New Form 16: Important changes in Form 16 you must know


The Form 16 format has been revised by the Central Board of Direct Taxes (CBDT) and is applicable from 12th of May. The format specified in the notification comes is effective from May 12, 2019, which is well before the last date for issue of Form 16 for salary by employers. Therefore, those issuing Form 16 after the effective date will have to make sure they use the new format.

WHAT IS FORM 16 AND WHY IS IT IMPORTANT:

Form 16 is a certificate from the employer that has details of salary paid to an employee and tax deducted at source (TDS) from his or her salary for the financial year. It has to be issued by the Employer to the Employee under Section 203 of the Income-tax Act, 1961. It has two sections—part A and B.

PART A:

It consists of the employee's personal details like address and name, the employer's name and address, the PAN (Permanent Account Numbers) of both and the employer's Tax Deduction Account Number (TAN). Part A also contains details of the time of employment with your current employer and details of TDS (tax deducted at source) on your income.

  • TDS Deducted by Employer
  • TAN of Employer
  • PAN of Employer
  • Name and Address of Employer
  • Current Assessment Year
  • Taxpayer's Name and Address
  • Employee's PAN

PART B:

Part B of the form has all details of income earned during the time of employment with the employer, total deductions and taxable income. It also contains fine points of the tax refundable or tax payable.

Form 16 is one of the most important documents as it forms the basis for Income Tax return (ITR) filing. If you hire a Chartered accountant online for Income Tax filing the first thing he or she would ask for is your form 16.

In order to file ITR meticulously, it is essential for taxpayers to be aware of all the changes in the Form. If you know about all the changes, you will be in a position to verify whether Form 16 issued to you by your employer is correct and if not, you can ask your employer to correct it as per the revised guidelines.

LET WIZCOUNSEL WALK YOU THROUGH THE RESPECTIVE CHANGES MADE IN FORM 16:

The current form 16 part B lists only the total amount of Salary and the Deductions. The new format would list details of:

1. Detailed breakup of salary

2. Detailed breakup of exempted allowances under section 10:

A. Leave travel concession exempt under section 10(5)
B. Death cum retirement gratuity exempt under section 10(10)
C. Commuted value of pension under section 10(10A)
D. Leave encashment under section 10(10AA)
E. House rent allowance under section 10(13A)

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3. Deductions allowed under the income tax act (under chapter VIA):

Specific fields are notified for deductions mentioned below:

  • Under Section 80C - Deduction for life insurance premium paid, contribution to PPF, etc.
  • Under Section 80 CCC - Deduction for contributions to pension funds
  • Under Section 80CCD (1) - Deduction for employee's contribution to the pension
  • Under Section 80CCD(1B) - Deduction for taxpayer's self contribution to the notified pension scheme
  • Under Section 80CCD (2) - Deduction for employer's contribution to the pension scheme
  • Under Section 80D - Deduction for health insurance premium paid
  • Under Section 80E - Deduction for interest paid on loan taken for higher education
  • Under Section 80G - Deduction for donations made
  • Under Section 80TTA - Deduction for interest income on savings account

4. Any other section of Chapter VI-A must be mentioned quoting the respective section.

5. Relief under section 89

6. Details of Rebate and Surcharge, if applicable must be reported in the latest format. Further Educations Cess has been replaced by Health and education cess.

7. TDS Return: A similar break up of Exemptions under section 10 and Deductions under Chapter VI-A is also added in Form 24Q i.e. the TDS return to be filed by the employer. Thus Form 24Q has been brought in line with Form 16.

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Ranu Gupta 
on 26 April 2019
Published in Income Tax
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