Unlocking the Secrets of Form 16: A Taxpayer’s Handbook

Published On - May 4, 2024

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What is Form 16

Form 16 is a crucial document issued under the Indian Income Tax Act, 1961. It is a certificate provided by employers to their employees, detailing the amount of tax deducted at source (TDS) from the salary and deposited with the government on behalf of the employee. In simpler terms, it serves as proof that tax has been deducted from an individual’s salary by their employer.

Form 16 Eligibility

Any salaried person whose tax has been deducted by the employer at the source is eligible to get Form 16. Imespective of the fact whether your income falls under the tax exemption limit or not, the employer must issue a Form to if they have deducted tax at source

When Will Form 16 Be Available For FY 2023-24?

The due date to issue Form 16 is 15th June 2024. If your employer deducted TDS from April ‘23 – March ’24, then Form 16 must be issued latest by 15th June ’24. If you lose your Form 16, you can request a duplicate from your employer.

Why it is important to know about Form 16

Importance for Employees:

  • Tax Filing:Form 16 is a crucial document for employees during the income tax filing process. It helps them accurately report their income and deductions while ensuring compliance with tax laws.
  • Verification:Employees can cross-verify the details provided in Form 16 with their salary slips and other financial records to ensure accuracy and identify any discrepancies.
  • Tax Planning:By analyzing the details in Form 16, employees can assess their tax liabilities and plan their investments and expenditures accordingly to optimize tax savings.

 Role of Employers:

  • Compliance: Employers are required by law to issue Form 16 to their employees annually before the specified deadline. Failure to do so can attract penalties and legal consequences.

Transparency: Issuing Form 16 demonstrates transparency and adherence to tax regulations by employers, fostering trust and accountability in the employer-employee relationship.

Breakdown of form 16
Form 16 has two parts – Part A and Part B.

Part A contains the following details:

  • Employer’s TAN or Tax Deduction and Collection Account Number
  • Employer’s and Employee’s Permanent Account Number (PAN) details
  • Addresses of employee and employer
  • Assessment year
  • Period of employment
  • Summary of the amount of TDS deducted from your salary every quarter
  • Summary of the TDS deposited with the government

 

Part B contains the following details:

 

Part B of Form 16 is an Annexure to Part A. Part B is to be prepared by the employer for its employees and contains details of the breakup of salary and deductions approved under Chapter VI-A.If you change your job in one financial year, you should take Form 16 from both employers. Some of the components of Part B notified newly are:

 

  • Your gross salary
  • Allowances exempt u/s 10
  • Tax on employment
  • Deductions u/s 80C, which include (the list is not comprehensive) details like Provident Fund (EPF/PPF) Housing Loan, National Saving Certificate, Life Insurance Plans, tax saving mutual funds (ELSS), and any other investments in tax saving schemes
  • Deductions under Other sections (80E, 80G, 80TTA), which include (not limited to) National Pension Scheme. medical claims. donations exempt u/s 80-G, and others
  • Tax on total income
  • Any cess levied (e.g. education cess, Swachh Bharat cess, levied by the government from time to time)
  • Any rebate on tax

Any surcharge

Points to be noted while checking Form 16

  • Once an individual receives Form 16 from the employer, it is their responsibility to ensure that all the details are correct.
  • One should verify the details mentioned in Form 16, for example, details of the amount of income, TDS deducted, etc.
  • If any of the detail is mentioned incorrectly, one should immediately reach out to the organisation’s HR/Payroll/Finance department and get the same corrected.The employer would then correct their end by filing a revised TDS return to credit the TDS amount against the correct PAN. Once the revised TDS return is processed, the employer will issue an updated Form 16 to their employee.

Conclusion
Form 16 is not just a piece of paper; it represents the financial integrity between an employee and their employer. Understanding its significance and contents can make the tax filing process smoother and error-free. Make sure to consult with your employer or financial advisor for any clarifications regarding Form 16.