Unlocking the intricacies of income tax compliance in India begins with understanding the document known as Form 16. This document is a crucial gateway to tax compliance and transparency for every salaried individual in the country.
Employers are the ones to provide Form 16 to salaried individuals in the country. It contains all the information employees require when filing their income tax returns with the Income Tax Department of India. Form 16 serves as proof of the TDS that the employer or organisation has deposited with the Income Tax department.
In this comprehensive blog, we embark on a journey to understanding Form 16, which encapsulates your earnings, deductions, and tax liabilities.
What is Form 16?
Form 16 is issued under Section 203 of the Income Tax Act 1961. It is a certificate of deduction of tax at source and issued on deduction of tax by the employer on behalf of the employees, which plays a vital role during the income tax return filing process. Form 16 is evidence of the TDS (Tax Deducted at Source) and other crucial information about your income for filing an Income Tax Return (ITR). It also enables you to accurately report your income and deductions and claim eligible tax refunds from the Income Tax Department. Every salaried employee whose salary is within the taxable bracket according to regulations released by the Indian Government’s Finance Ministry is eligible to receive Form 16. If an employee’s salary is not within the taxable bracket, they will not need TDS charged. In these cases, the company is not obligated to provide the employee with Form 16.
Why is Form 16 required?
Form 16 is an essential document for the following reasons:
- It proves that the government has received the TDS from your employer.
- It assists in filing your ITR with the Income Tax Department.
- It is a Proof of Salary
- Many banks and financial institutions demand Form 16 in order to verify an individual’s credentials while applying for loans.
When Will Form 16 Be Available For FY 2022-23?
The due date to issue Form 16 for FY 2022-23 is June 15, 2023. If an employer has deducted TDS from their employee’s salary from the financial year April 2022 to March 2023, then Form 16 must be issued by the employer on or before 15th June 2023. If an employee loses their Form 16, they can request a duplicate copy from their employer.
Components of Form 16
Form 16 has two components:
- Form 16 Part A: This section includes details of the employer and the employee, such as their names, addresses, and Permanent Account Number (PAN). It also contains information on the tax deducted and deposited with the government.
- Form 16 Part B: Form 16 provides a detailed summary of the employee’s salary, allowances, deductions, and net taxable income. It also includes information on other sources of income, if any, and tax computations.
What is Form 16A?
Form 16A contains details regarding the TDS deducted from an employee’s salary every quarter.
Details of Form 16A:
- Employee’s Name and Address
- Employer’s Name and Address
- Employee’s Permanent Account Number (PAN)
- Employer’s PAN
- Employer’s Tax Deduction Account Number (TAN)
- Assessment Year (the year an employee’s tax is calculated from the income you earned in the previous year)
What is Form 16B?
Form 16B is an annexure to Part A made by the employer with details like an employee’s salary breakdown, tax deductions allowed under Chapter IV-A, tax paid, tax dues, and other income, if any. If an employee changes their job in a financial year, they should take Form 16 from both employers.
The details of the Form 16B are to be prepared by the employer for its employees.
Details of Form 16 B:
- Employee’s Gross Salary Components:
- Basic salary
- House rent allowance
- Transport allowance
- Perquisites, etc.
- Deductions under Chapter VI-A:
- Exemptions u/ Section 80C (for investments in specified instruments like Provident Fund, Life Insurance Premium, etc.)
- Section 80CCD
- Section 80D (health insurance premium)
- Section 80E (interest on any education loan)
- Section 80G (for donations to specific funds)
- Total Income
- Cess and surcharge details
- Total tax payable and the amount of TDS deducted by the employer
- Tax Deducted and Deposited: Summary of the TDS deducted from the employee’s salary.
- Verification and Certification (a declaration by the employer certifying the accuracy and authenticity of the information provided in Part B of the form)
Essential Terms mentioned in Form 16
| Term | Details |
|---|---|
| Permanent Account Number (PAN) | A unique 10-digit alphanumeric code is allocated to every taxpayer |
| Tax Deduction and Collection Account Number (TAN) | It is allocated to every employer to facilitate tax payments to the government. |
| Tax Deduction at Source (TDS) | A summary of the tax deducted at source (TDS) from the employee’s salary and deposited with the government |
| Gross Salary | The total salary paid to the employee, including incentives, bonuses, and more |
| Allowances | Allowances given by the employer like HRA (House Rent Allowance), Medical allowance, Travel allowance, etc. |
| Deductions | All tax deductions claimed on taxable income under relevant Sections of the Income Tax Act, 1961 |
| Total Income | The final income or taxable income after all deductions that are subject to tax |
| Cess & Surcharge | A tax on tax levied by the government, which is paid towards various development programs of the nation |
Points to remember when receiving Form 16
Once an individual receives Form 16 from the employer, they must ensure all the details are correct. They should verify the details mentioned in Form 16, such as the amount of income, TDS deducted, etc. If any of the details are mentioned incorrectly, they should immediately contact the organization’s HR/Payroll/Finance department and get the same corrected. The employer will file an updated TDS return to credit the TDS amount against the proper PAN to make corrections. Once the updated TDS return is processed, the employer will issue an updated Form 16 to their employee.
Difference Between Form 16, Form 16A, and Form 16B
| Form 16 | Form 16A | Form 16B |
|---|---|---|
| An employer who deducts the Employee’s TDS issues it. | The financial institution that deducts the TDS issues it. | The respective buyer issues it to the seller for deducting TDS on the sale of any immovable property. |
| It is issued for TDS deducted from the salary. | It is issued for TDS deducted on other incomes except for salary. | It is issued for TDS for the sale of any immovable property. |
| It applies to salaried individuals only. | It applies to the incomes earned from interest, commission, dividends, etc. | This form applies to the income earned by property selling, except for agricultural land. |
| This form is issued annually. | This form is issued quarterly. | This form is issued per transaction on a property. |
| Applicable to Employees in the taxable bracket as per the chosen old or new tax regime. | Applicable to individuals having income above the mentioned threshold level. | Applicable on transactions exceeding Rs. 50 lakhs. |
How to Download Form 16 Online?
The steps to Form 16 download from the Income Tax Department are as follows:
From the e-filing portal of the Income Tax Department
- Visit the Income Tax Department Website
- Go to the “Forms/Downloads” section
- Click the “Income Tax Forms” tab
- Choose the “Form 16” option from the “Frequently Used Forms” section
- Select the financial year for which you want to download Form 16.
- Select from the appropriate format option “PDF” or “Fillable Form” available under Form 16
- The form will be downloadable on the next window.
From the TRACES (Tax Deduction and Collection Account Number System) portal
- Go to the TRACES website
- Click the ‘Login’ button.
- Enter your PAN number and password.
- Click on the ‘Downloads’ tab.
- Select the ‘Form 16’ option.
- Select the financial year for which you want to download Form 16.
- Click on the ‘Download’ button.
Conclusion
Form 16 is a crucial document in the financial landscape of India, serving as a comprehensive record of an individual’s income and tax deductions. It is needed to file your Income Tax Returns (ITR) with the Income Tax Department.
Frequently Asked Questions about Form 16
What is Form 16 issued for?
Form 16 is a certificate issued by employers to their employees in India. It is proof of tax deducted at source (TDS) on the employee's salary. The form contains details of the employee's salary, allowances, deductions, and the amount of TDS deducted.
How do I file my return if I do not have Form 16?
If you do not have Form 16, you can still file your income tax return (ITR) using your payslips or Form 26AS.
What is the Form 16 issue date?
All employers, if they deduct TDS, must issue Form 16 by 15th June of the following year, immediately after the financial year in which the tax is deducted.
Can I recover my Form 16 from a tax website if I missed taking a copy from my previous employer?
No, Form 16 can only be given by the employer.
If no Form 16 has been issued to me, does it mean I don't have to pay tax or file a return?
Not having a Form 16 does not mean you do not have to pay tax or file a return.
Can Form 16 be generated without PAN?
No, Form 16 cannot be generated without a PAN. The PAN is a mandatory field in Form 16, and it is used to identify the employee and track their tax deductions. If employees do not have a PAN, they must apply for one before their employer can issue Form 16.
How do you download Form 16 for Previous Years?
Form 16 for previous years can be downloaded from the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal of the Income Tax Department.
Who issues Form 16 for pensioners?
The bank through which a pensioner receives their pension issues Form 16 for them.
