A Beginner’s Guide to Understanding the ‘Form 16’

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What is Form 16 2020?

Your employer is liable, as per the Income Tax Act, to deduct tax at specified rates on the salary you receive through them. The tax deducted is one so at the average rate of tax that is applicable to respective employees and is deposited on a monthly basis by the employer in the income tax department. As per the rules, an employer will file a quarterly TDS return that will show details of the amount paid as well as tax deducted by them with respect to each employee. These quarterly details are also consolidated by one’s employers each year. Employers thereby issue a Form 16 that will contain all relevant details regarding this.

Why Do You Need Form 16?

Form 16 2020 is needed as it contains all relevant details regarding the salary you receive through your employee, including the taxability of these amounts. Furthermore, the amount is tax deducted is also certified by one’s employer in their Form 16. In general, Form 16 contains all the requisite details that may be necessitated by one’s employer to file their ITR. In case you have opted to switch jobs in the past year, you will receive an individual Form 16s from all your respective employers.

Form 16 Eligibility Salary

As per the Finance Ministry’s regulations that have been issued by the Indian Government, every salaried individual that falls under the taxable bracket is eligible for Form 16. If an employee does not fall within any preset tax brackets set, she or he will not need to have any tax deducted at the source. In these cases, a company is no longer under the obligation to provide a Form 16 to their employees. These days, however, as good practice at work, many organizations issue a certificate to their employees as it contains a consolidated picture of the earnings of the individual, in addition to having other uses.

Components of Form 16

The Form 16 format is pretty much the same each year, except for minor changes. It is issued by the company in the Form 16 format that has been specified by the Income Tax Department. Broadly, Form 16 contains two parts:

Part A essentially contains all details of the tax deducted by one’s employer. It will contain the following information:

  • Employer’s name and address
  • The TAN or ‘Tax Deduction Account Number’ of one’s employer, which will be required if one wants to claim the credit of tax deducted.
  • Employee’s PAN
  • Summary of tax that has been deducted & deposited on a quarterly basis
  • The year that succeeds the financial year, also known as the assessment year. For example, for the financial year 2018–19, the assessment year would be 2019–20.
  • A unique TDS certificate number whose goal is to check the authenticity of the certificate generated by the employer. Form 16’s Part A must be generated and downloaded through the Traces portal. It can, hence, be verified online too.

Part B of Form 16 2020 is basically an annexure to Part A. Part B contains the breakup of the salary that is paid by one’s employer into taxable allowances, one’s salary, perquisites, and more. Part B also contains the breakup of the deductions under Chapter VI-A as per the details which were submitted to your employer by you. Part B also shows one’s total taxable income, as well as the tax deducted on this income.

What Do You Need to Share from Form-16 in the ITR?

You will need the following details from your Form 16 when you are filing for your Income Tax Returns.

  1. Details of the taxable portion of one’s salary
  2. The breakup of the deductions as per Chapter VI-A
  3. TDS that has been applied by one’s employer
  4. Employer’s TAN
  5. Address and name of one’s Employer
  6. Assessment year that matches the assessment year for which one is filing their returns

If my employer has not issued my Form 16, should I not file my taxes?

Note that your employer only issues a breakup of the salary that has been paid by him. On the other hand, Income Tax Returns should contain complete details about the incomes that have been earned during the year. Even while your employer is responsible for issuing Form 16 2020 to you, the onus to file your income tax returns lies with you alone. It’s possible that your employer may not issue Form-16 to you if they have not deducted any tax against your salary.

In fact, you may still remain liable to file your income tax returns considering your other incomes such as profit on the sale of shares, your rental income, and more. For this reason, you should prepare accordingly, and file your ITR. In addition to this, if you choose to switch your job during the financial year, do not forget to income the income from all of your employers, whether or not Form 16 was issued by them. Ensure that you remember to use your Form 16 when you choose to file your income tax returns online.

The Bottom Line

Any individual that is responsible for paying salaries is obligated to deduct tax at source (TDS) before making payment of their employees’ salaries. If your gross income from different sources exceeds the minimum tax slab, it is mandated that you pay tax, whether or not your employer has chosen to deduct TDS. Even when your employer fails to issue a Form 16 2020 to you, it is required that you file your income tax returns and pay off any taxes that are due.