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A Complete Overview of Form 16

What is Form 16?

It is a certificate issued by the employer to his employees providing the information of the tax deduction. It is an acknowledgement form stating that your deducted tax has been deposited with the income tax department. This Form is issued in accordance with provisions of the Income Tax Act, 1961. It is an important form which contains the details of the amount of tax deducted at source (TDS) on salary by the employer. This form also includes the salary breakup of the employee for the financial year. In simple terms, Form 16 is a certificate of proof of the TDS deducted and deposited by the employer.

Importance of Form 16

• Form 16 serves as proof to the fact that tax deducted by the employer has been deposited with the bank.
• This form helps in the process of filing Income Tax Returns to the Income Tax Department.
• It also serves as a verification document in many banks and financial institutions while applying for loans.

Who issues Form 16

This Form is issued by the employer who holds TAN no and deducts tax on the salary of the employees. Employers must issue it every year on or before 15 June of the next year, immediately after the financial year in which tax is deducted. If your income is below the basic exemption limit, the employer will not deduct any TDS and not issue the Form 16.

Form 16 has two components Part A and Part B.

FORM 16A

Form 16A is applicable for TDS on Income other than salary. It shows quarter-wise details of your tax deposited with the Income Tax Department. An employer can generate a part of Form 16A through the TRACES portal.

Following are the components of Form 16A :

• Name and address of the employer
• PAN and TAN of the employer
• Name and address of the employee
• PAN of the employee
• Statement of taxes paid by the employer

Form 16B

This Form contains a detailed breakdown of the salary income. It is issued for tax deducted at source for any income gained by the sale of immovable property. This part shows the detailed calculation of income, based on which the employer is deducting tax. It includes the salary breakup of the employee, various deductions, and tax computation after considering all the items based on current tax slab rates.

Following are the components of Form 16B :

• Form 16B requires a detailed breakup of the salary as per provisions of section 17 (1)
• It also requires a detailed breakup of exempted allowances under Section 10. However, there are certain deductions allowed under the income tax act.

Deductions allowed in Form 16B:

•  Life insurance premium paid, contribution to PPF etc., under Section 80 C
• The contribution made to pension funds under section 80CCC
• Employee’s contribution to the pension scheme under section 80CCD(1)
• Employer’s  contribution to the pension scheme under section 80CCD(2)
• Health insurance premium paid under section 80 D
• Interest paid on loan is taken for higher education under section 80 E
• Donations made under section 80 G
• Interest income on savings account under section 80TTA

List of allowances provided in Form 16B under section 10 :

• Travel concession under section 10(5)
• Death-cum- retirement gratuity under section 10(10)
• Commuted value of pension under section 10(10A)
• Cash equivalent of leave salary encashment under section 10 (10AA)
• House rent allowance under section 10(13A)
• Amount of any other exemption under section 10

Difference between Form 16, Form16A and Form16B

Benefits of Form 16

• It helps in filing Income Tax Return.
• It serves as a proof of income
• This Form is like one place document to check all your tax-saving investments
• You can check for any overpaid taxes, and claim for refund in case of discrepancies
• This form also benefits in Loan assessment and approval
• This form helps in Visa issuance as well
• In a case you switch your job, it becomes easier for the next employer to compute your tax liabilities based on deductions made by the previous employer.

How to file Income Tax Returns with Form 16

Form 16 is one of the most important documents needed when you file your income Tax Return. It is mandatory for taxpayers with an income of Rs 5 lakhs per year to file your returns online on www.incometaxindiaefiling.gov.in. While filing returns, the Chartered Accountant’s help can be taken. Taxpayers can also avail the help of paid third party online services which have simplified forms.

Conclusion

Form 16 is very crucial for employees. It contains essential information such as the name of the employee, PAN details, salary details etc. Every employer must provide Form 16 to its employees, as long as their income is subject to tax. This form provides complete information of the tax deductions and exemptions claimed by the employee to the Income Tax Department.

Form 16, Form16A & Form16B – Steps to Download

The process of downloading Form 16, 16A, & 16B is an online process. To download Form 16 from the official website of the Income-Tax Department of India, users needs to follow these simple steps:

Step 1: Go to website https://www.incometaxindia.gov.in/

Step 2: Go to Pages > Tax Services

Step 3: There will be an option > Form 16A Download by The Deductor.

On the page, there will be a link to the main download form. It will redirect the user to the web page > https://www.tdscpc.gov.in/app/login.xhtml

Fill the required details and download the Form 16, Form16A & Form16B

Download Form 16 in PDF Format

Form-16A