I changed jobs mid-year; will my new employer account for tax my old employer deducted?

Your new employer is allowed to take your old employer’s deductions into account, but it needs proof. Section 149 of the Income Tax Ordinance lets an employer adjust for tax already withheld from you in the tax year, and for any excess or shortfall from earlier deductions, “after obtaining documentary evidence”. The old employer’s tax deduction certificate under section 164 is the natural evidence.

What does the law say?

All the year’s salary is taxed together. Section 12(1) charges any salary received by an employee in a tax year. Section 12(5)(b) says an amount is treated as received from employment whether it is paid by the employer or “by a past employer or a prospective employer”. Salary from July to December with one company and January to June with another is one figure for the tax year.

The new employer deducts on your estimated salary for the year. Section 149(1) requires the person paying salary to deduct at your average rate “on the estimated income of the employee chargeable under the head Salary for the tax year in which the payment is made”. It then allows adjustment, “after obtaining documentary evidence”, for:

1. tax withheld from the employee under the Ordinance during the tax year;
2. any excess deduction or deficiency arising out of any previous deduction; or
3. failure to make deduction during the year.

The old employer must give you a certificate. Section 164(1) requires every person deducting tax to furnish, at the time of deduction, copies of the Computerized Payment Receipt (CPR) or an equivalent document along with a certificate setting out the amount of tax deducted. Section 164(2) requires you to attach the CPR copies to your return.

You get credit for all of it. Section 168(2) allows a tax credit for tax deducted from payments to you against the tax due for that tax year.

How does it work in practice?

The law gives the new employer the power to adjust, on evidence. It does not say the new employer must ask for your old salary details, and it does not set a form for you to hand them over. Without the evidence, the new employer can only estimate from the salary it pays, and the gap stays open until your return.

Worked example (illustrative figures)

Ayesha works in Lahore. From July to December 2026 she earns Rs. 150,000 a month with her first employer. From January to June 2027 she earns Rs. 250,000 a month with a new employer. The salaries are invented; the rates are tax year 2027 rates from clause (2) of Division I, Part I, First Schedule.

Tax on her total salary for tax year 2027:

1. Old job: 6 x 150,000 = 900,000
2. New job: 6 x 250,000 = 1,500,000
3. Total: 2,400,000
4. Band above Rs. 2,200,000 up to Rs. 3,200,000: 116,000 + 20% of 200,000 = 116,000 + 40,000 = Rs. 156,000

What the old employer deducted. Assume it estimated her salary at a full year of Rs. 1,800,000. Tax on that is 6,000 + 11% of 600,000 = 72,000, an average rate of 72,000 / 1,800,000 = 4%. Over six months: 4% of 900,000 = Rs. 36,000.

Case 1: the new employer has no evidence. It estimates only its own Rs. 1,500,000. Tax: 6,000 + 11% of 300,000 = 6,000 + 33,000 = 39,000. Total deducted by both employers: 36,000 + 39,000 = 75,000. Shortfall at the return: 156,000 - 75,000 = Rs. 81,000.

Case 2: Ayesha gives the new employer her section 164 certificate. It estimates her salary for the year at Rs. 2,400,000, giving tax of Rs. 156,000. It subtracts the Rs. 36,000 already withheld, leaving 120,000 to deduct over six months: 120,000 / 6 = Rs. 20,000 a month. Total deducted: 36,000 + 120,000 = 156,000, matching her liability.

In both cases her final tax is the same Rs. 156,000. The difference is whether it is collected monthly or left as a lump sum to pay with the return.

What if …?

My old employer deducted too much? Section 149(1)(ii) lets the new employer adjust for “any excess deduction” arising from previous deductions, again on documentary evidence. Anything still over-deducted at year end is credited under section 168 and is refundable.

My old employer did not deduct at all? Section 149(1)(iii) covers “failure to make deduction during the year”. The new employer may take that shortfall into account once it has the evidence.

I had a gap between jobs? Months without salary add nothing. Only salary actually received in the tax year is charged under section 12(1).

My final settlement from the old job came after I joined the new one? It is still salary from a past employer under section 12(5)(b) and belongs in the same tax year’s total.

Common mistakes

• Assuming the new employer already knows. Section 149 permits adjustment “after obtaining documentary evidence”; without it the new employer works only from its own payroll.
• Not asking for the certificate. Section 164(1) obliges the deductor to issue it, and section 164(2) requires the CPR copies with your return.
• Treating each employer’s deduction as final. Section 168 treats all of it as a credit against one liability for the year.

What to check in the official text

Read section 149(1) and (2), section 164(1) and (2), section 12(1) and 12(5), and section 168(2). The certificate’s contents are “such other particulars as may be prescribed”, so check the Income Tax Rules, 2002 for the prescribed form. Take the rates from clause (2) of Division I, Part I of the First Schedule.