Form 16 is a significant
document containing your salary details that is issued by your employer. As an
employee, you have full right to demand Tax Deducted at Source (TDS)
certificate in Form 16 from your employer. The details of the certificate are
of great help in filing of Income Tax Returns. If in case, the employer fails
to issue Form 16, then s/he shall be liable for a penalty of Rs 100 each day of
the default, under section 272A(2) (g).
What is Form 16?
Each year your employer
issues Form 16 certificate. This is a certificate U/S 203 of Income Tax Act,
1961 that provides all probable information on tax deducted at source from the
income chargeable under 'salaries' head.
To be more specific, it
provides details about the tax amount that has been deducted by your employer.
Moreover, it also
contains the details of your Salary, Other Income and Tax benefits available to
you. It has detailed information about the manner of calculating income as per
the income tax laws and tax payable on it.
Components of Form 16
Understanding about the
components of Form 16 will assist you to file ITR and you can to do it without
any help from a chartered accountant, particularly if your earnings come
completely from your salary and do not have any other income source.
Form 16 comprises of two
sections:
Part A
This part encompasses
your personal information like your name, your address, your employer's name
and address, PAN of both, TAN of your employer and receipt number of TDS
payment. The information mentioned above assist the Income Tax Department to
keep a track of money flow from your as well as your employer's account.
In addition, Part A
provides information like assessment year (AY), i.e. the year in which tax
liability is computed for the income earned during the previous year. This
particular portion of Form 16 also provides information about your employment
period with the existing employer.
After that, it provides
a summary of TDS deducted by the employer on employee's behalf. This amount is
deducted by the employer from your salary from time to time as tax and credits
the same to the Income Tax Department. The most relevant information in Part A
is TAN (Tax Deduction Account No.) of employers and total TDS deducted as both
of the information has to be correctly mentioned in your Income Tax Return so
that you can take tax credits for TDS deducted.
Part B
This part of Form 16
provides major information that you require to file your Income Tax Return.
First of all, your Salary income is mentioned. Then the tax free allowances
like HRA or Conveyance allowance is deducted from salary to arrive at taxable
salary. Any other incomes or deduction for Interest on housing loan just
follows after this.
Subsequently, deductions
are disclosed.
Deductions include those
U/S 80C, 80CCC plus 80CCD.
Always keep in mind that
the aggregate sum deductible under these respective sections must not go beyond
Rs 1.5 lakh. Then after this, deductions U/S 80D, 80E, 80G and others are also
mentioned.
The entire deductions
are subtracted from Gross Income so as to arrive at taxable income. Hence, tax
is then computed on the amount based on the current tax slab.
Importance of Form 16
•Significance of Form 16
cannot be overlooked by the employer as well as the employee. Now let's have a
glance at some important points:
•Form 16 serves as
source document during filing of Income Tax Return as it comprises of the
details about income, deductions, tax calculated and TDS as per the Income Tax
Rules.
•It serves as in
important document for claiming credit of Tax deducted by employer and you
might require it to produce before Income Tax Authorities if you don't get
credit of TDS properly
•Form 16 can also be
used if you wish to apply for home loans. There are some banks that ask for
Form 16 for income proof.
•Form 16 is needed while
processing visas. It is an important certificate for acquiring Income Tax
Clearance Certificate (ITCC) through IT Department
•As it is an
authenticated certificate and therefore it can be used as an Income Proof.
Other important points:
•If TDS is not deducted,
then it is not mandatory to issue Form 16 to the employee
•If the organisation
does not possess the TAN, they are not entitled to deduct TDS. Thus, in this
situation, they will not give Form 16.
•It is not mandatory
that every person requires Form 16; if s/he is self-employed then there is
actually no way to acquire Form 16. In this situation, it is vital for you to
submit ITR and how it as your income proof
(From Rediff.com)
Courtesy: Shri
C H Mahadevan
