Starting a business in India may seem daunting at first. But if you look at the micro business sector in India which has 630.52 estimated enterprises (Source: CII), you may feel attracted to the ease of doing business in India. The current interconnected world has led to millions of opportunities for aspiring business owners to get started.
Individuals who want to become entrepreneurs need to understand various sides of the business, one of which is tax filing that requires significant planning.
If you are a salaried individual who hasn’t yet found a suitable opportunity to climb the ladder, you must know about Form 16. In this complete guide, we will take you through various facets of Form 16 meaning in detail.
What is Form 16?
Form 16 is basically a certificate that contains detailed information about an individual’s income from salary and the TDS deducted by the employer. It is an important document you need during income tax preparation and returns filing.
Form 16 meaning has its origin in Section 203 of the Income Tax Act that says the employers deducting tax at source are required to furnish a certificate containing all the particulars to the payees. The form details the amount of tax deducted at source by your employer which is to be submitted to the Income Tax department.
Moreover, employers are required to issue Form 16 on or before June 15 of every assessment year following the financial year in which the tax deduction is made. You should also know that:
- If you have switched jobs during a year and tax has been deducted by every employer, then you need to obtain Form 16 from each of the employers.
- In case the employers did not deduct any TDS from your salary considering it to be under the prescribed limit, they may not issue Form 16.
Components of Form 16
Form 16 has two components, namely Part A and Part B, which are described below:
Part A of Form 16
Part A of Form 16 includes details of TDS that is deducted by your employer and deposited quarterly by your employer. It also specifies the PAN and TAN of the employer along with other information. Your employer can generate this component through the TRACES website and must authenticate its information before issuing it to you and other employees.
Given below are the primary details included in Part A of Form 16:
- Name and address of your employer
- PAN and TAN of your employer
- Your PAN
- Summary of tax deducted and deposited (certified by your employer)
Part B of Form 16
Part B of Form 16 is more like an annexure to Part A and is to be prepared by the employer for all the employees. It contains various details related to the breakup of your salary and deductions approved under Chapter VI-A.
Similar to Part A of Form 16, you need to collect Part B of Form 16 from multiple employers in case you change jobs in one financial year.
Some of the components of Part B of Form 16 are:
- Detailed breakup of your salary
- Breakup of exempted allowances as defined under Section 10
- Deductions allowed under Chapter VI-A of the Income Tax Act, such as:
| Section | Deduction |
| Section 80C | Deductions for the premiums of life insurance, PPF contribution, and others |
| Section 80CCC | Deduction for pension fund contributions |
| Section 80CCD(1) | Deduction for your contribution to a pension scheme |
| Section 80CCD(1B) | Deduction for self-contribution into a notified pension scheme |
| Section 80CCD(2) | Deduction for your employer’s contribution to a pension scheme |
| Section 80D | Deduction for premiums paid for health insurance |
| Section 80E | Deduction on the interest you paid on a higher education loan |
| Section 80G | Deduction for donations you made |
| Section 80TTA | Deduction on interest received on your savings accounts |
Details from Form 16 required to file your income tax return
Given below are the subsets of information you can find in Form 16 that is used to file an income tax return for any financial year:
- Breakup of deductions availed under Section 16
- Allowance exemption as defined in Section 10
- Your taxable salary
- Income (or loss) from house property reported for TDS
- Income specified under the head ‘Other Sources’ (if any) as detailed for TDS
- Breakup of deductions availed under Section 80C
- Aggregate amount of deductions availed under Section 80C
- Tax payable or due tax refund
Eligibility criteria for Form 16
As per the regulations issued by the Finance Ministry of our country, every salaried employee having an income that falls under certain tax brackets is eligible to receive Form 16.
In case your income falls below the minimum tax bracket, TDS will not be deducted from your salary. In such a case, your employer is not obliged to provide you with Form 16. However, as a work practice, most organizations issue Form 16 to provide a consolidated picture of earnings to their employees.
What else you should know about Form 16?
- Once you receive Form 16 from your employer, you must check and verify the details related to your income and others mentioned in it.
- If you find any information in Form 16 to be incorrect, immediately reach out to your firm’s finance department and get it corrected.
- Your employer will then need to correct the same by filing a revised TDS return to credit the correct amount deducted against your PAN. Once this return is processed, your employer will provide you with an updated Form 16.
- If you do not have Form 16, you can still file your income tax return. Seek help from a tax professional on how to proceed further.
Difference between Form 16, Form 16A, and Form 16B
Form 16A and Form 16B actually refer to the two components or parts of Form 16. However, many individuals misconstrue them as separate forms.
How can you use Form 16?
You can use Form 16 as a statement of your income from the salary that can be provided to various authorities when needed. You can also use it:
- To file an income tax return
- As proof of income
- Document to verify tax computation
- To check all your tax saving investments in one place
- For loan assessment
- While switching jobs to help your new employer compute tax liabilities as per the details mentioned in Form 16 provided by previous employers
- To check for any overpaid taxes and ask for refunds
FAQs
How to get Form 16?
You can get Form 16 from the employer you work for to file tax returns and many other purposes. Even if you have left your previous job in the same financial year, your previous employer is liable to provide Form 16 to you. Unfortunately, you cannot download Form 16 from any online portal.
Can I ask for Form 16 from my employer even if no TDS is deducted?
TDS certificate in Form 16 will be issued to you when any tax amount is deducted at source. If your employer has not deducted any TDS, he may not provide you Form 16.
Is there any exception for not issuing Form 16 after deducting TDS from an employee’s salary?
Any individual responsible for paying a salary must pay taxes at source if applicable and furnish a certificate to the tax payee as defined under the Income Tax Act. For all employers in India, it is compulsory to provide this certificate in the form of Form 16.
If I do not get Form 16, does that mean I do not need to file my income tax return?
An employer is responsible for providing Form 16 to the employees after deducting tax on salaries. However, it is your responsibility to pay income tax and file the tax return timely whether or not your employer has deducted TDS.
How to get Form 16 for previous financial years?
As an employee, you cannot find or download your Form 16 online. Instead, you need to ask the current or previous employers to issue Form 16 for the required tax years by logging into their account at TRACES website.
