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Faster, easier and secure gateway to e-file income tax return

The Structure and Components of Form 16 in India

Form 16 is an Income Tax form issued under section 203 of the IT Act for Tax Deducted at Source from an employee’s salary. Form 16 contains a detailed record of every tax deducted by the employer, from the salary of the employee. As Form 16 contains a full detail of the salary paid by the employer, its structure and the tax deducted from the employee’s salary, this is the reason why it is also known as a Salary Certificate.

An employer must issue Form 16 to the employees even if there are no tax deduction from the employee’s salary as it bears all the necessary details which assist an employee in filing his / her tax returns. In India, the law for filing of Income Tax is based on The Income Tax Act of 1961 and the Income Tax rules of 1962. Form 16 is issued to verify that the employee’s Income Tax has been filed which is the reason why every employer should issue this form to employees who fall under the segment of Finance Ministry of the Government of India.

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Understanding Form 16

When a salaried individual realizes the contents of Form 16 then Income Tax Returns filing become more understandable. With a thorough knowledge of the form, an employee will be able to even file the Income Tax Returns on his / her own. Understanding Form 16 is also very important if an individual’s only source of income is from the monthly salary.

Form 16 has two section, Part A and Part B.

Part A of Form 16 consists of the following:

  • The employee’s name.
  • Address of residence of the employee.
  • The employer’s name and address.
  • Permanent Account Number (PAN) of both the employer and the employee.
  • Tax Deduction Account Number (TAN) of the employer.
  • Details of the Assessment Year (the year when the tax liability is calculated upon the income earned the previous year). Example; the Assessment Years for income earned between 1 April 2015 and 31 March 2016, will be 2016-17.
  • Details of the employee’s date of joining the company.
  • A summary of the Tax Deducted at Source (TDS) which is paid on behalf of the employee by the employer.

Part B comprises of numerous details that are needed while filing Income Tax Returns.

Part B of Form 16 consists of the following:

  • The amount of salary.
  • The amount of any other income which may be taxable.
  • Details of tax deductions.
  • Details of Gross Income
  • Any deductions made under sections 80C, 80CCC and 80CCD (always note that the aggregate amount deductible under these three sections should never exceed Rupees 1 lac).
  • Any deductions under section 80D (health insurance premium), 80E (interest on education loan), 80G (charity donation) etc.

These details are very helpful in assisting the Income Tax Department to maintain a track of the money flow of the employee and the employer.

Steps to fill Form 16

Part A of Form 16 should be filled with the following details:

  • Fill in the name and address of the employer.
  • Name and designation of the employee as recorded in the company.
  • Permanent Account Number of the employer.
  • Tax deduction and account number where the deducted amount is saved.
  • The employee’s Permanent Account Number.
  • In the CIT (TDS) section enter the office details of Income Tax Commissioner.
  • Enter the Assessment Year and Period.
  • Mention the taxes deducted in every quarter.

Part B of Form 16 should be filled with the following details:

  • Enter the Gross salary (the total salary before any deductions added with prerequisites)
  • Mention the allowance paid by the employer (travel allowances, house rent allowances etc.)
  • Mention the total income of the salary and the payable tax amount.

Who should file for Form 16?

If a salaried individual’s annual taxable income is more than Rupees 2 lakhs, then he / she must file for Income Tax Returns. However, if one’s annual salary exceeds Rupees 5 lakhs, then it becomes mandatory for him / her to file Income Tax Returns.

When does the requirement for Form 16 arise?

Form 16 is required after an individual files his / her Income Tax Returns and after the employer also files for the Taxes Deducted at Source (TDS) on behalf of the employee. Many institutions like banks and financers use this document during verification process if an individual applies for a home loan, car loan, personal loan etc.

Advantages of Form 16

The many advantages of Form 16 are as follows:

  • Form 16 contains every detail about the amount of TDS which has been debited from an employee’s salary.
  • It can be used as proof of income and a proof of tax payments made by the employee.
  • While applying for a loan, Form 16 can be used as proof of one’s income or proof of tax payments.

Verification of Form 16 Online

The online verification process of Form 16 is quick and easy. For completing the process one must fulfill the following steps:

  • Go to the official website of TDS Centralised Processing Cell.
  • The taxpayer must then click on ‘Tax Payer’ and select ‘Verify TDS Certificate’.
  • Enter the Deductor’s TAN.
  • Taxpayer’s Permanent Account Number.
  • TDS Certificate Number.
  • TDS Amount Deducted as per Certificate.
  • Select the ‘Financial Year’ and ‘Source of Income’ from the drop-down menus.
  • Then click ‘Validate’.

Frequently Asked Questions

Q. What are the ways to obtain Form 16?
Form 16 is usually issued by an employer and it is applicable for the present financial where the total earnings and taxes deducted for that financial year is reflected.
Q. How can one gain access of Form 16 for the Previous Years?
If a taxpayer requires Form 16 from any of the previous years, he / she can request for it to be issued, from the employer.
Q. Is it mandatory for an employer to issue Form 16?
As per the provision of Income Tax Act, it is mandatory for an employer to issue Form 16 to the employee if any TDS has been debited from the salary of the employee.
Q. Why is Form 16 required?
Form 16 is required because of its beneficial function in Income Tax filing process. Form 16 contains a complete record of the salary income earned and the taxes paid on it.
Q. What are the other benefits of Form 16?
Form 16 can be used as a proof certificate to verify whether the taxpayer has paid the correct tax amount. It allows the government to check if a taxpayer is truthfully making contributions towards his / her tax liabilities.
Q. What is a Digitally Signed Form 16?
Form 16 is issued by the employer either in hard copy or soft copy. To speed up the filing process, the government has introduced Digitally Signed Form 16 which can be downloaded and used while e-filing for Income Tax Returns.
Q. Generally when does an employee receive Form 16?
The employers usually issue Form 16 by the 31st of May, each year. However, the date may vary from one company to another.
Q. What can be done if the employer does not issue Form 16?
When an employer fails to issue Form 16 then the taxpayer can refer to his / her Form 26AS online. Form 26AS will contain every detail of taxes which have been debited from the taxpayer’s account and credited to the government’s account.
Q. State the difference between Form 16 and Form 16A.
Although Form 16 and Form 16A are both TDS Certificates, the differences lie their applicability. Form 16 is used only while TDS has been debited from the salary, while Form 16A can be used for TDS on any Income taxation and not just the salary deduction. After the deduction of TDS, Form 16 gets issued by the employer but, Form 16A is issued by the bank after it has deducted TDS on the income earned from interest.