Recently, the Central Board of Direct Taxes (CBDT) issued fresh guidelines on issuance of Form 16. Now Form 16 Part B can only be downloaded via TRACES (TDS Reconciliation Analysis and Correction Enabling System) Portal. For uninitiated readers, here's a quick and easy definition of Form 16.
Form 16 is a certificate issued to salaried individuals in India by their employers. Also referred to as Salary Certificate, Form 16 is issued in accordance to Section 203 of the Indian Income Tax Act 1961. This certificate recounts the details of the salary paid to an employee and the respective tax deducted by the employer in a particular financial year.
As per the rules stipulated by the Indian Income Tax Department, employers are required to issue Form 16 to the employees on or before 31st May for a particular financial year.
Let's look at the various components of Form 16.
Different Components of Form 16
Form 16 is divided into two different parts:
1. Part A
2. Part B
Form 16 Part A
Essentially, Part A of Form 16 provides details of the total tax deducted by the employer from an employee's salary. Part A of Form 16 is a certificate issued by the employer that declares that TDS has been deducted from an employee's salary and has been deposited with the income tax department.
Here's how Part A of Form 16 looks like:
Form 16 Part A has the following details:
- Employee's personal details including name, address, PAN details
- Employer's details such as registered business name, address, PAN details, and TAN details
- Assessment Year (AY)
- Tenure of an employee's with the employer in the concerned FY (Financial Year)
- Salary paid and it's particulars
- Date of deduction of tax from an employee's salary
- Date of deposit of taxes with the income tax department.
- Details of tax deducted & deposited quarterly
- TDS payment acknowledgment number
Form 16 Part A can be generated and downloaded via Traces portal. One can also find information pertaining to Bank's BSR code via which the payments were made, challan numbers, etc. Form 16 Part A is required to be signed manually or digitally by the employer.
Form 16 Part B
Part B of Form 16 covers details pertaining to the total salary paid to the employee plus any other income gained by the employee. These details are disclosed by the employer. In addition, other details such as the amount of tax paid, and any due taxes are also disclosed in this certificate only. This certificate discloses all salary and tax-related information in an orderly fashion and also states any applicable exemptions and tax deductions. Part B of Form 16 also features personal details such as the name, address and PAN details of the employee.
Here's how Form 16 Part B looks like:
Form 16 Part B features the following details:
- Total salary received by the employee under different salary heads such as HRA, LTA, etc.
- Applicable exemptions as per Sec (10) of the Income Tax Act including conveyance, HRA, Children's education, etc.
- Total gross income received by the employee as the salary. It also includes other income reported by the employee.
- Total deductions allowed under Section 80 C / 80 CCC / 80 / 80D / 80G.
- Net taxable salary.
- Education Cess and surcharges if any
- Tax rebate under Section 87, if applicable
- Tax relief under Section 89, if applicable
- Total tax payable
- Total tax deducted and the tax due or tax refund, whatever is applicable
Important points to remember:
- Form 16 is only provided and issued by the employer.
- Form 16 cannot be downloaded by individuals. It is important to remember that individuals can't download Form 16 on Traces website using PAN number.
- Employers are required to issue Form 16 on or before 31st May of every financial year.
Why Form 16 is so important for Salaried Individuals?
Form 16 is one of the most important documents for salaried individuals. The details furnished in Form 16 are used for filing of income tax returns.
Form 16 can help taxpayers prepare and file their income tax returns, without the need for any external help. Form 16 is especially important for salaried individuals who rely on their salaries as the only source of income.
In addition, this certificate is also useful to check if the correct amount of taxes is being deposited with the income tax department. Most bank and registered financial lenders demand Form 16 as the proof of income and taxation from salaried individuals at the time of lending home loans, personal loans or car loans.
In addition, organizations may also demand Form 16 of the previous employer from an employee to calculate taxable income correctly. Furthermore, those planning to travel aboard may also require furnishing Form 16 during the Visa application process, especially when applying for Schengen visa.
Given the usefulness of Form 16, it wouldn't be an exaggeration to say that it is of the most important documents for any salaried individual.
Back to the News!
According to the changes announced by the Central Board of Direct Taxes (CBDT) on May 6th, 2019, employers are now mandated to issue and download Form 16 Part-B to employees only from the TRACES portal. The changes will reflect on all tax deductions made on or after 1st April 2018 under section 192 of the Income Tax Act 1961.
Earlier, employers used to issue and download Form 16 Part-B using third party software, which results in a lot of different and confusing formats. Also, in order to issue and download Form 16 Part-B, employers will need to ensure and report accurate data in Annexure II of Form 24Q. Form 16 generated via TRACES portal will have a unique TDS certificate number.
With the new rule in place, there will be symmetry in the way TDS certificates are issued since employers will now generate and download Form 16 Part-A and Part-B directly from the TRACES portal.