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 Income Tax. deducted from the salary of the employee by the employer. It is also known as a Salary Certificate since it also contains the complete details of salary paid by the employer, its components and as well as the tax deducted from salary. It is issued by the employer even when there is no tax deduction from the salary of the employee.
Form no. 16 is required due to its utility in Income Tax filing. Since, it is a complete record of income earned and taxes paid, it is the 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 proof that correct taxes are being deducted from salary and deposited with the government.
Form-16 is divided into two parts. Part A and Part B.
Part A is the certificate of TDS. Hence Form 16 becomes proof of the TDS deducted by the employer from the salary of the employee and paid to the government account.
It is also known as TRACES Form and contains the following details:
1. Personal details of employee, address, Permanent Account Number
2. Address, PAN and TAN (tax deduction and collection account number) of the employer,
3. Duration of the period that the employee worked with the employer during the Financial Year,
4. The Assessment Year
5. Summary of the taxes deducted and paid into the government account by the employer.
Employers generally deduct TDS from the salary of the employee and deposit the same into the government account. 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 proof of tax deducted and paid to the government account.
Fundamentally, part A of form no. 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 is an 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
1. Gross salary,
2. Exemptions claimed under section 10 of the IT Act and
3. Net taxable salary after deducting these exemptions
4. Details of house property income
5. Deductions from salary under section 80 C to 80 U
6. Amount of tax on income
7. Income tax paid and hence either taxes due or refund due
Exemptions from salaries include things like 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 thus derived.
If a person has a house property in his name and is claiming deductions for the interest paid on his/her 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/her 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 80D 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, it is 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 are due only in cases where income earned apart from salary is not declared to the employer for the purpose of preparing Form16.
Form 16 and Form 16A are the proofs of the tax deducted at source (TDS) that is issued by the employer to his employees. However, there are certain differences in both the forms that you need to know to understand which form is applicable to you.
Let us see what differences exist between these two forms.
|Form 16||Form 16A|
|Form 16 is a certificate under Section 203 of the Income Tax Act which is used as a proof of tax deducted at source from the chargeable income under the ‘salaries’ head.||Form 16A is a certificate under Section 203 of the Income Tax Act which is used as a proof of tax deducted at source for income other than salary.|
|Anyone who is earning a regular and steady income in the form of salary is eligible for this form.||Anyone who is either a professional with document qualification degree or is self-employed is eligible for this form.|
|This form is applicable towards interest on dividends, securities, interest except for interest on securities, etc.||This form is issued against rent, building, plant, commission, machine hired, professional charges, commission agents, etc.|
|Form 16 comprises of proof of income, details of tax paid on behalf of the employee by the employer, PAN and TAN of the employer, employee’s PAN, acknowledgement of the tax amount paid, education cess and surcharges.||Form 16A comprises of Name, PAN, TAN of the employer, PAN and name of the employee. It also comprises of the amount and the nature of payment and the receipt number of the TDS payment.|
|Details of Form 16 of only the TDS deducted by the employer is available in Form 26AS.||
All the details that are present in the Form 16A are available on Form 26AS.
Form 16 and Form 16A both are important forms and are required to help you file your IT returns smoothly. Both the forms can be verified online.
All salaried employees are eligible to get Form 16 from their employers. If your employer deducts TDS from your salary, then heshe must issue Form16 to you.
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.
Form16 is generally issued by your employer in hard copy as well as soft copy. Nowadays digitally signed Form no. 16 are issued to employees via emails. These can be downloaded and used in Income Tax Return e-filing.
There is a common misconception that one can download Form-16 using PAN number from TRACES website. In reality, you can only get your Form16 from your employer.
If you need Form16 for any previous year, you can ask your employer to issue you the same. Provisions in the Income Tax Act make it mandatory for an employer to issue Form 16 to his employee if TDS has been deducted from his salary.
If you need Form-16 for any previous year, you can ask your employer to issue you the same.
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.
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