What is Form 16?
Form 16 is a certificate or a document which is issued by the employees to all their salaried personnel in India. The Form 16 consists of all the essential details which are helpful during the filing process of Tax Returns. This certificate is issued by the employer to his employee. It is basically used by the salaried personnel as a reference document and a proof during filing Income Tax returns. The form consists of all the details. For example, employee’s Salary, Income components, Tax Deducted at Source by the employer, details of paid tax by the employer to the Income Tax Department.
Form 16 has special importance for those employees who are working with a company or a firm. This is applicable to all the salaried personnel. It basically functions as a Tax Deduction Source Certificate, which is primarily issued by the Employer. It acts as a proof to reflect that the employer has deducted the TDS along with paying salary to his employee. It can further be used by the employee as a proof, so whenever the Income Tax Department turns up for inspection then the employee can show his proof of paying the income tax. Only the employer who has a Tax Deduction Account Number is eligible to deduct TDS of his employee and so they have the authority to issue a Form 16.
The TDS will not be deducted in case the employer is not under the obligation to issue a Form 16 to his employee. It is employer’s duty to issue the form 16 to the employee. If there is any wrong or incorrect information included in the form 16 then it can be corrected in future. It can also be called as the salary certificate because it is issued by employers even when it doesn’t include any TDS on the salary of the salaried personnel
This certificate is classified into two parts: Part A and Part B.
Part A is a certificate for TDS. Therefore it act as a proof of the deducted TDS by the employer for the salary of his employee, the deducted amount is later paid into the government account.
Part B is an Annexture which consists the details of the salary which is paid to the employee. The paid tax and the due tax is also mentioned in that. So, it serves as preference for complete details of salary, deductions and exemptions which are computed in an organized manner to be used in future.
Key components that are found in a Form 16:
The form 16 has all the personal details of the Employee. The details include name of employee, his Permanent Account Number, his work place, permanent address. It also includes personal details of employer, his name, PAN, TAN, Company or firm name and etc. It includes the acknowledgment Number of the Income Tax Payment which is made by the detail of employer’s salary, salary should include gross salary and net salary too. Apart from that perquisites and deductions are also mentioned. The Over all Income and Total Tax deducted, The Details of Education Cess or Surcharge is Indicated.
The other things mentioned are the Tax deducted according to the section 191A. The TDS Payment receipt number is included. Balance Tax which is Payable by the Employee and the amount that is refundable to the employee. Various other Details include; Tax Payment, Cheque Number, DD Number, Voucher Number, Challan Number etc and the Declaration of Tax Payment by the Employer of company or the firm.
Importance of form 16
Form 16 is an essential certificate or document. All employers should make sure that all related rules must be followed by the employees meticulously. This should not only be done in the interest of employee or for the employer, but also to maintain the law under the act of income Tax, 196. The person who is granted the authority to sign on the Form 16 must be the most responsible person of that particular company or firm. All details should be calculated effectively so that there is least chance of error. The Salary, Deductions and other financial details should be calculated with utmost care. If any error is found during calculation or later, then the rectifications should be made and a new Form 16 should be issued without wasting much time.
Once the Tax has been deducted from the salary of employee, it should then be paid to the Government within the allotted time. All details of The PAN and TAN details must be filled in the form correctly. After filling of form, employee should be issued the duly completed Form 16. So that they file their Tax Returns with the Income Tax Department in time. Although the duty of providing the documents of form 16 is of the employer, but the employee is also supposed to fulfill all the required conditions to ensure that all rules and standards are met.
The employee should make sure they collect the form 16 from their employee, in time. So that they are able to file Income tax Returns with the Income Tax Department. They should verify whether all the mentioned details related to Name, PAN, address are filled in correctly. Then they should go for Checking Deductions under 80C, 80CCC, and 80CC. In case they discover any discrepancies, they should immediately get the rectified. Another very important thing is to Keep the Form 16 safely, as that will be a proof for all the details filled in while filing Income Tax Returns.
Form 16A is basically a TDS certificate or a document which states amount of deducted TDS, it also includes the nature of payment and the detail of deposited TDS payment with the Income Tax Department. According to the Income Tax Act, the TDS is likely to be deducted on all other payments too. When the payment is expected to be made during that particular year is above than that of 30 thousands.
But the TDS on salaries of employees is primarily deducted at the mean rate of the analyzed income or the computed income according to the Income Tax Slab Rate. TDS on all such other payments like, TDS on Interest, TDS on rent are likely to be deducted. The rates are specified by the government authority. The TDS which is deducted by the authority and deposited on all other payments except salary is mentioned in Form 16A, for the future references.
The difference between Form 16 and Form 16A
Form 16 is issued every year. On the contrary, form 16A is issued quarterly.
Form 16 is issued under the Section 203 of the Income Tax Act, 1961. It contains the below mentioned details; Name of employee, PAN No. & TAN No. of the Deductor, Name & PAN No. of the Deductee, Nature or mode of Payment, Amount Paid & the date of payment and Receipt No. of the TDS Payment.
The above mentioned detail in the Form 16A are required to be filled during the time of filing the Income Tax Return.