TomorrowMakers ™

Dummy’s guide to Form 16

07 July 2017
If you are a salaried individual paying tax, Form 16 is an important document, provided by your employer for the previous financial year.
 
 

By the end of May, your employer will issue Form 16 to you and your fellow employees, if not issued already. Here’s why it is essential you know what it is!  

What is Form 16? 

Form 16 is an Income Tax form or certificate under section 203 of the Income-Tax Act, 1961, which provides information on the TDS (Tax Deducted at Source) for salaried individuals. In other words, this form contains details of your taxable income, and the tax deducted by your employers for the previous financial year, which in turn helps employees file their income tax returns (ITR). 

What to do once you receive  

Don’t let the numbers on your Form 16 intimidate you. It entails a summary of your income and tax declaration, which gives your employer an estimate of your taxable income. The deducted tax amount is deposited with the government before 30 April of the next financial year. You can verify this by checking Form 2AS from the TRACES website. 

You can also view your Tax Credit Statement (which has been deducted on the payment that has been made), which is linked with you PAN card. The password for the 26AS form would be your date of birth in the DDMMYYYY format. 

What to look for? 

Ensure the numbers between Form 26A and Form 16 and your PAN number are the same. If they don’t, get these details rectified immediately. You can then claim deductions based on this investment proof at the time of filing tax return.   

Do all employees need to file tax returns? 

No. Employees who do not fall in the taxable income bracket (Rs. 2.5 lakhs p.a. or less), need not file a return, and hence do not need Form 16.  

On the other hand, those employed with more than one employer during the same year, will receive the Form 16 document from both employers. 

 

RelatedHow is taxable income calculated?

 

What does Form 16 look like? 

Form 16 is divided into two parts: Part A and Part B 

Part A includes the following details: 

  • Employer’s TAN  

  • Employer and employee’s PAN card numbers 

  • Name and address of employer 

  • Name and address of employee 

  • Assessment year (AY - current financial year) 

  • Employee’s employment period 

  • Summary of TDS deducted by the employer during the year 

Part B includes the following details:  

This part contains consolidated details of the employee’s salary during that year. It includes the breakup of the salary and details of deductions claimed by the employee under section 80C such as House Rent Allowance (HRA), medical allowance, leave travel insurance, conveyance allowance etc. Other sections that fall under chapter VI A of the IT Act include EPF, NSC, Life insurance and PPF to name a few. It also includes details of the employee’s total taxable income and the tax deducted on the income. 

 

Form 16 Part B includes the following details: 

  • Employee’s taxable salary    

  • TDS by employer 

  • Breakup of deductions 

  • Aggregate of section 80 

  • Tax refund or any due payment 

 

Using Form 16 to file tax returns 

Since Form 16 includes all the details of TDS on your salary, it can be used as proof of tax payment. More importantly, it can be used for filing tax returns, which must be done by 31 July every year. But when using Form 16 to file IT returns, there are certain things you must check. For instance, ensure that details regarding your investment amount and documents are all entered correctly 

If any details have been mentioned incorrectly in the form, it is essential that you inform your employer and get the error rectified. Also remember that this form only provides details for TDS from salary. If you have any other sources of income (rent from real estate), there are other forms that will be required for filing returns. 

Where can you get Form 16? 

The Form 16 document is usually provided by the employer for the current financial year, and specifies the employee’s total income and taxes applicable during a particular financial year.  

Form 16 A: What is it and when do you need it? 

While Form 16 is a salary certificate issued by employers, Form 16 A is an additional TDS certificate that is required for TDS on non-salary income. For instance, any interest earned on income from Recurring or Fixed deposits, for which TDS will be deducted, requires Form 16 A from the bank. Form 16 A is required for various other reasons; some of which include- 

  • Payments to sub-contractors and contractors 

  • Fees for technical or professional services 

  • Rent and insurance commission 

  • Interest on securities or dividends etc. 

It includes details similar to Form 16, including PAN, TAN and TDS details. Form 16 A is used by individuals for filing IT returns, and can also be used for verifying actual income tax paid to the government and TDS deducted by employers.  

Form 16 is an essential document for helping you file tax returns. It also offers a complete income and tax statement for the financial year from your employer. Additionally, it can also be used when applying for term insurance, loans etc.  

 

 

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