What is Form 16 in Income Tax?

Table of Contents:

What is Form 16?

Form 16 is a certificate that gives information on the Tax Deducted at Source (TDS) of your annual income under Section 203 of the Income Tax Act, 1961. It is a TDS certificate which reflects TDS deducted on the salary income by your employer. It is divided into two parts: Part-A and Part-B.

Form 16 is only issued when an employee’s annual income exceeds the tax exemption threshold and is liable for TDS. If the employee have worked with more than one employer during the year, he/she will have more than one Form 16. The TDS details of Form 16 are also available in Form 26AS.

What is the Eligibility criteria for Form 16?

Every salaried individual whose income exceeds the tax exemption threshold is eligible for Form 16. Employee can request From 16 from his/her current and previous employers while filing taxes.

Nowadays many organizations issue this certificate to all the employee regardless of their eligibility as it is a consolidated representation of the employee’s earnings and has other additional uses also.

What are the Components of Form 16?

In a broader sense, Form 16 is divided into 2 distinct parts, namely –part A and part B.

Form 16 Part A:

Form 16 Part A contains details about the TDS deducted directly from your salary and paid to the government. Part A typically includes details like:

The employee, i.e. your personal details like name, residential address, and Permanent Account Number (PAN)
Employer details like the name of the company, Tax Deduction Account Number (TAN), and their PAN number
The TDS amount that has been deducted every quarter, as well as details such as the dates of deposit, bank details through which TDS was made, the challan serial number for each transaction, etc.
The tax assessment year
The period of your employment with the employer

Form 16 Part B:

Form 16 Part B breaks down the computation of the tax paid. It is a detailed account of your salaried income, the different components, the deductions, and exemptions claimed, and the final tax paid. It should include:

Gross salary with details of basic salary, dearness allowance, house rent allowance, provident fund contributions, any other allowances, TDS, professional tax, etc.
Exemptions such as HRA, conveyance allowance, medical allowance, etc.
Any deductions as claimed under Chapter VI A of Income Tax Act, 1961
Any reliefs
Tax amount paid
Any tax that may be due
Tax refund, if applicable

What Details are Required from Form 16 When Filing IT Return?

You can take the reference from the image shared above and get some information for filing your income tax return. These details from the said Form no 16 online are used to file ITR –

Taxable salary.
Exemption on allowance under Section 10.
The breakup of applicable deductions under Section 16.
The breakup of applicable deductions under Section 80C.
Profit or loss resulting from housing reporting made by the employee.
Income generated from ‘Other Sources’ applicable for TDS.
Total deductions under Section 80C.
Outstanding refund or tax payable.
TAN and PAN of an employer.
PAN of an employee.
Taxpayer’s name and address details.
Current Assessment Year.
TDS amount.

How is Form 16 Important for a Salaried Individual?

These points below highlight the importance of income tax Form 16 for employees –

The information contained in this form comes in handy to file ITR.
It helps taxpayers to prepare their ITR easily without seeking the help of any financial planner or CA.
The said certificate helps to verify the deposited tax amount by comparing the same with Form 26AS.
It serves as proof of TDS.
Form 16 also serves as proof of income.
It is an important document that is used in the verification process while availing of a loan.
Several organisations require individuals to submit Form 16 issued by their previous employers as a part of the onboarding process.
It also serves as a visa checklist and comes in handy while planning a foreign trip

Which period is Form 16 issued for?

The employer issues Form 16 on an annual basis, for one financial year.

How to Download FORM 16?

As already mentioned before online Form 16 download is impossible for an employee. ITR Form 16 has to be issued by an employer. Employers can generate and download Form 16 from the TRACES portal.

Here are steps that employers can follow for Form 16 download:

Go to tdscpc.gov.in/app/login.xhtml
Log in using employer login ID and password
Go to the “Downloads” tab
Look for Form 16 A
Fill in all the relevant details of the employee such as their name, address, PAN, etc.
The employer will also have to fill in their own details
Then, the generated ITR Form 16 can be sent to the employee

Conclusion:

Form 16 is a very important and useful document. Although Form 16 is not required to be attached as a supporting document while filing income tax returns, it is necessary that the document is preserved for at least 6 years from the end of the relevant assessment year.

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Note: This Post was last updated on March 23, 2023

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