Form 16 is among the necessary forms for salaried individuals when it comes to taxation. It comprises all crucial information related to one’s salary and accumulated tax amount deducted by the issuer. What makes the said form so important is its role in filing ITR among others.
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What is Form 16?
It is a certificate that contains vital information required to file income tax returns. Employer issues said certificate according to Section 203 of the Income Tax Act 1961.
Form 16 is also known as a salary certificate and comprises details related to the salary paid by an employer to an employee in a given fiscal year. It also details the income tax that has been deducted from the salary of the individual in question.
Those who have worked with more than one employer at the same time or have changed jobs in a financial year will receive Form 16 from all the employers. It must be noted that Form 16 is not issued to that employee whose income for a particular year is below the threshold of tax exemption with no provision for TDS.
Components of Form 16
In a broader sense, Form 16 is divided into 2 distinct parts, namely –part A and part B. Both the components are discussed in details below –
Part A of Form 16
This particular part offers a record of the tax collected by the individual’s employer or organisation from his/her salary income and is subsequently deposited to the government’s account. It is more like a certificate that is signed by the employers stating that they have deducted TDS from an employee’s salary and have deposited the amount with the IT department.
The primary components of part A of Form 16 include these details –
- The employer and employee’s details including their name, address, PAN and TAN details.
- The Assessment Year or AY. It indicates the financial year in which the income is assessed.
- The employment period for which he/she was employed with an employer in a particular fiscal year.
- Summary of salary paid.
- Summary of deducted and deposited tax amount with the IT department.
- Date of tax deduction.
- Date of tax deposited.
- Bank’s BSR code.
- Challan number.
- Acknowledgement number of the TDS paid.
Part A of Form 16 can be generated and downloaded through the IT department’s TRACES portal. Notably, the deductor must sign all the pages of this form’s part A.
Part B of Form 16
This part serves as a consolidated statement. It offers details related to the salary paid, other income sources, amount of tax paid, amount of tax due if any. Part B of this form represents information comprehensively and provides details related to the income earned; deductions made and applicable exemptions.
The essential components of Form 16 part B include –
- Salary received along with salary structure.
- Gross income which is the sum of salary income and other income declared.
- Exemptions allowed as per the Income Tax Act.
- Deductions from salary under Section 80C/80CCC/80CCD/80D.
- Net taxable salary.
- Rebates under Section 87.
- Education cess and surcharges.
- Relief under Section 89.
- Tax deducted.
- Balance tax due or applicable refund.
What are the Eligibility Criteria for Form 16?
Salaried individuals whose annual income is included under the taxable slabs are eligible for Form 16. Regardless, an employee must issue Form 16 to an employee if he/she has deducted tax at source from salary. The said form comes in handy for salaried employees and helps them to file an ITR when they have no other income source other than their salary.
How to Download Form 16?
The task of downloading Form 16 is limited to employers. Contrary to popular belief, salaried individuals cannot download their form using their PAN at the TRACES website. All employers must issue this form every year to eligible employees before May 31st of a financial year.
Significance of Form 16
These points below highlight the importance of income tax Form 16 for employees –
- The information contained in this form comes handy to file ITR.
- It helps taxpayers to prepare their ITR easily without seeking the help of any financial planner or CA.
- The said certificate helps to verify the deposited tax amount by comparing the same with Form 26AS.
- It serves as proof of TDS.
- Form 16 also serves as proof of income.
- It is an important document that is used in the verification process while availing a loan.
- Several organisations require individuals to submit Form 16 issued by the previous employers as a part of the on-boarding process.
- It also serves as a visa checklist and comes in handy while planning a foreign trip.
What are the Form 16 Details that are Used To File ITR?
These details from the said Form no 16 online are used to file ITR –
- Taxable salary.
- Exemption on allowance under Section 10.
- The breakup of applicable deductions under Section 16.
- The breakup of applicable deductions under Section 80C.
- Profit or loss resulting from housing reporting made by the employee.
- Income generated from ‘Other Sources’ applicable for TDS.
- Total deductions under Section 80C.
- Outstanding refund or tax payable.
- TAN and PAN of an employer.
- PAN of an employee.
- Taxpayer’s name and address details.
- Current Assessment Year.
- TDS amount.
Difference Between Form 16, Form 16A and Form 16B
Individuals often confuse Form 16 with Form 16A and Form 16B. This table below offers a fair idea about the fundamental point of differences among them –
|Type of Form||Form 16||Form 16A||Form 16B|
|Purpose of issuance||It is issued for TDS on salary.||It is issued for TDS on any earnings that are generated outside salary income like – returns on investment or FD, rent, etc.||It is issued for TDS on income generated through the sale of immovable assets or property.|
|Issuer||Form 16 issued by an employer.||Tenants, financial institutions and others issue Form 16A.||A property buyer issues Form 16B to the property seller.|
In any case, if an employer does not issue Form 16 to an employee, he/she may reach out to the concerned authority for redressal. Nonetheless, individuals can use an alternate document like Form 26AS, TDS certificate from a financial institution, etc. to file ITR if they fail to receive income tax Form 16 from their employer.