In India, Form 16 serves as proof of income and tax payments issued by employers to their employees. It includes a summary of employees’ income, tax deductions, and other relevant details for a particular financial year. This article explores the significance of Form 16, its components, and how it aids in filing Income Tax Returns (ITR).
What Is Form 16?
Employers issue a Form 16 certificate (under Section 203 of the Income Tax TDS) to all their salaried employees. It contains details regarding salary and TDS (Tax Deducted at Source) payments necessary to file your ITR.
However, if no tax is deducted because your salary is below the income tax level (Rs. 2.5 lakh), the employer might not issue a Form 16.
Why Do You Need Form 16?
According to the Income Tax Act, every employer must deduct tax before issuing the salary to the employee. The tax is calculated based on the employee’s income tax slab and the investment declaration made by the employee.
Form 16 simplifies the process of ITR filing. It serves as proof that the TDS was properly deducted and deposited with the authorities.
Form 16 contains details on how the tax is calculated based on the investments declared at the beginning of the financial year. It comprises information about any allowance paid by your company and other details, such as house rent, medical bills, and loans, that might affect the final tax.
Eligibility for Form 16
There is no eligibility criterion as such. Any salaried employee who has TDS deducted from their income is automatically eligible to receive Form 16, irrespective of whether their income falls under the tax exemption limit or not.
When Is Form 16 Issued?
The employer must issue Form 16 before 31st May (or the latest by 15th June) of the assessment year. It will give you enough time to file your ITR before the due date.
It is important to note that the assessment year and financial year are calculated differently. The assessment year starts on the 1st April of the next financial year. For example, for the financial year 2022-23, which started on 1st April 2022 and ended on 31st March 2023, the assessment year will begin on 1st April 2023 and end on 31st March 2024.
What Are Form 16A & 16B?
Similar to Form 16, Form 16A and Form 16B are also used as income certificates. However, these two are not to be confused with Part A and Part B of Form 16. Here are the details related to Form 16, Form 16A, and Form 16B.
Form 16A: Form 16A provides details of TDS calculated on income other than salary. It includes TDS deducted on income from freelancing, interest earned on bank FD, commission on insurance, rental income, or any other.
Like Form 16, Form 16A contains the personal details of the employee, PAN, PAN and TAN (Tax Deduction and Collection Account Number) of the employer, nature of payment, amount, date, amount of TDS deducted, and receipt number.
Form 16B: Form 16B contains details of income generated from property sales. In the case of a property deal, the buyer is responsible for deducting TDS before paying the seller and depositing the amount with the government. The seller receives Form 16B as proof of the TDS being deposited.
Form 16B contains information such as the seller’s PAN, the tax assessment year, the payment acknowledgement number, etc.
The following table showcases the differences between Form No. 16, 16A, and 16B.
| Form 16 | Form 16A | Form 16B |
| It is a TDS certificate that highlights the income earned through salary | Form 16A is a TDS certificate for all income other than salary | It is the TDS certificate for income earned from property sales |
| Applicable only to the income earned as salary | It covers income earned from interest, dividends, commissions, mutual funds, etc.
Form 16A is not compulsory for salaried employees |
Applicable only to income earned from the sale of an immovable property (land or building) |
| Issued by the employer to employees as a certificate for deducting and depositing TDS | Issued by financial authorities responsible for deducting TDS | Issued by the buyer against TDS deducted on making payment against a property |
| All employees earning above Rs. 2.5 lakh a year are eligible for Form 16 income tax certificate | Issued to those who earn over a certain threshold in income from other sources, apart from salary | Issued against transactions over Rs. 50 lakh |
Benefits of Form 16
Form 16 offers the following benefits.
Easy ITR filing: Form 16 simplifies the process of ITR filing, reduces complexities, and saves time as it offers a consolidated statement of your income and tax deductions.
Proof of Income: Form 16 is accepted as valid proof of income for loan processing, renting properties, and visa processing.
Transparent tax filing: By enlisting the breakup of salary components, exemptions, deductions, and the tax amount deducted at source, Form 16 makes ITR filing simple and transparent.
Quick refund: It helps you get quick refunds by enabling the tax department to review and process your claims faster.
Financial planning: With all the details regarding your earnings and tax liabilities, you can plan your finances effectively.
Reduces scrutiny from the IT department: Form 16 helps you meet compliance requirements and assists in record-keeping and documentation. It serves as a legitimate document of income and tax compliance.
How to File ITR With Form 16?
You can file an ITR using both offline and online routes. The steps to file an ITR using Form 16 are stated below.
Offline process:
- Visit the e-filing portal of the IT Department
- Select the applicable ITR utility from the dropdown
- Fill in all the details in the ITR form
- Validate all tabs and proceed to calculate the tax
- It will generate an XML file
- Upload the file to the ITR e-filing portal
Online process:
- Open the Income Tax e-filing portal
- Log in to the portal using your Username and Password
- Enter details related to PAN and others
- Enter mandatory information on the ITR form (address, date of birth, e-mail ID, mobile number)
- Submit the form for ITR verification
How to Download Form 16?
Employers can generate and download Form 16 from the TRACES website. These are the steps to download TRACES Form 16.
- Login to the website using the Username, Password, and taxpayer’s PAN
- To download Form 16, go to the download tab and select Form 16 along with the assessment year
- Submit the document for download
Final Words
When you receive Form 16 from your employer, ensure all details are correctly represented, especially the PAN number. It is important for error-free and hassle-free tax filing that your Form 16 provides the correct information. In the event of an error, you must contact your employer and get it rectified.
FAQs
What is Form 16?
Form 16 is a TDS certificate issued by employers to salaried employees. It contains information on an employee’s salary, allowances, deductions, and taxes deducted at source during a particular financial year.
Who receives Form 16?
All employees who have TDS deducted from their salary by the employer are eligible for Form 16. The employer must issue a Form 16 income tax certificate under the provisions of the Income Tax Act, of 1961.
However, if your income is below Rs. 2.5 lakh, the employer might not issue a Form 16.
What information does Form 16 contain?
Form 16 contains all details related to the employee’s PAN (Permanent Account Number), employer’s PAN and TAN (Tax Deduction and Collection Account Number), salary breakup, allowances, deductions, gross total income, tax deducted, and any exemptions claimed by the employee.
How can I get my Form 16?
You will receive it from your employer. Even if you have switched jobs, your employer is still responsible for issuing you a Form 16. Unfortunately, Form 16 is not available online for download.
