What Is Form 16?
It is that time of the year!
Tax season is approaching, and the thought of getting your finances together might seem overwhelming.
This blog will discuss a form that smoothens your tax journey. It helps you calculate your tax liabilities and tax already paid at source by giving you a detailed breakdown. Yes, we are talking about Form 16!
Let us understand Form 16 of Income Tax in more detail.
What Is Form 16?
Form 16 is a certificate issued under the provisions of the Income Tax Act, 1961 by employers to their employees. It is a document that shows the summary of:
- Salary paid to the employee
- Tax deducted at source (TDS) on salary by the employer
- Tax deposited with the government by the employer
It is an essential document for salaried individuals. It helps employees verify if the TDS deducted by the employer matches the tax deposited with the government.
When Do Employees Get Form 16?
Employees can get this form from their employer on or before 15th June following the financial year for which form 16 is issued. This means for the financial year 2023-2024 (1st Apr 2023 - 31st Mar 2024), employees must receive this document from their employer by 15th June 2024.
Why Is Form 16 Required?
- Assistance In Tax Filing And Planning: It summarises an employee's salary. This makes it easier to compute tax liability while filing income tax returns (ITR).
- Loans And Visa Processing: This form may be required by banks as proof of income for loan applications. It might also be crucial for visa processing.
- Verification Of Income: It serves as a means for employees to verify whether the employer has deducted the correct amount of tax.
- Claiming Deductions: This document can be helpful to claim deductions like health insurance premiums paid, home loan interest deductions, etc, while filing ITR.
- Employment Record: It also acts as proof of employment since it mentions the period of employment.
What Are The Components Of Form 16?
Form 16 consists of two parts, namely Part A and Part B. Let us understand these components in detail.
Part A
Part A of Form 16 covers the specifics about the employer and employee, such as:
- Name, address, PAN, Tax deduction and collection account number (TAN) of the employer
- Name and address of the employee
- Challan details
- Period of employment with the employer during the financial year
- The assessment year for which the form is issued
- Details of how much tax is deducted and deposited
Part B
It includes the details about taxable income:
- Gross salary with a detailed breakup of salary components
- Exemptions and allowances such as HRA allowance, any other allowances, etc.
- Deductions claimed under the provisions of Chapter VI-A of the Income Tax Act.
- Total taxable income
- Tax amount payable
Note: Parts A and B of Form 16 are not the same as Form 16A and Form 16B.
What Is Form 16A And 16B?
Form 16A gives TDS details of income other than salary. Form 16A is typically issued for TDS on interest income, rent, commissions, professional fees, etc. The components include details such as name and address of the deductor and dedicated, PAN, TAN, income earned, tax deducted, and deposited.
Form 16B is a certificate for tax deducted at source on the property sale. The buyer of the property issues it to the seller. It acts as a proof for the seller that the tax deducted has been deposited with the government.
Difference Between Form16 And Form 16A
| Characteristic | Form 16 | Form 16A |
| Nature of income | Issued for TDS deducted on salary income | Issued for TDS deducted on non-salary income |
| Issued By | Issued by employer to employee | Issued by entities deducting TDS, such as banks, financial institutions, companies, etc |
| Frequency Of Issuance | Issued once a year, by 15th June of the assessment year, for which tax is deducted | Form 16A is issued every quarter. |
| Eligibility | Salaried individuals with employer-employee relationships earning regular income | Self-employed or other professionals |
Conclusion
Form 16 or Form 16A is an essential document in your tax filing. Form 16 helps to assess your salary and taxes in detail and tax already deducted at source.
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Read more on tax and financial planning:
Which ITR Should I File? Type Of ITR Forms For FY 2023-24 (AY 2024-25)
Frequently Asked Questions On Form 16
1. How can I download Form 16?
An individual (employee) cannot download Form 16 themselves. Form 16 can only be issued by your employer and provided to the employee in a physical or digital copy.
2. What is TAN?
TAN stands for tax deduction and collection account number. It is a 10-digit unique identification alphanumeric number issued by the Income Tax department and required for collecting tax on behalf of the government.
3. What if an employee switches his/her job in a year?
In such a case, you must get Form 16 from all the employers you have worked with in a financial year. While filing the ITR, you must consolidate all the details of Form 16.
4. Can an individual get Form 16 if his/her salary falls below the income tax slab?
If an individual’s income is below the tax brackets, there will be no TDS. In such cases, employers may or may not issue Form 16 to employees.
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