Introduction

  • An employer issues Form 16 which is a certificate that contains all the information that one would need to prepare and file his/ her Income Tax Return (ITR). It is one of the most important documents required for filing the ITR.
  • Form 16 substantiates the fact that the Tax Deducted at Source (TDS) has been deducted and it has been deposited with the tax authorities on the behalf of an employee.
  • Every year on or before June 15 of the following year an employer must issue Form 16 immediately after the financial year (FY) in which the tax is deducted.
  • Due to the COVID-19 pandemic for the financial year 2019-2020, the same was extended till August 15, 2020.
  • Form 16 summarises the taxes deducted by the employer and it is deposited with the government during the particular FY.
  • Form 16 also contains the information on the total salary paid by the employer to the employee for the FY.

There Are Two Components of Form 16 Part A and Part B

Form 16 Part A

  • If a person loses his Form 16, then he can always request a duplicate copy from the employer.  According to Part A of Form 16; By using the TRACES Portal, this part of Form 16 can be downloaded and generated by the employer. The link to the TRACES Portal is shared below.

https://www.tdscpc.gov.in/app/login.xhtml

  • Before the Form 16 certificate is issued the employer should ensure that the employee confirms and validate the contents of Form 16 carefully.
  • It is essential to know that if an employee changes his/her job in one FY, a separate part A of Form 16 certificate will be issued by every employer for the period of employment.
  • Some of the important components of Part A Form 16 include; The employer’s name and address, the employer’s PAN and TAN, the employee’s PAN. The summary of tax deducted should be mentioned as well as the tax deposited quarterly, it will be certified by the employer.

Form 16 Part B

  • The Part B of Form 16 is an annexure to Part A.
  • If an employee changes his job in one FY then they have the choice to decide if they want Part B of Form 16 from the employer or the previous employer.
  • Some of the important components of Part B Form 16 include; Detailed breakup of the income, under Section 10, detailed breakup of the exempted allowances, deductions allowed under Specific Fields and Income Tax Act (under chapter 6 A) which are notified for deductions under specific sections.
  • The breakup of Section 80 C deductions
  • The aggregate of section 80 C deductions; gross as well as the deductible amount
  • The details that an employee requires from his/her Form 16 while filing a return includes;
  • Income or admissible loss from house property reported by the employee offered for TDS
  • Income under the head of other sources offered for TDC
  • Taxable salary
  • Tax payable or refund due
  • The allowances are exempted as per Section 10.
  • The breakup of deductions as per Section 16

Additional Information Required from Form 16

  • Name and address of the employer
  • Current assessment year
  • TDS deducted by the employer
  • PAN of the employer
  • TAN of the employer
  • The name and address of the employee
  • The PAN of the employee

The Key Objectives of Form 16

  • Form 16 is considered a salary certificate that contains information About the salary paid to the employee by the employer and it contains the details related to the TDS deducted.
  • Form 16 is an essential document that is accepted for tax filing.
  • Form 16 is accepted as income proof for loan processing purposes.
  • This Form can be received by the employee only by his/her employer and from no one else.
  • A salaried employee whose employer deducts tax on his salary is eligible to get Form 16
  • It depends on Company to Company when an employee would receive Form 16.
  • Returns can be filed by an employee even if he does not have Form 16. An employee should download the file 26AS and attach the salary slips and after that, he would be able to file tax returns
  • If an employee has received multiple Form 16 in one FY then he has to consider all of them and prepare his returns or he can use his form 26AS.
  • If the employer has not provided the employee with Form 16, then Form 26AS will be helpful as it contains all the income and tax details for that financial year.

Conclusion

  • Form 16 is the certificate that is issued on the deduction of tax from the employee’s salary and the same is deposited with the government by the employer.
  • Form 16 is only for the reference of the employee to know the investments declared, the tax deducted on his salary, and how much salary was paid to him by his employer.
  • Whereas ITR is a declaration to the government of any other source of income or investments which has not been stated on Form 16, that is provided to the employees along with the salary income
  • Form 16 can be used by an employee to source information for filing his/her income tax return (ITR) and as backup proof for TDS, it should be retained.

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