What is Form 16?
Form 16 is an Income Tax form used by companies to provide their salaried individuals in India. This form carries all the required details that help the employee in filing their tax returns with the Income Tax department in India. The Income Tax Act of 1961 and the Income Tax rules of 1962 are the laws that are prevailing in India. When Form 16 is provided to an employee by their employer it’s a source of proof of filing their Income Tax Returns, the form has various components such as Salary Income components of the employee. Every employer should provide their employees with the Form 16 who fall under the tax brackets set up the Finance Ministry of the Government of India. If an employee doesn’t fall under the tax brackets set, then he/she doesn’t receive the Form 16 as he/she will not need to pay taxes neither will they need to have Tax Deducted at source or TDS.
These components are:
· The personal details of the employee, like name, Permanent Account Number (PAN) etc.
· The employer details, name, PAN, Tax deduction and collection Account Number (TAN), etc.
· An acknowledgment number of the taxes paid by the employer.
· Details of the salary; Gross salary, net salary, deductions, perks etc.
· Total income and tax deductions.
· Education cess and surcharge details.
· Taxes deducted as per sections 191A.
· Declaration of tax payments from the employer.
· Refunds in any to the employee, or balance of taxes payable by the employee.
· Receipt of the TDS paid.
· All details of the Tax Payment, like Challan number, cheque number, Demand Draft number etc.
Form 16 has 2 parts, Part A and Part B:
The Part A of Form 16 contains the TAN of the employer and PAN of the employer and the employee. The addresses of both the employee and employer. This will contains all details of the pay-outs from the employer and employee during the current financial assessment year. This part of Form 16 also contains the TDS filed by the employer, the taxes deducted from your income and paid to the government every quarter. This also contains a monthly statement of the same.
The Part A of the Form must include:
· TDS deducted by the employer.
· PAN of the employer.
· The current financial assessment year.
· The employee PAN.
· TAN of the employer.
· The employee/tax payer’s name, address etc.
· Name and address of the employer.
The Part B of Form 16 contains the consolidated details of the salaries paid to the employee during the financial assessment year. The salary must be broken down, with details of deductions made by the employee under section 80C. The deductions that can be made under this section is EPF, NSC, Life insurance premiums, PPF, etc. If in one financial assessment year employee has changed jobs then the employee needs to be provided Form 16 of both companies.
The Part B of the Form must include:
· Taxable salary of the employee.
· TDS by the employer.
· Breakup of the deductions of sections 80C.
· Aggregate of the section 80C with a gross and deductible amount.
· Tax refund or any payables due.