Form 16 is a certificate issued under section 203 of the Income Tax Act, 1961, to salaried employees by their employers. Every month TDS is deducted from the salary income. Form 16 gives a detailed summary of the salary paid to the employee, the tax deducted at source (TDS) on the salary and deposited with the government by the employer.
Form 16 is a certificate issued to salaried employees by their employer that provides a detailed summary of TDS deducted and deposited to the Income tax authorities. Form 16 is an important document issued under the Income Tax Act of 1961 provisions.
Each salaried employee can obtain Form 16 from the employer on or before the 15th of June of the following year, immediately after the financial year in which the tax is deducted. If any employer delays or fails to issue Form 16 by the specified date, he is liable to pay a penalty of Rs.100 per day until the default continues.
Here are some key points about Form 16:
Issuance: Employers are required to issue Form 16 to their salaried employees on or before 15th June of the assessment year for which the income tax return is being filed. For example, for the financial year 2022-23 (assessment year 2023-24), Form 16 should be issued by 15th June 2023.
Components: Form 16 consists of two parts - Part A and Part B.
Part A: This section contains details such as the employer's and employee's PAN (Permanent Account Number), employer's TAN (Tax Deduction and Collection Account Number), summary of tax deducted and deposited by the employer (TDS), and other relevant details.
Part B: Part B provides a comprehensive breakdown of the employee's salary, allowances, deductions claimed by the employee (such as under Section 80C, 80D, etc.), and the resultant taxable income. It also includes details of income from other sources, if any.
Use in Income Tax Return Filing: Form 16 serves as a vital document for salaried individuals when filing their income tax returns. It provides key information about the employee's salary, TDS, and deductions. The details from Form 16 need to be accurately filled in the relevant sections of the income tax return form.
Verification: It is essential for employees to cross-verify the details mentioned in Form 16 with their salary slips, bank statements, and Form 26AS (consolidated statement of taxes deducted and paid) to ensure accuracy and identify any discrepancies. If any discrepancies are found, they should be promptly brought to the employer's attention for rectification.
Importance: Form 16 acts as proof of tax payment and helps employees reconcile their income and tax deducted. It provides a clear overview of the salary structure and facilitates easy calculation of taxable income. It also helps employees determine their tax liabilities and claim eligible deductions while filing their income tax returns.
Form 16 required
Form 16 is a very important document as it:
It serves as proof that the government has received the tax deducted by your employer.
Assists in the process of filing your income tax return with the Income Tax Department.
Proof of Salary Income
Many banks and financial institutions demand Form 16 to verify the person’s credentials while applying for loans.
Eligibility Criteria for Form 16
Every salaried employee whose income falls under the taxable band is eligible for Form 16 according to regulations released by the Indian Government's Finance Ministry.
If an employee's income does not fall within the taxable band, Tax Deducted at Source is not required to deduct. As a result, in certain situations, the employer is not required to give Form 16 to the employee.
However, many organizations now provide this certificate to employees as a good work practice because it contains a consolidated picture of the individual's earnings and has other applications.
Types of Form 16
Other than Form 16, there are 2 other types of Form 16, which you will receive for earning income other than salary:
Form 16A:
Form 16 is a TDS certificate which reflects TDS deducted on the salary income by your employer. On the other hand Form 16A is a TDS certificate applicable for TDS on income other than salary. For instance, you will receive a Form 16A when your bank will deduct TDS on your interest income earned from Fixed Deposits, TDS on rent receipts, TDS on insurance commission or any other income which is liable for such deduction. Form 16A provides details of the income earned and TDS deducted and deposited on such income. It also contains the name and address of deductor/deductee, PAN details, TAN details of deductor and challan details of TDS deposited.
Form 16B:
Form 16B is a TDS certificate for TDS deducted on the sale of property and reflects that the TDS amount deducted on Property by the Buyer has been deposited with the Income Tax Department. The buyer is required to deduct 1% TDS on Property from the amount he has to pay the seller at the time of sale of immovable property. The buyer is later required to submit the TDS with the Income Tax Department and provide Form 16B to the seller of the property. Form 16B is a proof that the TDS deducted on the sale of the property has been deposited with the Government.
How to Download Form 16
Form 16 can only be downloaded and issued by your employer. Any individual cannot download his / her Form 16.
There is a common misconception that an individual a download Form 16 on TRACES website using the PAN number. All salaried individuals are eligible to get a Form 16 from their employers.
If your employer deducts TDS from your salary, then he must issue your Form 16 as it is a TDS certificate which reflects that TDS is deposited to Government.
Also, the employer should issue Form 16 before the due date of May 31 of every financial year.
Rectify the mismatch in Form 16 and Form 26AS
If you identify a mismatch between Form 16 and Form 26AS, it is important to rectify the discrepancy. Here are the steps you can take to rectify the mismatch:
Contact your employer: Inform your employer about the mismatch and provide them with the necessary details and documentation. Share copies of Form 16 and Form 26AS, highlighting the specific areas of discrepancy. Ask your employer to rectify the information in Form 16 and issue a revised form with the correct details.
Coordinate with your employer: Work closely with your employer to ensure that they rectify the errors in Form 16 promptly. Provide any additional supporting documents or information required by your employer to rectify the mismatch.
Update Form 26AS: After your employer has rectified the errors and issued a corrected Form 16, the revised information should be updated in Form 26AS. However, it may take some time for the updated information to reflect in Form 26AS, as it depends on the timelines of TDS return filing by your employer.
Cross-verify and reconcile: Once the revised Form 16 and updated Form 26AS are available, cross-verify the information in both documents to ensure that the discrepancies have been resolved. Make sure that the details in Form 16 now match the updated information in Form 26AS.
File your income tax return: Once you have verified that the mismatch has been rectified, you can proceed to file your income tax return. Use the corrected Form 16 and updated Form 26AS to accurately report your income and taxes while filing your return.
Is Form 16 and Form 16A Similar
While many people assume that both these forms are the same and use the terms interchangeably, but in reality, these are two different documents. The objective of Form 16 and Form 16A is the same as they are both TDS certificates and the difference lies in the issuing body. While Form 16 shows the tax deducted at source (TDS) for a salaried employee, Form 16A is applicable for non-salaried employee. In simple words, Form 16A is the TDS Certificate for income earned other than salary.
People rendering their services to an organization not as employee, but as a consultant and earning contractual/professional and other fees for their services, are eligible to receive Form 16A. Also, there are many other areas where TDS can be applicable like the tax for interest earned on your Fixed Deposits, etc. Here bank is the body/organization who deducts the tax at source. Hence, for every financial year they must issue a TDS certificate called Form 16A to the customer.
Form 16A is also issued for tax deductions on insurance commission paid. This certificate has personal details of the deductor and deductee such as name, address, PAN/TAN details, and details of TDS deducted & deposited. The income on which TDS is deducted is also specified.
Due Date for Issuing Form 16
The form must be issued every year on or before the 31st of May for the financial year in which income was paid and tax was deducted. Form 16A must be issued every quarter within 15 days from the date of furnishing the statement of TDS as under:
