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

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Uses and benefits of Form 16 for Income Tax

Overview

Form 16 is a certificate issued by the employer to the employee. It is basically issued annually for salaried personals. It is utilized in filing Income Tax Return by the employee, as it is a document comprising of the income details and tax paid by the employee. Being issued by the employer, Form 16 comprises of the details of a salaried personal only, whereas the income details and TDS deduction details for an unsalaried personal are shown in Form 16A. It is often presumed that anyone can download Form 16 with PAN number from TRACES website, but only your employer can download your Form 16 and you can get it from him/her only. Further, to file your Income Tax Return timely you should get your Form 16 before 31st May of that financial year.

Definition of Form 16

Under section 203 of Income Tax Act, the employer of an employee is liable to issue a certificate for deducting TDS from the employee’s salary. This certificate is called Form 16 or sometimes Salary Certificate. It comprises the detail information of the salary paid and the tax deducted from the employee’s salary. It should be issued by the employer to ever employee, even if his/her income does not falls under the tax slab of that financial year.

Uses of Form 16

Being a document comprising of income details of an employee, Form 16 is used for the following proposes

  • To file Returns, as it contains all the information regarding the tax deduction.
  • To verify the TDS deducted by the employer and the actual TDS collected by the government, by verifying the details with Form 26AS.
  • It can also be used as an income proof while taking a loan from banks and other financial institutions.

Importance of Form 16

Form 16 is required to file both income tax return by the employee as well as TDS refund by the employer on behalf of the employee. It can also be used as income verification certificate for various purposes.

Components of Form 16

Form 16 comprises the following components

  • Employee personal details personal details such as name, PAN number, etc.
  • Employer details The employer’s details such as name, TAN, PAN, etc.
  • Acknowledgment number a verification number of the taxes paid by the employer
  • Employee’s Salary details net salary, gross salary, perks, deductions, etc.
  • Total income with tax deducted
  • Surcharge and Education Cess details
  • Tax deducted under section 191A
  • The employer’s tax payment declaration
  • Details of Refund (if an employee have any) and amount of tax payable (if an employee have to pay)
  • TDS paid receipt
  • Tax Payment details such as Cheque number, Challan number, Demand Draft number, etc.

Understanding the various components of form 16 will help an employee to file his/her Income Tax Returns accurately.

SECTIONS OF FORM 16

Form 16 comprises of two parts - Part A and Part B

Part A of Form 16 comprises of all the personal details of both employer and employee. It contains the address details and Permanent Account Number (PAN) of both the employer and employee. It also contains the Tax Deduction and Collection Account Number (TAN) of the employer and the TDS filled and paid to the government by him/her. It also comprises of the monthly statement of both employer and employee.

On the other hand, Part B includes consolidated details of an employee such as salary paid, other income, tax paid and tax due. This part also includes the deductions under section 192(1A)

An elaborated components of Part A and Part B of Form 16 is given below in the table

Part A Part B
Name, address and PAN number of the employee Salary details such as House rent allowance, leave encashment, leave travel allowance, pension, gratuity and deduction claims – namely tax saving FD, PPF, National saving certificate, etc
Name, address, TAN and PAN number of the employer Total income of the employee and the tax on the salary
Assessment year of the TDS deducted Details of Surcharge and Education Cess (If any)
Salary summary, TDS deducted and sent to government Tax deducted u/s 192(1A)
Acknowledgment number of the deposited TDS. Tax payable or refundable amount

Online verification of form 16

An individual can verify his / her Form 16 online on TDS Centralised Processing Cell website.

Click ‘Tax Payer’ and select ‘Verify TDS Certificate’ and furnish the details such as

  • TAN number of the Deductor
  • PAN number of the payer
  • TDS certificate number
  • Deducted TDS amount
  • Select the financial year
  • Select income source

Click ‘Validate’ and verify your Form 16.

Difference between Form 16 and Form 16A

The difference between Form 16 and Form 16A are given below

Form 16 Form 16 A
Form 16 is issued by the employer after deducting TDS on salary Form 16A is issued by the bank after deducting TDS on the income earned from interest.
It is a TDS certificate for salary It is also a TDS certificate, which is applicable for TDS on income other than salary.
Only TDS deducted by the employer is included in form 16 as wll as 26AS. Details which are in form 16A are available on Form 26AS.

The difference between Form 16 and Form 26AS.

The difference between Form 16 and Form 26AS are given below

Form 16 Form 26AS
Form 16 is a TDS salary certificate issued by the employer. It certifies that TDS has been deducted from the salary of an employee. Form 26AS contains the details about the tax deducted and deposited to the Government.
Form 16 can only be downloaded by the deductor. Form 26AS can be downloaded online by anyone.
Form 16 is a salary TDS certificate. Form 26AS is a Tax Credit Statement.

Income Tax and its Tax Slab

Income tax is a tax which is levied by the government on the financial income of individuals within their jurisdiction. Every year all individuals must file Income Tax Return to know whether they have any tax liability or they are eligible for any tax refund. And in return of the taxes that the citizens paid, the Government uses the funds to serve public and to improve infrastructure.

There are various rates under which taxes are paid or TDS are deducted from an individual depending on the source of income.

The various tax rate are given below

Income tax slab rates for individual and HUF’S (Below 60 years) for the Financial Year 2017-18

Income Slab Tax Rate
Income up to Rs. 2,50,000 No tax
2,50,000- 5,00,000 5%
5,00,000- 10,00,000 20%
Above 10,00,000 30%

Surcharge

  • 10% of Income Tax whose total income is above Rs. 50 lakh and below Rupees One Crore.
  • 15% of Income Tax whose total income exceeds Rupees One Crore.
Cess 3% of total income tax and surcharge calculated.

Income tax slab rate for senior citizens ( above 60 and less than 80) for the financial year 2017-18

Income Slab Tax Rate
Income up to Rs. 300000 No tax
3,00,000- 5,00,000 5%
5,00,000- 10,00,000 20%
Above 10,00,000 30%

Surcharge

  • 10% of Income Tax whose total income is above 50 lakh and below Rs.1crore.
  • 15% of Income Tax whose total income exceeds Rupees One Crore.
Cess 3% of total income tax and surcharge calculated.

Income tax slab rate for super senior citizens (above 80 years) For the financial year 2017- 18

Income Slab Tax Rate
Income up to Rs. 5,00,000 No tax
5,00,000- 10,00,000 20%
Above 10,00,000 30%

Surcharge

  • 15% of Income Tax whose total income exceeds Rupees One Crore.
Cess 3% of total income tax and surcharge calculated

Income tax slab rate for individuals and HUF’s (below age 60) for the financial year 2016-17

Income Slab Tax Rate
Income up to Rs. 2,50,000 No tax
2,50,000- 5,00,000 10%
5,00,000- 10,00,000 20%
Above 10,00,000 30%

Surcharge

  • 15% of Income Tax whose total income exceeds Rupees One Crore.
Cess 3% of total income tax and surcharge calculated

Income tax slab rate for senior citizens (both men and women, above 60 and less than 80) for the financial year 2016-17

Income Slab Tax Rate
Income up to Rs. 300000 No tax
3,00,000- 5,00,000 10%
5,00,000- 10,00,000 20%
Above 10,00,000 30%

Surcharge

  • 15% of Income Tax whose total income exceeds Rupees One Crore.
Cess 3% of total income tax and surcharge calculated

Income tax slab rate for senior citizens (both men and women above 80 years and more ) For the financial year 2016-17

Income Slab Tax Rate
Income up to Rs. 2,50,000 No tax
Income up to Rs. 5,00,000 No tax
5,00,000- 10,00,000 20%
Above 10,00,000 30%

Surcharge

  • 15% of Income Tax whose total income exceeds Rupees One Crore.
Cess 3% of total income tax and surcharge calculated

Form 16 for individuals who switched job

If an employee has switched to a new job during the same financial year, then he is required to collect Form 16 from both the employers i.e. new employer as well as previous employer as employee would be filing Income Tax Return for that financial year on the basis of the two Form 16s provided by his/her employers. Employees are required to submit Form 12B as per rule, if they are joining the new organization between the years to the new employer.

This form furnishes the details like

  • Permanent Account number (PAN) and Tax Deduction and Collection Account Number (TAN) of the previous employer.
  • Salary structure or salary slips from the previous organization.
  • Deductions under section 80C, 80G, 80E, 80D.
  • TDS deducted on salary
  • Any professional tax paid by the employee.

Providing the TDS details to the new employer issued by the previous employer will help the new employer to deduct tax accordingly. However, providing these details to the new employer is not mandatory. If you do not provide these details to the new employer then you can compute yourself the total income from both the employers and can calculate the tax liability accordingly.

Procedure to fill form 16

Part- A

  • First, fill the employer name and address.
  • Now fill the employee name and his designation.
  • Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) of the employer.
  • Permanent Account number (PAN) of the employee.
  • Fill the financial year for which you are filing details.
  • Mention the summary of the quarters.

Part- B

  • Fill your gross salary i.e. the salary without any deductions.
  • Allowances which are received from a company like House Rent allowance, travel allowance, entertainment allowance etc.
  • The total income chargeable.
  • Calculate gross total income on which tax will be calculated.

Conclusion

To conclude Form 16 is a certificate provided by the employer explaining the income and TDS deducted details of an employee.

Some bullet points, an individual should keep in mind for Form 16 are as follows

  • It is divided into 2 parts i.e. Part A and Part B.
  • You can verify Form 16 online.
  • This form is not required to attached with ITR Form.
  • Deductions claimed under section 80C, 80G, 80E, 80D should be furnished otherwise the TDS deducted will be higher.
  • If any professional tax is paid by the employee then that would be reflected in Form 16.

Frequently Asked Questions

Q. From where can I get my previous year Form 16?

There are two ways from which an employee can get Form 16 for the previous year, they are

  • From the previous employer with whom you have worked during the year.
  • Download form 26AS online from the government site, which furnishes all the details about TDS, TAN, and Salary.
Q. What shall I do in case my employer do not provide Form 16?
It is the right of an employee to get Form 16 from the employer and the individual can also demand his or her Form 16 from the employer. Otherwise, the employee can download Form 26AS online from the government site which contains the details of tax deducted and tax deposited to the government.
Q. Is Form 16 readily available online?
No, the employee can get Form 16, only from his employer. No one can download his or her form 16 online.
Q. Why is form 16 required?
It is a complete record of income earned and taxes paid by an employee that is required for e-filing purposes. It is accepted as an income proof in taking home loan from a bank. Form 16 can be used to verify whether correct taxes are deposited to the government by comparing the amount with the Form 26AS.

In the News

  • Here’s a convenient way to file your income tax returns right from your smartphone

    BGR: If you are a harried individual or business owner rushing to file your tax returns with just a few days left before the due date, then All India ITR’s new mobile app is just the answer you’ve been praying for. From filing returns using Form 16, checking refund status, processing rent receipts or calculating various tax heads, this app is packed with features yet surprisingly easy to use. You can even purchase specifically tailored plans that let your filing be performed by professionals at very affordable rates.

    20th June 2017

    BGR

  • All India ITR offers free income tax filing assistance for personnel of armed forces

    The Economic Times Wealth: Vikas Dahiya, founder and chief of tax compliance platform, All India ITR announced a free of cost tax returns solution for members of the Indian Armed Forces. Due to their disciplined schedules, annual tax returns become a hectic chore for servicemen. They need to repaid for their services to millions of citizens and this initiative will go a long way to alleviate the stresses in their service conditions.

    18th July 2017

    THE ECONOMIC TIMES