Form 16 is a certificate issue by employer to its employees on deduction of tax by the employer from employee’s salary & deposition with government.

It is one of the most important Income Tax forms that basically validate the fact that TDS has been duly deducted from the salary paid to employees & deposited with the concerned authorities. It consists of all the detailed information related to your Income Tax Return filing regarding amount paid to employee and TDS on the same. This form is considered as Salary certificate and should be retained by employee as backup proof for TDS.

Who is Eligible For FORM 16?

If you are a salaried employee and falls under tax slab, this certificate will be issued by your employer. Even if you have left the job, you will be eligible for Form 16. This Form is issued by employer in accordance with the provisions of the Income Tax Act. TDS Certificate is issued only if your TDS has been deducted. In case no TDS is deducted, its employers discretion to issue this form or not as it is not compulsory in that case. As per Income tax Act, Every Person who has deducted TDS from any Payment made, is required to furnish certificate for the same showing details of TDS deducted & deposited.

Responsibility of Employer While Issuing FORM 16

It is the responsibility of employer to ensure that all the details mentioned in Form 16 are correct & each page is signed by the authorized person. However, On receipt of Form 16 from employer, employee must ensure that all the details mentioned therein are correct as he/she may not feel any issue while filing of return. If there are any discrepancies, same should be reported to his employer so the same can be rectified and revised form is issued.

Employers must issue TDS certificate every year on or before 15 June of the next year immediately preceding the Financial Year in which the tax is deducted. If an employer delays or does not issue Form 16 by specified deadline, they will be liable to penalty.

The responsibility of deducting tax on salary & depositing the same with government as well as issuing form 16 is the responsibility of the employer and he can attract penalty in case he fails to do the same. However, onus of paying Income Taxes & filing return is on individual. In case, individual has not received form 16 or he has no tax balance due as per Form 16 and he is liable to file return then he must file the return. Non issuance of Form 16 does not exempt an individual from filing return.

Components of FORM 16

Form 16, issued as per Section 203 of Income Tax Act 1961 to salaried employee by their respective employers comes in two parts : Part A and Part B. Part A depicts the details related to TDS Deducted & deposited with IT Department whereas Part B represents the full details regarding Income, Exemptions, deductions as well as Tax information in orderly manner.

What does Part A of FORM 16 consists of?

Part A of Form16 comprises of details regarding summary of amount paid & TDS thereon along with general details about the employer and employee. This form can be generated and downloaded from Traces portal of Income tax department by the employer. It is important that employer checks & authenticates all the information mentioned on the form, prior to issuing the same to its employees.

Here is the list of some of components of Part A:

  • Name & Address of the Employee
  • TAN & PAN of the Employer
  • Name & Address of the Employee
  • PAN of the Employee
  • Period Worked with Employee
  • Quarter wise Summary of Tax Deducted & deposited by Employer.

If an employee has worked with more than one employer in the past year, then every employer is required to issue separate Part A of this form for the tenure of his employment in that year. It will contain the details of amount paid and tax deducted & deposited for the period for which you we reemployed with each of them.

What does Part B of FORM 16 consists of?

Part B is an annexure to Part A of Form 16 and needs to be issued by employer. It is like a consolidated statement covering breakup of Salary, other incomes as disclosed by employee, Taxes paid & due in a prescribed format.

Part B includes the following:

  • Detailed Salary Breakup
  • Detailed Breakup of Allowance to the extent exempt u/s 10
  • Income of House Property reported by Employee
  • Income from Other Sources
  • Deductions under Chapter VI-A of the Act
  • Relief under Section 89
  • Total Tax Payable on Income
  • Tax or Refund Due

Unlike Part A, issuance of Part B of Form 16 depends on requirement of Taxpayer. So Part B of Form 16 may be issued by each employer or by last employer as required by employee.

Why FORM 16 Is Important For Salaried Employees.

From Tax point of view, Form 16 is a certificate of utmost importance for salaried employee. As per Income Tax Act, every employer at the time of payment of salaries is required to deduct TDS( Tax Deducted at Source) for the employees falling under Tax Bracket during that financial year. TDS, so deducted by employer is required to be deposited with the department on duly basis. As a proof of same, employers are required to issue Form 16 to its employees on or before prescribed timeline. The details mentioned in this form are required for filling Income Tax Returns.

Form 16 is not only a proof that verifies that TDS has been deducted as well as deposited duly but also a document that assists in various other compliance. Here are some of uses:

  • It is required for filing Income Tax returns.
  • It is considered as a valid proof of income.
  • It is required by many financial Institutions for the purpose of loan & credit card applications processing.
  • It is also a valid document for the purpose of Passport & Visa applications.
  • It helps your next employer to compute your tax liabilities on the basis of previous deductions, in case you have switched the job in same year.