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What is Form 16 ? Basics Part A & Part B of Form 16

At the end of every month, you get your salary credit alert. For some of you, the amount you receive is minus the tax deducted at source (TDS) by the employer. If you are an employee with a salary package such that your income comes under the taxable bracket, then your employer is obligated to deduct tax from your income at the time of payment. This TDS is deducted as per the applicable income tax slabs. The aim: the company deducts tax on your behalf and deposits it with the government. As a proof of the TDS amount deducted and other details, a Form 16 is issued by the employer.

What is Form 16?

Form 16 is a certificate of tax deducted at source, a sort of proof document that has to be issued by the employer to an employee. The salary certificate, as it is often referred to, has to be issued by June 15 of the financial year immediately following the year in which the income was paid and tax deducted.

When is it needed?

When an individual files his/her income tax returns at the end of each financial year, the Form 16 issued comes handy. The form carries details pertaining to the manner of computation of TDS as done by the employer, in line with the declaration made by an employee at the start of the financial year under consideration. All salaried individuals are eligible who come under the ambit of taxation are eligible for the Form 16. For individuals whose incomes do not fall under the tax bracket, the TDS obligation does not arise. Hence, in such cases, an employer does not necessarily have to issue a Form 16.

Form 16 is divided into two parts- A and B. Parts A and B carry different information. Read on to find out more.

Part A

This part of the Form 16 carries:

  • Name and address of the employer
  • Valid tax deduction and collection amount number (TAN) and permanent account number (PAN) of the employer
  • Valid permanent account number (PAN) of the employee
  • Details of tax deducted and deposited quarterly with the Income Tax Department

Part B

This part is an annexure to Part A. It contains details regarding the salary breakup of the employee (various components of an individual's salary), allowances that are exempt under section 10, and the various deductions available under the Act. It also holds details about relief under section 89 of the I-T Act.

Other points to note

For those individuals who may have switched jobs within a financial year, a Form 16 must be obtained from each of the employers for the period that you worked with them. Part B of the form in such a case may be issued by each of the employers or the last employer as per the employee. However, if you were employed at one place throughout the year, a single Form 16 is issued by the employer for the entire financial year.

The Income Tax Rules state in the event that an employee has lost the original Form 16, a duplicate certificate can be sought from the employer.

Where else does Form 16 comes handy?

There are many other situations in which having a Form 16 can be of help. Say, when you apply for a Credit Card, most banks required that you furnish the Form 16 of at least the preceding two years as part of the documentation. A similar requirement is seen in the list of documents requested by lenders in a loan application process.

There is also the case of via application. Often, foreign embassies may ask for Form 16 to assess the applicant’s financial situation. Having the salary certificate can add to the ease of the via application process.

References:

https://incometaxindia.gov.in/pages/rules/income-tax-rules-1962.aspx

Disclaimer :ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. Please note, filing of tax related services are not Exchange traded products and I-Sec is acting as a distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. The content is solely for informational and educational purpose. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.

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