Income tax law is an elaborate measure covering various aspects of tax that is procured from the people who are earning beyond a certain level. Income Tax can also be defined as price which tax payers have to pay to the government. The government in turn uses these funds for the development of the social infrastructure.
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An important part of Income Tax is TDS or Tax Deducted at Source, which is seen as form 16
About Form 16:
Form 16 is essentially a certificate issued by employers to their employees. It provides a validation that TDS has been deducted and deposited with the government authorities on behalf of the employee. It gives a detailed summary of the salary paid to the employee and the TDS amount deducted on the same.
What is Form 16?- Basics
Form 16 contains the information needed to prepare and file your income tax return. It shows the breakup of salary income and the TDS amount deducted by the employer. It has two components – Part A and Part B (discussed in detail below).
Employers must issue it every year on or before 15th June of the following year, immediately after the financial year in which the tax is deducted. If you lose your Form 16, you can request a duplicate from your employer.
Part A of Form 16
Part A of Form 16 provides details of TDS deducted and deposited quarterly details of PAN and TAN of the employer and other information.
An employer can generate and download this part of Form 16 through the TRACES (https://www.tdscpc.gov.in/app/login.xhtml) portal. Before issuing the certificate, the employer should authenticate its contents.
It is important to note that if you change your job in one financial year, each employer will issue a separate Part A of Form 16 for the period of employment. Some of the components of Part A are:
Name and addre
TAN and PAN of emplss of the employeroyer
PAN of the employee
Summary of tax deducted and deposited quarterly, which is certified by the employer
Part B of Form 16
Part B of Form 16 is an Annexure to Part A. Part B is to be prepared by the employer for its employees and contains details of the breakup of salary and deductions approved under Chapter VI-A.
Deductions allowed under the Income Tax Act (under chapter VIA):
The list of deductions mentioned are as below:
Deduction for life insurance premium paid, contribution to PPF etc., under Section 80C
Deduction for contribution to pension funds under Section 80CCC
Deduction for employee’s contribution to a pension scheme under Section 80CCD(1)
Deduction for taxpayer’s self contribution to a notified pension scheme under Section 80CCD(1B)
Deduction for employer’s contribution to a pension scheme under Section 80CCD(2)
Deduction for health insurance premium paid under Section 80D
Deduction for interest paid on loan taken for higher education under Section 80E
Deduction for donations made under Section 80G
Deduction for interest income on savings account under Section 80TTA
You may also read about Income Tax Verification.
Relief under Section 89
Details required from Form 16 while filing your return
With reference to the image below, here is where you can locate certain information for filing your income tax return for FY 2020-21 (AY 2021-22).
Allowances exempt under Section 10
Break up of deductions under Section 16
Income (or admissible loss) from house property reported by an employee and offered for TDS
Income under the head ‘Other Sources’ offered for TDS
Break up of Section 80C deductions
The aggregate of Section 80C deductions (gross and deductible amount)
Tax payable or refund due
What is the eligibility criteria for Form 16?
According to the regulations issued by the Finance Ministry of the Indian Government, every salaried individual whose income falls under the taxable bracket is eligible for Form 16.
If an employee’s income does not fall within the tax brackets set, they will not need to have Tax Deducted at Source (TDS). Hence, in these cases, the company is not obligated to provide Form 16 to the employee.
However, these days, as a good work practice, many organisations issue this certificate to the employee as it contains a consolidated picture of the individual’s earnings and has other additional uses.
Points to be noted while checking Form 16
Once an individual receives Form 16 from the employer, it is their responsibility to ensure that all the details are correct.
One should verify the details mentioned in Form 16, for example, details of the amount of income, TDS deducted, etc.
If any of the detail is mentioned incorrectly, one should immediately reach out to the organisation’s HR/Payroll/Finance department and get the same corrected.
The employer would then correct their end by filing a revised TDS return to credit the TDS amount against the correct PAN. Once the revised TDS return is processed, the employer will issue an updated Form 16 to their employee.