Korpfintax

Form-16

Form 16 is a certificate issued by employers that provides a detailed summary of the salary paid to an employee and the TDS (Tax Deducted at Source) withheld during the financial year. It includes all the necessary information required for an employee to file their income tax return, such as salary components, deductions, and the amount of tax deducted and deposited with the government.

This form serves as proof that the employer has deducted TDS and deposited it with the central government on behalf of the employee. Employers are required to issue Form 16 to their employees annually, on or before June 15 following the end of the financial year in which the tax was deducted.

Form 16 consists of two parts:
Part A of Form 16 :

Form 16 provides details of the TDS deducted and deposited by the employer on behalf of the employee. This form is generated through the TRACES portal and must be verified by the employer before it is issued.

Part A of Form 16 includes the following information:

  • Name and address of the employer

  • Employer’s TAN (Tax Deduction and Collection Account Number) and PAN (Permanent Account Number)

  • PAN of the employee

  • Quarterly summary of tax deducted and deposited, certified by the employer

Here is the list of deductions:

  • Deduction for life insurance premiums, Public Provident Fund (PPF) contributions, and other eligible investments under Section 80C

  • Deduction for contributions made to pension funds under Section 80CCC

  • Deduction for an employee’s contribution to a pension scheme under Section 80CCD(1)

  • Deduction for self-contribution to a notified pension scheme under Section 80CCD(1B)

  • Deduction for the employer’s contribution to a pension scheme under Section 80CCD(2)

  • Deduction for health insurance premiums paid for self and family under Section 80D

  • Deduction for interest paid on education loans under Section 80E

  • Deduction for eligible donations made under Section 80G

  • Deduction for interest earned on savings accounts under Section 80TTA

  •  
Part B of Form 16 :

Form 16 is an annexure to Part A and is prepared by the employer for each employee. It contains detailed information about the salary structure and the deductions claimed under Chapter VI-A of the Income Tax Act. If an employee changes jobs during a financial year, both the current and previous employers are required to issue separate Form 16 certificates.

Key components of Part B include:

  • Detailed salary breakup

  • Breakdown of exempt allowances under Section 10

  • Deductions permitted under Chapter VI-A of the Income Tax Act

Wage Tax Withheld :

Once the employer submits the TDS returns, the government issues TDS certificates, which are then provided to the employees.

Form 16A contains detailed information about TDS deducted on income other than salary. Form 16B provides details of TDS on property transactions, while Form 16C is used for TDS deducted under Section 194-IB (typically for rent payments by individuals or HUFs). For Tax Collected at Source (TCS), Form 27D is issued.

Form 16, which summarizes salary income and TDS, must be issued by the employer on or before June 15 of the financial year following the year in which the tax was deducted. Form 16A, on the other hand, should be issued every quarter for non-salary TDS.

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