The ITR season is about to arrive, employers will issue Form 16. Seeing the form 16 for the first time? No worries, this article has got you covered.
What is Form 16?
Form 16 is a tax certificate provided by employers. The form documents the salary earned by the employee and the tax deducted (TDS) on that salary. The employer needs to issue this form to the employee on or before 15 June of the next financial year. It serves as proof of TDS deducted on the salary income and is crucial for filing an income tax return for salaried persons. If a person has switched jobs during the year, then each employer will issue a separate Form 16.
Form 16 has two parts: Part A and Part B
Part A contains details of TDS deducted and deposited, along with PAN and TAN of the employer and PAN of the employee.
Part B is an annexure prepared by the employer detailing the breakup of salary and approved deductions under Chapter VI-A of the Income Tax Act.
Part B of Form 16:
- Part B is an Annexure to Part A.
- It is prepared by the employer for their employees.
- This part contains details of the breakup of the salary.
- It also includes deductions approved under Chapter VI-A of the Income Tax Act.
- Similar to Part A, if you change jobs in one financial year, you should collect Form 16 (which includes Part B) from all your employers.
- Some of the detailed components mentioned for Part B include a detailed breakup of salary and a detailed breakup of exempted allowances under Section 10. It also lists various deductions allowed under Chapter VI-A of the Income Tax Act, such as those under Section 80C (for life insurance premium, PPF contribution, etc.), Section 80CCC (contribution to pension funds), Section 80CCD(1), Section 80CCD(1B), Section 80CCD(2) (employee's and employer's contribution to a pension scheme), Section 80D (health insurance premium), Section 80E (interest on loan for higher education), Section 80G (donations), and Section 80TTA (interest income on savings account). Part B also includes details like tax calculated, surcharge, education and health cess charged, and relief under section 89.
Form 16 Vs Income Tax Return
The common question is whether the Form 16 is equivalent to the Income Tax Return.
The answer here is no. Essentially, Form 16 is a document provided by your employer that shows the salary paid and the tax deducted from it, specifically for salary income The ITR is the actual filing process where you, the taxpayer, report all your income and claim deductions to determine your final tax payable or refund due. Form 16 is a vital document used by employees when filing their income tax returns, but it is not the return itself. One can use the details provided in Form 16 while filing their Income Tax Return.
FAQs
1. What if the employer deducts TDS but doesn't deposit it with the government?
If TDS is deducted from your salary but not deposited, the employer is at fault. However, the income tax department may still hold you responsible for unpaid taxes unless you can prove deduction via Form 16 or payslips. You can raise a grievance with the department and take legal action against the employer.
2. Can I correct mistakes in Form 16, like a wrong PAN or deduction figure?
No, you can't directly correct Form 16. You must request your employer revise and issue a corrected version. Accurate PAN and deduction details are crucial for proper credit of TDS in your account.
3. Are perquisites like stock options, company cars, or rent-free accommodation always included?
Yes, if taxable, these perquisites are included in your salary and reflected in Form 16. Their value is added to income as perquisites and taxed accordingly.
4. Can employers show incorrect or inflated deductions under Section 80C to reduce TDS liability?
No, employers are required to verify proof of investment declarations. Falsely inflating deductions can lead to penalties for both the employer and the employee. Ultimately, discrepancies will be flagged during ITR processing.
5. Is it safe to rely only on Form 16 when filing ITR?
Not entirely. You should also refer to your Form 26AS, AIS (Annual Information Statement), and actual investment documents to ensure all income and TDS details match and nothing is missed.
6. What is the difference between Form 16 and Form 16A, and when do you need both?
- Form 16: Issued by your employer for salary income and TDS deducted on it.
- Form 16A: Issued for TDS on non-salary payments like interest, professional fees, or rent.
You may need both if you have multiple income sources.
7. Can you use Form 16 to verify if you're eligible for a refund?
Yes, if the TDS deducted exceeds your final tax liability (based on total income and deductions), you are eligible for a refund, which you can claim while filing your ITR.
8. Does Form 16 include bonus payments?
Yes, any taxable bonus paid during the year is included in the salary section of Form 16 and taxed accordingly.
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