Table of Contents
Over 8.18 Crore 5ITRs (Income Tax Returns) were filed for the assessment year 2023-2024, which is an increase of 9% YoY.
When it comes to filing income tax returns, Form 16 is a financial document everyone is likely to need. We take a quick look at what exactly it is and its significance in facilitating the filing of Income Tax Returns (ITR).
What Is Form 16?
Form 16 is a certificate provided by employers under Section 203 of the Income Tax Act. It outlines the amount of tax deducted from an individual’s taxable salary by their employer.
People may have changed jobs during the year or worked for multiple employers simultaneously, receiving tax deductions from each. In that case, Form 16 must be collected individually from each of the employers. However, if no tax deductions were made as their income for the year was below the tax-exemption threshold, then it is not required.
Who is Eligible to get Form 16?
Every salaried individual whose employers have deducted tax at the source is eligible for Form 16. Regardless of whether their income is below the tax exemption threshold, the employer is obligated to furnish Form 16. This is if tax has been deducted from the salary.
What’s the Role of Form 16?
Form 16 makes it easy to file IT returns. It is evidence that the employer reported the tax deducted at source (TDS) from a person’s salary to IT authorities. It also outlines how tax liability was calculated based on the investment declarations provided by a person at the beginning of the fiscal year. This helps in the accurate filing of income tax returns.
When is Form 16 Expected to Come?
This document should be provided by the employer on or before May 31 of the assessment year. This gives everyone ample time to file their Income Tax return before the deadline.
PS: In India, the fiscal year (FY) runs from April 1 to March 31, during which the income was earned. The assessment year is the subsequent year when this income is evaluated and taxed.
What is Form 16A?
Form 16 comprises two essential parts: Part A and Part B. Both these segments are important when it comes to filing IT returns.
Part A of the document gives essential details about both the employee and the employer, including:
- Employee particulars
- Employee’s address details
- Employee’s PAN
- Employer particulars
- Employer’s address
- Employer’s PAN
It also outlines the amount of tax deducted, the date of deposit into the Central Government Account by the employer, and the Challan number issued by the government.
What is Form 16B?
Part B of the Form document shows how the tax liability was computed. This is based on investment declarations at the beginning of the fiscal year and subsequent evidence of investments. It also details any additional allowances provided by the employer for tax purposes. Part B includes any supplementary information provided by the individual, such as rental expenses, medical expenditures, home loan EMIs and tax-free gifts. Here are the specifics:
- Annual gross income
- Exemption benefits under Section 10
- Employment taxes
- Deductions under Section 80C, including items like National Savings Certificates, EPF/PPF contributions, housing loan repayments, life insurance premiums, ELSS investments and other tax-saving schemes.
- Deductions under other sections (80E, 80G, 80TTA), including medical reimbursements, the National Pension Scheme, donations qualifying for deduction under section 80-G and other eligible deductions.
How is Form 16 different from Form 26AS
Form 26AS summarizes whether the deductor has transferred the deducted tax to the Central Government Account. It can be downloaded from the TRACES portal (TDS reconciliation, analysis, and correction enabling system).
While Form 26AS incorporates data from Forms 16A and 16B, it does not cover all the details found in Form 16. To be precise, it only contains information about the TDS amount that is remitted to the Central Government by the deductor. Unlike Form 16, it does not provide a breakdown of income and deductions across various categories.
What are the Advantages of Form 16 Document?
The Form 16 document is crucial as it serves as proof that the TDS amount has been deposited to the Central Government account. It is a critical document to ensure transparency and prevent fraud. It is important on various counts:
- Facilitates income tax return filing.
- Serves as evidence of income source.
- Allows scrutiny of tax calculation documentation for errors.
- Shows all tax-saving investments in one place.
- Helps in processing loans and visa applications.
- Helps new employers determine tax obligations when changing jobs.
- Enables checking for overpaid taxes, facilitating tax refunds.
How to Get Form 16 From Employer?
An employer is obligated to furnish employees with Form 16, if they have deducted any tax at source. It can either be printed or downloaded from the TRACES Portal. Alternatively, the company might use a third-party online payroll system for Form 16 access. If an individual loses their Form, they can simply request for another copy from the employer.
How to Get Form 16A and Form 16B?
An individual can obtain Form 16A from their bank by downloading it. If they stay on rent, their landlord should provide Form 16A if tax deductions were made from the rent revenue.
Form 16B can be requested from the buyer of a property if tax was deducted from the sale price. The deductor should furnish Form 16B within 15 days of filing Form 26QB. It can also be generated and downloaded from the TRACES portal.
Is Form 16 Required for Filing Income Tax Returns?
It is not necessary to have Form 16 for filing income tax returns. An individual will have to gather information from their employer such as their name, address, PAN etc. They can refer to their own salary statement for details on basic pay, benefits, deductions and gross pay. They can also use investment documents previously submitted to the HR department as proof. They can then file returns using this information.
Wrapping Up
For salaried professionals in India, the Form 16 document is crucial. It contains vital information needed to file tax returns and significantly eases the process. Forward-thinking companies go with new-age HRMS software like Akrivia HCM to make the process error-free and streamlined for the HR teams.
What is the most challenging part of filing income tax returns? Let us know in the comment section!
