window, and it's worth reading in full before deciding a two-employer year is something you can quietly let slide.

What you actually need to know

1. Two employers in one fiscal year means two independent, uncoordinated tax calculations. Neither employer can see what the other paid you, so their combined withholding may fall short of what the correct, combined annual figure owes.
2. A second employer knocks you out of the no-filing safe harbor. The convenience of "my employer's TDS is my final tax" only applies with one employer at a time; a job switch mid-year moves you into mandatory annual filing.
3. Get every employer's TDS certificate the day you can, not the day you file. Reconciling two incomes is straightforward arithmetic once you have both Form 25-Ka documents; it's a scramble without them.

If you switched jobs this fiscal year and want a second pair of eyes on whether you owe more than what's already been withheld, email me at parjanya57@gmail.com.

This post is part of the Nepal Money Basics guide — the Earn More (And Reconcile the Tax) section.