Form 16 is a certificate issued under section 203 of the IT Act
for tax deducted at source from salary. It is a detailed record of
deducted from the salary of the employee by the employer.
It is also known as a Salary Certificate since it also contains
complete details of salary paid by the employer and its components
as well as tax deducted from salary. It is issued by the employer
even when there is no tax deduction from the salary of the employee.
Form 16 is divided into two parts. Part A and Part B.
Part A – Form 16
Part A is the certificate of TDS. Hence Form 16 becomes a proof of the TDS deducted by
the employer from salary of the employee and paid into the government account.
It is also known as TRACES Form and contains following detail
Personal details of employee, address, Permanent Account Number
Address, PAN and TAN (tax deduction and collection account number) of the employer,
Duration of the period that the employee worked with the employer during the Financial Year,
The Assessment Year and most importantly
Summary of the taxes deducted and paid into the government account by the employer.
Employer generally deducts TDS from the salary of the employee
and deposits the same with the government account and the details
of TDS deducted and paid each quarter are mentioned in this TRACES form or Part A of the Form 16.
It also contains details like BSR code of the bank branch through which payments
are made and challan numbers etc for reference. All these details are of utmost
importance when it comes to presenting Form 16 as a proof of tax deducted and
paid to the government account.
Fundamentally, part A of form 16 provides summary of tax deducted from your
income and deposited to the government as per the monthly and quarterly
TDS return filed by the employer.
Part B – Form 16
Part B is annexure containing details of salary paid, other income,
tax due and tax paid. This is a complete detailed record of salary
and related deductions and exemptions computed in a step by step manner.
This part of the Form 16 is a complete detailed record of the salary of an
individual. The name and PAN of the employee are quoted even in this part
of Form 16. It contains details of
Exemptions claimed under section 10 of the IT Act and
Net taxable salary after deducting these exemptions
Details of house property income
Deductions from salary under section 80 C to 80 U
Amount of tax on income
Income tax paid and hence either taxes due or refund due
Exemptions from salaries include house rent allowance ,
Leave Travel Allowance ,
conveyance allowance, attire allowance,
medical allowance to name a few. Part B details the amount of each
of these allowances that are exempt from tax. The salary chargeable to tax is hence derived.
If a person has house property in his name and is claiming deductions for interest paid on
housing loan then under salaries the income from house property is derived in this format.
Details of income if any from house property and deductions mainly in form of interest paid
on housing loan is specified. In case a person has more than one house property then his
income from rent, standard house property deduction, municipal taxes paid etc are also
shown while calculating income from house property. In major cases where there is only
one house property which is self-occupied the income is negative since income NIL and deduction
in form of interest paid on loan is allowed up to Rs2,00,000.
Details of any other income are then specified under this section. However all these details
(apart from salary) need to be declared with the employer first so that they can be included
in the Form 16.
Details of deductions under Chapter VIA are also shown below this.
Each deduction under section 80C e.g. employee’s contribution to
PF, life insurance premiums, home loan principal repayments,
children’s tuition fees, investment in mutual funds, investment
in PPF ,
Sukanya Samridhhi , or etc. Section 80 D deduction for medical
insurance and other deductions are also mentioned. Once these
amounts are deducted from income chargeable to tax the net amount
chargeable to tax is derived. This is the amount on which tax is
calculated at the applicable tax slab rates. Rebate u/s 87A is also
given if applicable. After applying the applicable cess and surcharge
on the amount of tax, the tax payable for the year is derived.
Finally the amount of tax deducted from the salary of the employee is deducted
from this tax amount and if any taxes are due these are to be paid by the assesse
to the government. However generally taxes due are NIL as per Form 16 since these
are always calculated based on the tax declarations made and investment proofs submitted.
In many cases there is a refund due. Taxes may be due only in case where income earned
apart from salary is not declared to the employer for the purpose of preparing Form 16.
Why is Form 16 required?
Form 16 is required due to its utility in Income Tax filing. Since it is complete record
of income earned and taxes paid it is a single most important document that is accepted
for tax filing purposes. It is also accepted as an income proof in various transactions
like loan processing etc. Also Form 16 can be used to verify whether correct taxes are
deposited with the government account by comparing the amounts with your
Form 26AS .
This is a proof that correct taxes are deducted from salary and deposited with the government.
How to download Form 16?
Form 16 is generally issued by your employer in hard copy as well as soft copy.
Now a days digitally signed Form 16 are issued to employees via emails.
These can be downloaded and used in
Income Tax Return e-filing .
When do I receive Form 16?
Form 16 is generally issued by employers by 31st of May each year.
However this date may vary from one company to the other. Certain
companies may issue it sooner or later.
What if the employer does not issue Form 16?
If the employer does not issue Form 16 then you may refer
to your Form 26AS online. This form contains details of tax deducted
from your payments and deposited in the government account. If however you cannot access this or it does not reflect any TDS payments then you must demand your Form 16 from your employer. It is your right to do so.