Employers must provide a Salary TDS certificate each year by June 15th of the following year, which corresponds to the financial year in which the tax was deducted. Form 16 consists of two parts, Part A and Part B. If an individual misplaces Form 16, they can request a duplicate form from their employer.
What is Form-16?
Form 16 is a crucial tax document for salaried individuals, issued annually by their employers. According to Section 203 of the Income Tax Act 1961, it is mandated to be issued by June 15th of the subsequent financial year.
This TDS certificate primarily serves as evidence of tax deducted at source (TDS) from an employee's salary, enabling them to claim applicable tax-saving benefits when filing their income tax returns. It's important to note that the deducted tax is directly deposited with the government, along with the taxpayer's PAN card details.
Form 16 provides numerous advantages to taxpayers, serving as evidence that your employer or deductor has deposited the TDS amount with the Central Government, ensuring transparency and accountability. Besides these benefits, various other practical uses of Form 16 can work to your advantage.
Form 16 also serves as an 'income from salary' statement, which can be presented to various authorities or companies when required. Its versatile applications include:
Assisting in Filing Income Tax Return: Form 16 simplifies the process of filing your income tax return by providing essential income and TDS details.
Proof of Income: It acts as a legitimate proof of your income, which may be requested by different entities or for various purposes.
Tax Computation Reference: It documents how your tax liability was computed, allowing you to cross-check for any irregularities or discrepancies in your tax calculations.
Centralized Record of Tax-Saving Investments: Form 16 compiles information about your tax-saving investments, offering a comprehensive overview of your deductions.
Loan Assessment and Approval: Many lending institutions request Form 16 as part of the documentation for loan assessment and approval.
Visa Issuance: When applying for a visa, authorities may ask for proof of income, and Form 16 can serve this purpose.
Simplified Transition Between Jobs: In case of job changes, Form 16 assists your new employer in calculating your tax liabilities based on the deductions made by your previous employer.
Refund Claims: Since Form 16 pertains to tax credits, you can review it to identify any overpaid taxes. This enables you to claim refunds where applicable.
Tax & Process
Who Can Issue Form 16?
Form 16 can only be issued by the employer. It must be provided if taxes have been deducted from an employee's gross income, which constitutes their total salary, without any tax exemption.
The Income Tax Act, 1961 requires employers to furnish Form 16 to employees whose annual salaries exceed ₹2.5 lakh. This is because they may be liable to pay taxes.
However, there are situations where an employer may not withhold TDS:
The employee might not fall into the income tax bracket subject to taxation.
Even if the individual falls into a taxable income bracket, TDS may not apply due to certain eligible tax benefits.
For those wondering about the purpose of Form 16, it primarily serves as proof of income tax return submission to the government since it is issued by the employer.
While it is not obligatory to provide Form 16 to employees who don't fall within the taxable income bracket, many organizations voluntarily issue it for clarity.
Eligibility Criteria for Form 16
Form 16 is crucial for individuals whose salaries have undergone TDS deductions. While it's not obligatory for all employees in an organization, the following criteria help determine who receives Form 16 each year:
If your salary experiences tax deductions that your employer remits to the government, you are entitled to receive a TDS certificate.
If your income is not within the taxable bracket, but TDS is deducted by the employer, you should receive your Form 16 to understand the income tax refund you can claim.
You must receive your tax document by June 15th after the end of the financial year.
Form 16 is issued regardless of the company's size, so if you are not receiving it, you have the right to file a complaint against your employer.
Structure of Form 16
Part A of Form 16
Part A of Form 16 provides details about the Tax Deducted at Source (TDS), which has been deducted from the employee's salary and deposited with the government. Employers generate this part through the TRACES portal and must verify its contents before issuance. Part A typically includes:
Name and address of the employer.
TAN (Tax Deduction and Collection Account Number) and PAN (Permanent Account Number) of the employer.
PAN of the employee.
Summary of tax deducted and deposited quarterly, certified by the employer.
Part B of Form 16
Part B serves as an annexure to Part A and is prepared by the employer for its employees. It contains a detailed breakdown of salary components and deductions permitted under Chapter VI-A of the Income Tax Act. In situations where an employee changes jobs within the same financial year, Form 16 should be obtained from both employers. Some components of Part B include:
Detailed salary breakdown.
Detailed explanation of exempted allowances under Section 10.
Deductions are allowed under the Income Tax Act (under Chapter VI-A). These may include:
Deduction for life insurance premium paid, contribution to PPF, etc. under Section 80C.
Deduction for contributions to pension funds under Section 80CC.
Deduction for employee's contribution to a pension scheme under Section 80CCD(1).
Deduction for the taxpayer's self-contribution to a notified pension scheme under Section 80CCD(1B).
Deduction for employer's contribution to a pension scheme under Section 80CCD(2).
Deduction for health insurance premium paid under Section 80D.
Deduction for interest paid on loans for higher education under Section 80E.
Deduction for donations made under Section 80G.
Deduction for interest income on savings accounts under Section 80TTA.
Form 16 helps employees understand their tax liability, deductions, and the details of TDS, making it a crucial document for income tax return filing and financial planning.
Is it mandatory for employers to issue Form 16?
Yes, employers must issue Form 16 to their employees. It serves as a record of the tax deducted from the employee's salary and deposited with the Income Tax Department.
What is the importance of Form 16?
Form 16 is important because it acknowledges that the employer has deducted taxes from the employee's salary and deposited them with the Income Tax Department. It provides essential details for the employee to file their income tax returns.
What happens if the employer does not provide Form 16?
If the employer fails to provide Form 16 after deducting Tax Deducted at Source (TDS), they may be subject to a penalty. The minimum penalty for such non-compliance is Rs 100 for each day the default continues.
How can Form 16 be downloaded for salary?
Employers can download Form 16 from the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal before providing it to the employee.
Is Form 16 available online?
Yes, Form 16 can be downloaded from the Income Tax Department's online website. Typically, this document is issued by the employer for the current financial year and provides details of total earnings and applicable income taxes for that financial year.