How is Form 16 important for a salaried individual?
For a salaried person, Form 16 is of utmost importance from income-tax point of view. The details mentioned in this Form are required for filing of Income Tax Returns.
With this certificate, the taxpayer can easily prepare their income tax return in India, by themselves, without seeking the help of Chartered Accountants or financial planners. This is more applicable for individuals, whose only source of income is the salary that they receive from their organization.
Form 16 can be used to verify whether correct taxes are deposited in the govt. account by comparing the amounts with the Form 26AS.
Also, it is not only a proof of TDS but is also looked upon as document of importance for tax compliance. It is the only document that an employee has to furnish to prove that he or she has paid tax and can be shown as proof during any income tax related scrutiny. Banks, other lenders and financial institutions also accept it as a valid income proof. For the purpose of loan applications, many financial institutions require this document as a part of their verification process.
Many organizations require Form 16 of the previous employer (in that same financial year) to be submitted to them, as part of their onboarding process. This helps them to ensure that they calculate the tax payable correctly as the income tax slabs change depending on the total earnings of an individual in that year.
Also, if one is planning to travel abroad, many visa checklists such as the one for Schengen visa, ask for Form 16 as one of the documents to be submitted.
Multiple employers in a financial year
In case of people who have changed jobs and hence worked with multiple employers in a particular financial year, they will receive individual Form 16 from all the employers.