What is form 16 – This is a very basic question if you are a working professional. For a salaried employee, Form 16 is of utmost importance from income-tax point of view as it forms the base of their income-tax return. Income Tax Form 16 is a certificate from your employer. It certifies that TDS has been deducted on your salary by the employer. If an employer deducts TDS on salary, he must issue income tax Form 16 as per tax rules of India. Form 16 is issued once in a year, on or before 31st May of the next year, immediately following the financial year in which tax is deducted.
A part of your Form 16 will be the TDS certificate issued by your employer. It determines the total amount paid to you during the year and amount of tax deducted and deposited by the employer in your name with the Indian Government Treasury.
Your Form 16 has 2 parts – Part A and Part B.
Part A has TAN (tax deduction & collection account number) of the employer & PAN (permanent account number) details of both the employer and employee. The name and address of employer and employee is also mentioned. It also mentions the assessment year and the period spent by you with the employer. Note that for financial year 2014-15 the assessment year is 2015-16. Part A also has summary of tax deducted from your income and deposited to the government as per the quarterly TDS return filed by the employer.
Part B is an important part of your Form 16 since it has details of salary paid to you during the year. The breakup of your salary as well as detail of deduction claimed by you under section 80 of the income tax act is mentioned. Deductions under Chapter VIA include details of amounts claimed under Section 80C for EPF, PPF, NSC, life insurance premium or Section 80D for health insurance, Section 80G for donations made are all mentioned here.
The last part of Form 16 consists of Annexure that provides summarised salary details for your reference purposes bifurcating the same into exempt and taxable components.
It determines the total tax payable by you, tax deducted and deposited by the employer and net tax refundable to you. Ideally, it should be Nil. In case the figure reflects a refundable amount represented by a negative sign, it does not mean that the employer is going to refund you the amount, so don’t catch them for this purpose.
TDS certificate in Form 16 is only required to be issued to the employee when TDS has been deducted. In case no TDS has been deducted by the employer they may not issue you a Form 16.