Form 16 is a certificate issued by an employer to its employees, explaining the income that was earned by the employee during a financial year (typically from April 1st to March 31st), and the taxes deducted at source (TDS) by the employer on behalf of the government. In basic terms, it is a document that offers information on the salary one has earned and the taxes that have been deducted from it.
Content of Form 16
Form 16 consists of two main parts, i.e. Part A and Part B. These parts contain specific information about the employee’s income, taxes deducted, and other relevant details.
A. Part A of Form 16
Part A of Form 16 contains information on TDS deducted and deposited quarterly, as well as the employer’s PAN and TAN. Employers can generate and download this section of Form 16 using the TRACES ( https://www.tdscpc.gov.in/app/login.xhtml ) interface.
Part A of Form 16 consists of:
- Name and Address: The name and address of the employer and the employee are mentioned.
- Permanent Account Number (PAN): Both the employer’s and employee’s PAN are provided.
- Tax Deduction and Collection Account Number (TAN): The employer’s TAN, which is used for TDS filing, is mentioned.
- Period: The financial year for which the Form 16 is issued (e.g., April 1st to March 31st).
- Summary of Salary: This section includes details of the gross salary, which comprises basic salary, dearness allowance (if applicable), and any other allowances. It also shows any exempt allowances, if applicable.
- Tax Deducted: The total amount of tax deducted at source (TDS) by the employer is specified in this section.
B. Part B of Form 16
Part B of Form 16 serves as an attachment to Part A. The employer is responsible for preparing Part B for its employees, which comprises the breakdown of salary and deductions authorized under Chapter VI-A. If you change jobs within the same fiscal year, you must collect Form 16 from both employers.
Part B of Form 16 includes the following :
- Detailed Breakup of Salary: Part B gives a detailed breakdown of the different parts of the salary, such as allowances, perks (if any), and deductions.
- Allowances: Various allowances are listed, along with their exempt and taxable portions, such as house rent allowance (HRA), leave travel allowance (LTA), medical allowances, and so on.
- Deductions: This section includes details of deductions claimed by the employee, such as contributions to the Provident Fund (PF), professional tax and other deductions allowed under the Income Tax Act.
- Other Income: If the employee has any other sources of income apart from the salary, it is mentioned here.
- Total Income: The total taxable income, after considering exemptions and deductions, is calculated in this section.
- Tax Calculation: The income tax payable by the employee is computed based on the total income and applicable tax rates. Any tax already deducted (TDS) by the employer is subtracted from the calculated tax.
- Relief under Section 89: If there is any relief claimed under Section 89 of the Income Tax Act (pertaining to arrears or deferred salary), it is mentioned here.
- TDS Details: The breakup of TDS on salary, along with the TDS certificate number, is provided.
How to download Form 16?
It is not possible for individuals to independently download Form 16. It is advisable to formally request the employer to furnish the Tax Deducted at Source (TDS) certificate, as it is expected that they have deducted the appropriate amount of TDS from your salary and subsequently submitted a TDS Return. The individual has the option to retrieve the document from TRACES at the conclusion of the fiscal year.
Points to be noted while checking Form 16
The following factors should be considered when reviewing Form 16:
1. Personal Information: It is important to ensure the accuracy of your personal facts, such as your name, PAN (Permanent Account Number), and employee code, as stated on the form. It is also important to ensure the accuracy of the financial year for which the issuance of Form 16 takes place. The designated time frame for inclusion in the evaluation year should span from April 1 to March 31.
2. Employer Information: It is imperative to accurately include the employer’s name, address, and TAN (Tax Deduction and Collection Account Number).
3. Salary Details: Verify the accuracy of all elements comprising your salary, including the basic salary, allowances, bonuses, incentives, and other relevant components. It is advisable to cross-check these numerical values with the information provided in the pay slips and employment contract. Please ensure that the calculation of your total taxable income is accurately verified. This comprises all elements of salary and any supplementary earnings, if relevant. You should also ensure that you have properly accounted for all the exemptions and deductions for which you qualify, such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), standard deduction, 80C deductions, and so on.
4. Tax Deducted at Source (TDS): The verification of pertinent TDS information, encompassing the precise amount of tax that has been deducted by one’s employer and subsequently sent to the government is also necessary. Ensure that it matches the figures mentioned in your pay slips and Form 26AS (tax credit statement).
5. Prerequisites: It is crucial to accurately document and assess any prerequisites, which include non-monetary advantages such as lodging, transportation, and other related perks. Section B of Form 16 includes a comprehensive overview of the individual’s income, exemptions, deductions, and taxes paid. It is very important to ensure the accuracy and consistency of the information provided in this part, aligning it with your financial records.
In compliance with the requirements of digital authentication, it is essential that Form 16 be affixed with a digital signature by the employer. It is necessary to verify the presence of a digital signature in order to ascertain the integrity and authenticity of the document.
The acknowledgement of the TDS return is included in certain Form 16s, indicating the inclusion of an acknowledgement number relating to the TDS return that has been filed by the employer. The inclusion of an extra layer of authenticity enhances the credibility of the document.
6. Additional Income: It is essential to disclose any extra earnings and ensure their accurate inclusion in the overall income calculation.
It is advisable to seek the assistance of a tax professional or financial counsellor if one encounters difficulties or complexities in understanding Form 16. The inclusion of Form 16 is essential when submitting one’s income tax return. It is essential to ensure the accurate use of the necessary details provided in Form 16 during the process of tax filing.