What is Form 16 in Income Tax: Types & How It Works?

As the last date of filing tax returns comes closer, it becomes crucial for you to ensure that all the work is officially done. It is beneficial for you to keep all the documents ready beforehand as it ensures that the entire tax filing process goes smoothly and quickly. While documentation is crucial, remember to make the right investments to save your Income Tax as well. Tata Capital Moneyfy is a digital platform that would help you in terms of making the right investment which is necessary for tax saving.

Speaking of documentation, Form 16 is one of the most important and sought-after forms when you talk about Income Tax Returns. Form 16 is basically a certificate that is issued to individuals who have a salary. If you happen to be a salaried person, your employer would issue you a Form 16 when tax is deducted from your salary and is deposited to the department of Income Tax. Form 16 is used by companies and establishments in providing details of the deducted tax.

What is Form 16?

Form 16 is a tax certificate issued by an employer under section 203 to salaried employees, showing the TDS deducted from salary income and deposited with the government. It shows how much tax has been deducted and when the form was submitted to the IT department.

What Are the Criteria Eligibility for Form 16

Any salaried person – irrespective of whether their income falls under the income tax exemption limit – whose tax has been deducted by the employer at source is eligible for Form 16. 

Why is Form 16 Required?

Form 16 serves as proof of the tax deducted by the employer. It simplifies the process of filing income tax returns by providing a detailed summary of salary components, TDS deductions, and additional tax information. 

It also details how your tax was computed based on your investment decisions and also contains details of any allowances that your company gave. 

How does Form 16 work?

If you happen to be an individual with a salary of above the exemption limit of Rs. 2,50,000 a year, your employer would have to deduct the tax amount from your salary and then deposit the amount at the Income Tax department. The following are some points to note about what Form 16 works as:

• Form 16 certificate works as your Tax Deduction at Source certificate or TDS
• Form 16 works as a proof of information on your income
• Form 16 works as a proof of information on tax deductions

What comprises Form 16?

There are two components or parts, namely A and B of Form 16.

1. Form 16-A: This contains information about you as an employee, your employer, PAN, TIN, and TAN details of your employer, your address, and your TDS deductions among other things.
2. Form 16-B: This contains information on the salary that is paid by your employer, any other sources of income that you might have, and allowed deductions among other things.

How to Download Form 16?

You can download Form 16 from TRACES (TDS Reconciliation Analysis and Correction Enabling System), which is a website by the Tax Department of India. This website is used to manage TDS-related activities and services for employers, taxpayers, and other stakeholders.

Here's how you can download Form 16 from TRACES-

1. Visit the official TRACES website
2. If you're a new user, create a new account by completing the registration process. If you're an existing user, log in with your PAN card number and password.
3. Go to the 'Downloads' tab and select 'Form 16'.
4. Choose the form type and the financial year for which you need the Form 16.
5. Verify your PAN card and other details.
6. Enter the TDS receipt number and select the TDS date.
7. Enter the total tax deducted and collected.
8. Click on submit request to download the form.
9. Download the files under the 'Downloads' tab.

Detailed information on the contents of Form 16

The following is a list of contents that are part of the Form 16:

• The tax payable balance which is paid by your employee, and refunds (if any) to your employee
• Details such as your employer's name, TAN, PAN, tax deduction, etc.
• Details of the tax payment such as the amount of the tax, challan number, demand draft or DD number, and the cheque number
• Your personal information as the employee such as your name, your PAN, and your salary amount
• Acknowledgement from your employer about the taxes that have been paid
• Tax deducted according to section 191A
• Total income and tax deductions
• Details on gross salary, net salary, perks, and deductions
• The TDS receipt
• Declarations on tax payment by your employer

Additional Read: Find out How ELSS Can Be a Great Tax Saving Option

What is Form 16-A?

Your employer will be using the TRACES portal to generate Form 16-A for you. It will be verified and authenticated by your employer to ensure that the information and details on it are correct before handing it over to you.

The following are the details that are to be found in your Form 16-A:

• The name of your employer
• Your PAN
• The address of your employer
• TAN and PAN of your employer
• A certified summary of tax that has been deducted and then deposited by your employer

What is Form 16-B?

Form 16-B would serve as the annexure of Form 1-A. The following are the details that are to be found in your Form 16-B:

• Detailed breakup of your salary
• Deductions that fall under the section VIA of Income Tax Act
• Relief under the section 89

Additional Read: 5 Ways to Minimize your Taxes and Maximize Investments

Difference Between Form 16, Form 16A and Form 16B

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FAQs

1. Where will I get the Form 16 from?

You will receive your Form 16 from your employer. You cannot download it from any website or portal.

2. Will I need Form 16 if there has been no TDS deduction?

Form 16 is not required mandatorily if there is no TDS deduction.

3. Do I not need to pay taxes if I have not been issued the Form 16 by my employer?

You need to pay the taxes if your salary is more than the permitted exemption limit.

4. How to get Form 16?

Your employer provides Form 16 after the financial year ends. They can download it from the official website of TRACES by the Tax Department of India.

How can I open my Form 16?

Form 16 is usually in PDF format and password-protected. To open it, the password is the first five characters of your PAN followed by your date of birth in the format DDMMYYYY. You can then view or print the file.

What is the penalty for not furnishing Form 16 to the employer?

The employer will have to pay Rs. 500 as a penalty for every day the default continues.

What is the difference between Form 16 and Form 16A?

Form 16 relates to TDS on salary income, issued by employers, while Form 16A is for non-salary income like interest or commission, issued by other entities that deduct TDS.

Is it mandatory to issue Form 16?

Yes, employers must issue Form 16 if they deduct tax from an employee's salary.