What is Form 16 and it’s Basics?
This form (Form 16) contains the details that you need to prepare and file your income tax return. Instantly, after the financial year in which the tax is deducted, employers must also issue it on June 15 or before June 15 of every year of the following year.
Generally, Form 16 is essentially a certificate which employers issue to their employees. It provides a proof of validation that TDS have been already deducted and deposited on behalf of the employee with the government authorities. It gives a detailed information of the salary paid to the employee and the TDS deducted.
Form 16 contains two components – Part A and Part B.
In case if you lose your Form 16, you can again request a duplicate from your employer.
Part A of Form 16
Part A of form 16 provides details of the quarterly TDS deducted and deposited, details of PAN, TAN of the employer, along other information.
An employer can also generate and download this part of the Form 16 through the TRACES portal (https://www.tdscpc.gov.in). Before the issue of the certificate, the employer should also authenticate its contents.
It is also very important to note that if you planning for any changing in your job in any one financial year, then it is compulsory that every employer would issue as a separate Part A of Form 16 for the employment period.
Few of the components of Part A are:
- Name of the employer and address of the employer.
- TAN of employer and PAN of employer.
- PAN details of the employee.
Summary of Tax deducted quarterly and deposited quarterly, which will be certified by the employer.
Part B of Form 16
Part B of Form 16 is an attachment to Part A. Part B is made by the employer for its employees, which contains the details of salary breakup, deductions which are approved under Chapter VI-A.
If you are changing your job in one financial year, then you should take Form 16 from both the employers.
Some of the components of Part B would notified newly are:
- Detail of salary breakup.
- Detail of exempted allowances breakup under Section 10.
Deductions which are allowed under the Act of Income Tax (under chapter VIA).
The list of deductions are mentioned below:
- Deduction for paid life insurance premium, contribution to PPF under the Section 80C.
- Under Section 80CCC, deduction for contribution to pension funds.
- Under Section 80CCD (1B), deduction for employee’s contribution to a pension scheme.
- Under Section 80CCD (1B), deduction for taxpayer’s self-contribution to a notified pension scheme.
- Under Section 80CCD (2), deduction for employer’s contribution to a pension scheme.
- Under Section 80D, deduction basically for a health insurance premium paid.
- Under section 80E, deduction for interest paid on loans taken for higher education.
- Under section 80G, deduction for donations.
- Under Section 80TTA, deduction for interest income on savings accounts.
Relief under the Section 89
Details which are required from Form 16 while filing your return.
Concerning the image below, here is where you will be able to locate specific details to file your income tax returns for the Financial Year 2019-20 (Assessment Year 2020-21).
- Allowances exempt under Section 10.
- The breakup of deductions under the Section 16.
- Taxable Salary.
- Income from house property is reported by employee which is offered for TDS.
- Income classified as under the head Other Sources as offered for TDS.
- The breakup of Section 80C Deductions.
- The aggregate of Section 80C Deductions (Gross & Deductible Amount).
- Tax Payable or refund due.
Form 16- Part B
Additional information, which you are will be require from your current Form 16 while your filing your annual return are:
- TDS Deducted by Employer.
- TAN of Employer.
- PAN of Employer.
- Name and Address of Employer.
- Current Assessment Year.
- Your (Taxpayer’s) Name and Address.
- Your PAN details.
What are the criteria of eligibility for form 16?
According to the regulations issued by the Finance Ministry of the Indian Government, every salaried individual who falls under the taxable bracket is eligible for Form 16.
If an employee doesn’t fall within the tax brackets set, they will not need tax deductibles at Source (TDS). Hence, in this kind of cases, the company is not obligated to provide Form 16 to the employee.
However, these days, considered as a good work practice, many organizations, even in these types of cases, issue this certificate to their employees as it contains a consolidated picture of the individual’s earnings and has a other known additional uses.
Points to keep in mind while checking form 16:
Once an individual receives Form 16 from the employer, it is their responsibility to ensure that all the details mentioned are correct.
In addition for the verification of the personal particulars and details of the amount of income and TDS deducted, the most crucial thing is one needs to confirm in Form 16 is their PAN number.
If it is also mentioned inaccurately, that one should immediately reach out to the organization’s HR /Payroll/ Finance Department and get corrected the same.
The employee would also issue a rectified and updated Form 16 by their employer. Besides this, the employer will also need to correct their end by filing a revised tax return to credit the TDS proceeds to the correct PAN.
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