Form 16
Form 16?

Form 16 is an official document in India that is issued by an employer to its employee. It contains details about the employee’s income earned during a financial year and the amount of tax deducted at source (TDS) by the employer on behalf of the employee. Form 16((incometaxindia.gov.in) has two parts, Form 16A and Form 16B and both together provide an exhaustive report about the computation of taxes applicable to the respective employee.

Form 16?

It is a certificate issued by the employer to the employees to deduct tax at the source (TDS). It is a form issued by employers to salaried individuals in India.  It mentions the tax amount deducted by the employer and is submitted to the Income Tax (IT) department.

If an individual has worked with more than one organization in the course of a financial year or worked with more than one employer at a given point in time, and tax has been deducted by all the employers, the individual has to ideally, obtain Form-16 individually from every such employer. However, if the income was below the taxable limit the employer may not issue Form-16.

Parts in Form 16 

  • Part A

Form 16 is like a report card for your taxes deducted at source (TDS). It comes in two parts, and Part A focuses on the tax game between you and your employer. Here’s what you’ll find in this section:

  1. Employer Identity: This includes your employer’s name, address, and unique identification numbers (TAN and PAN).
  2. Your Tax Details: Part A shows your PAN, the key that links your tax information.
  3. Salary Breakdown (Quarterly): This section provides a quarterly breakdown of your total salary for the financial year.
  4. TDS Tracking: Here’s the nitty-gritty! Part A summarises the tax deducted from your salary each quarter, along with confirmation from your employer that this amount has been deposited with the government.
  5. Key Point: If you switch jobs during the year, you’ll receive a separate Part A from each employer, reflecting your pay and tax details for the time you were with them.
  • Part B

Part B dives deeper into your income picture. Think of it as the ‘behind-the-scenes’ details of your salary and taxes. Here’s what you can expect to find:

Part in Form 16A Encompasses the Following Details

  • Details of the employer and the employee like the name and residential address
  • TAN and PAN details of the employer and the employee
  • Details pertaining to the tax deducted and deposited quarterly which is duly certified by the employer.

Part in Form16A also mentions the amount of the tax deducted and the date on which it was deposited and other details such as the challan issued by the government etc.

Part in Form 16B of the form is the annexure attached to Part A. Part B has to be issued by the employer and should enlist the breakup of the salary and tax deductions of the employee.

Form 16B predominantly explains the computation of taxes taking into consideration the investment declaration made by the employee at the beginning of the financial year and the proof submitted to corroborate the same. Details pertaining to the allowances awarded by the employer to the employee are also enclosed in this section. Other particulars such as rent paid, medical bills, EMIs (Equated Monthly Installments) towards home loans, and other tax exemptions shall be enclosed in Part B.

Form-16B of the Form Comprises the Following Details

  • Comprehensive details pertaining to the breakup of the salary
  • Details pertaining to the exempted allowances under the Income Tax Act, 1965
  • Deductions including PPF (Public Provident Fund), housing loans, national saving certificate, life insurance schemes, and other investments and saving schemes
  • Deductions under other sections include but are not limited to NPS (National Pension Scheme), mediclaim policies, donations, etc
  • Tax computed on the total income of the employee
  • Cess levied if any
  • Rebate on tax if any
  • Surcharges, if applicable.

Form 16 Eligibility

Form-16 is like a tax receipt for salaried individuals. But who qualifies to receive one? Here’s a breakdown:

  • Tax Filing Threshold: Generally, if your income falls under the taxable bracket and you need to file an income tax return, you’ll be eligible for Form-16. This ensures your employer reports the deducted tax to the government.
  • Not Mandatory for Everyone: If your income falls below the taxable limit and you don’t need to file a return, you technically aren’t eligible for Form-16. However…
  • Good Practice for Employers: Many employers still provide Form-16 to all employees, even those below the tax filing threshold. This acts as a record of your earnings and can be helpful for future loan applications or other purposes.

Why Form-16 is Required?

It is required for filing income tax returns (ITR) by salaried individuals. It is a certificate issued by an employer to their employees, which contains details of the salary paid, tax deducted at source (TDS), and other relevant information. It is proof of the TDS deducted by the employer on behalf of the employee.

When Form 16 will be Released?

It is issued by the employer to the employee by 15th June of the financial year following the year in which the income was paid and tax deducted. For example, if you have worked for a company in the financial year 2024-25, and your employer is required to issue Form 16 to you by 15th June.

Differences Between Form-16A and Form-16B

While both parts discuss TDS, the difference lies in the authority that issues the respective forms. For instance, Form-16A is issued by financial institutions for interests earned on fixed deposits, insurance commissions etc. Form-16B is issued for TDS for income earned through the immovable property. It is issued by the buyer to the seller.

Advantages of Form 16 Filing

The form acts as evidence for the deposition of the TDS amount by the employer with the Central government. Apart from this, there are a number of advantages Form 16 have to offer as depicted below:

  1. Form-16 acts as an ‘income from salary’ statement
  2. Acts as proof of income
  3. Clearly shows how the tax was computed
  4. Records all tax-saving investments
  5. Aids in loan assessment and approval
  6. Acts as proof for visa issuance
  7. While switching jobs guides the next employer to compute taxes based on how the previous employer had ascertained the same
  8. As the document is associated with the tax credit, employees can check if taxes are overpaid inadvertently, and can claim a refund appropriately.

How to File ITR with Form 16

There are certain bits of information that are required when filing your ITR. These details can be found on Form 16. They include the following:

  • Allowances that are exempt under Section 10 of the Income Tax Act
  • A breakup of the deductions under Section 16 of the Income Tax Act
  • Income from house property provided for TDS
  • Income from other sources provided for TDS
  • Taxable salary
  • A breakup of the deductions under Chapter VI-A of the Income Tax Act covering the deductions under Section 80C, Section 80CCC, Section 80CCD(1), Section 80CCD(1B), Section 80CCD(2), Section 80D and Section 80E of the Income Tax Act
  • Aggregate of deductible amount under Chapter VI-A of the Income Tax Act covering the deductions under Section 10(a), Section 10(b), Section 10(c), Section 10(d), Section 10(e), Section 10(f), Section 10(g), Section 10(h), Section 10(i), Section 10(j), and Section 10(l) of the Income Tax Act
  • Refund due or net tax payable

Additional details from Form 16 required for filing your income tax returns

  • Tax deducted at source by the employer
  • Employer’s TAN
  • Employer’s PAN
  • Employer’s name as well as address
  • Present assessment year
  • Name and address of the taxpayer
  • PAN of the taxpayer

*There are certain fields in the form that are notified for deductions. They are as follows: :

DeductionsContribution
Section 80CPPF, Premium Payments Towards Life Insurance
Section 80CCCPF
Section 80CCD(1)Both salaried and self-employed towards NPS
Section 80CCD(1B)Additional Deduction towards the Pension Scheme
Section 80CCD(2)Employer’s Contribution to Pension Scheme
Section 80DHealth insurance
Section 80EEducation Loan
Section 80GDonations or Charitable Trusts
Section 80TTASavings Account

Steps to file ITR Online with Form 16

Step 1: Visit the official Income Tax e-Filing portal.

Step 2: To log in to the portal, enter your user ID and password.

Step 3: Enter your PAN card number as well as other requested information.

Step 4: Provide other important details like your date of birth, address mobile number, etc.

Step 5: Upon entering all the details, you can submit the income tax return for verification.

Can I File ITR Without Form 16

  • According to Section 272A(2)(g) of the I-T Act, it is the employer’s responsibility to deduct tax from employees’ salaries and provide a certificate of TDS.
  • Failure to do so will result in a fine of Rs.100 per day of default.
  • If an organisation or employer refuses to issue the certificate despite repeated requests, there could be a chance that the deductor has not deposited the tax with the relevant government department.
  • After the employee informs the concerned Assessing Officer, they will take the appropriate corrective action and start the penalty proceedings against the employer.
  • However, it is the responsibility of the individual to pay income taxes and file returns.
  • Employees are not exempt from filing tax returns if their employer did not issue Form 16.
  • Income tax returns can be filed by using alternative documents like Form 26AS, rent receipts, TDS Certificates from the bank, proofs of tax-saving investments, and salary slips.

Lost your Form 16? Here’s what you can do

  • Form 16 is a highly important document that must be preserved carefully.
  • However, in case you have lost your Form 16, you can go through your mail and find it (if you received it via mail).
  • In case you received a hard copy from your employer and lost it, you can request your employer to issue another form.

How to Calculate your Salary Income if you have not received Form 16?

  • Sometimes, employers do not provide Form 16 to employees whose annual salary is lower than the minimum taxable limit (Rs.2.5 lakh).
  • In case you wish to file your income tax returns without Form 16, you will have to refer to your bank statements, payslips, home loan or education loan certificates, tax-saving investment proofs, Form 26AS, etc.
  • Your payslips will contain information regarding your basic salary as well as allowances, while Form 26AS will have the information regarding all the taxes you have paid and the taxes that have been deducted.

Given below is an example for how tax is calculated in case you do not receive the Form 16:

  • Basic Pay: Rs.30,000 per month (Rs.3.60 lakh per year)
  • Transport Allowance: Rs.1,400 per month (16,800 per year)
  • Deductions: Rs.30,000 (Since, tax exemption of Rs.1,600 per month is allowed, no tax will need to be paid on the allowance.)

Taxable Amount: (Rs.3,60,000 – Rs.40,000) – Rs.2,50,000 = Rs.70,000

Details a Receiver Must Check in Form 16

  • Once the employer issues Form 16, the receiver must make sure that all the information on it is accurate.
  • Besides checking personal information and details regarding the TDS and income, the receiver must also check the PAN number.
  • If the PAN is stated incorrectly, it must be rectified immediately by contacting the company’s HR, payroll, or finance department.
  • The employer will provide the employee with a corrected and updated Form 16.

Form-16 is one of the most crucial documents required to file IT returns. The form can be filed online or offline. Once Form-16 is filed online, the returns can be verified by generating the e-verification code (EVC). The form can also be verified by printing an ITR-V (Income Tax Returns – Verification) and by signing and furnishing the copy physically to the CPC (Central Processing Centre).

However, it might be interesting to note that ITR (Income Tax Returns) can also be filed without Form 16. But the respective individual has to furnish all the details mentioned in Part A and Part B separately. For instance, details pertaining to the salary, deductions, allowances, TDS, PAN, and TAN details of the employer, documents relating to investment, etc have to be submitted independently. Thus, Form 16 greatly streamlines the process of filing the ITR for salaried employees and also acts as proof of income to salaried employees.