Form 16 : TDS Certificate Form

Form 16 : TDS Certificate Form

Form 16: Meaning

Form 16 is an income tax form used by firms to give their employees information on the tax deducted. Form 16 is considered as the proof filing of income tax returns by your employer to the government. For example, if your income is more than the tax exemption limit, then the employer is required to deduct TDS on your salary and submit it to the government. If your salary income is less than the tax exemption limit, then in that case the employer will not deduct any TDS. When the employer provides the Form 16, it means that your employer has filed your income tax returns. The form can also be considered as your salary TDS certificate.
Simply, the Form 16 certifies how much an employee has earned during a financial year and how much has been deducted as TDS. The form has two parts — Part A and Part B.

Form 16 Part A

Fundamentally, the Part A gives the summary of tax collected by the organization or employer from the salary income, on the employee’s behalf and deposited in the government’s account. It is a certification duly signed by the employer that they have deducted the TDS from the employee’s salary and deposited it with the income tax department.

It contains the following details :
  1. Personal information of the employer as well as the employee. Particulars such as the individual and employer’s name, address details, PAN details of both and employer’s TAN details. (TAN refers to the number assigned to an account responsible for the deduction and collection of tax). These details help the IT Department to track the flow of money from the account of employee and employer. (It should be noted that if an organization does not possess the TAN, they are not entitled to deduct TDS. Thus, in this situation, they will not provide the Form 16)
  2. The Assessment Year (AY) – As the name indicates, this refers to the year in which the income is getting assessed or in other words, the year in which the taxpayer needs to work on the tax return processes. For example, for the income earned between 1 April 2015 and 31 March 2016, the Assessment Year will be 2016-17.
  3. The time period for which the individual was employed with the employer in the concerned Financial Year
  4. Summary of the salary paid
  5. Date of tax deduction from the salary
  6. Date of tax deposit in the account of government
  7. Summary of tax deducted & deposited quarterly with the Income Tax Department
  8. Acknowledgment Number of the TDS Payment
This part is generated and downloaded through the Traces portal of the Income Tax department. It also provides details such as Bank’s BSR code through which the payments are done, challan numbers etc. for future reference. All the pages of Part A should be digitally or manually signed by the deductor.

Form 16 Part B

Part B is a consolidated statement covering details regarding salary paid, any other income as disclosed by the employee to his/her organization, amount of tax paid and tax due, if any. It represents the information in a comprehensive and orderly manner stating the income earned by the employee along with the exemptions and deductions applicable thereon, in the prescribed format. Employee details such as name and PAN are mentioned even in Part B.

It contains the following information :
  1. Total Salary Received: Salary structure is further broken down into various components such as House Rent Allowance, Leave Travel Allowance, Leave Encashment, Gratuity and others.
  2. Exemptions Allowed: As per Sec (10) of Income Tax Act, 1961 such as allowances given to employees for Conveyance, Housing rent (HRA), Children education and hostel expenditure, medical, etc. are also mentioned in the form.
  3. Gross Income: This is the sum of the salary income as received from the employer and any other income declared by the employee such as income earned from house/property etc. Details regarding other income need to be shared by the employee with the employer during the phase of investment proof submission.
  4. Deductions From Salary: Section 80 C / 80 CCC / 80 CCD  includes contributions made towards instruments or schemes such as Public Provident Fund, Life Insurance policies, tax saving mutual funds, pension, Sukanya Samriddhi among others. The maximum limit for the same is Rs. 1,50,000.
  5. Deductions under other sections such as 80D (premium paid towards health insurance or Mediclaim), 80E (interest payment on education loan), 80G (donations), deductions for disability and other applicable sections are providedThe details for all these deductions need to be submitted by the employee along with the necessary supporting documents to the employer.
  6. Net Taxable Salary: Total deductions are aggregated under “Chapter IV-A” and reduced from the gross income to calculate the taxable income. Your tax liability is calculated on this amount.
  7. Education Cess and surcharges if any
  8. Rebate under Section 87, if applicable
  9. Relief under Section 89, if any
  10. Total amount of tax payable on income
  11. Tax deducted and the balance tax due or refund applicable

Who are eligible for Form 16?

Every salaried individual who has a taxable income and tax has been deducted at source by the employer is eligible to receive the Form 16. If the employee has an annual income less than the basic exemption limit, the employer is not obliged to issue Form 16. But, if the employer has deducted TDS on employee’s monthly income, then Form 16 needs to be provided to the employee.

Is Form 16 mandatory for salaried employees?

Form 16 is to be mandatorily provided by the employer to the employee if the former has deducted TDS on the latter’s income, as Form 16 is a tax certificate that carries full details of income earned and TDS deducted during the financial year. Form 16 helps a salaried employee to file an income tax return (ITR), especially when the employee does not have income from any other sources.

How do I get Form 16? Can I get Form 16 online?

Download Form 16 for salaried employees: Form 16 can be downloaded from the TRACES portal by the employer before handing it over to the employee. A detailed break-up of the allowances and perquisites received by the employee along with the Standard Deduction needs to be shown in Form 16. Form 16 has two parts – One is Form 16A, and the other is Form 16B.

Why Form 16 is required?

Form 16 is a very important document as it:

  1. Serves as a proof that government has received the tax deducted by your employer.
  2. Assists in the process of filing your income tax return with the Income Tax Department.
  3. Many banks and financial institutions demand Form 16 for verification of the person’s credentials while applying for loans.

Who issues Form 16?

Income Tax Law, mandates the employer who holds TAN no and deduct tax on salary of employee to issue Form 16. If your tax is not being deducted then your employer can refuse to issue Form 16 to you.

When Form 16 is to be issued?

It must be issued by 15th June of the year for which it is being issued. For example, for the F.Y. 2017-18, the due date for issue of Form 16 was 15th June, 2018. If any employer delays or fails to issue Form 16 by the specified date, then he is liable to pay a penalty of Rs.100 per day till the date the default continues.

Points to be noted while checking form 16

  • Once an individual receives the Form 16 from the employer, it is his/her responsibility to ensure that all the details mentioned therein are correct.
  • In addition to verifying the personal particulars and details of amount of income and TDS deducted, the most important thing one needs to confirm in Form 16 is the PAN number.
  • If it is mentioned inaccurately, one should immediately reach out to the HR /Payroll/ Finance Department of the organization and get the same corrected.
  • The employee will be issued a rectified and updated Form 16 by his/her employer. Besides this, the employer would also need to make a correction from their end by filing revised return of tax, to credit the TDS proceeds to the correct PAN.

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.

Is there any link between Form 16 and Form 26AS?

Form 26AS will combine all the tax deducted from your salary and/or non-salary income and deposited with the authorities concerned. Details of tax refund, if any, received during the financial year will also be available in this form. So, tax deductions that are shown in Form 16 / Form 16 A can be cross-checked and verified using Form 26AS. Ideally, the TDS amounts reflected in Form 26AS and Form 16/16A should always match. If there are discrepancies, the Income Tax Department considers the TDS figures as per the Form 26AS only.

Preserving Form 16

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. So, ensure that in the enthusiasm for festive cleaning of homes, the Form 16 is not thrown out along with other redundant things.

For more info visit TAXAJ
Posted by Ramesh Kumar Gupta

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