What is Form 16 & When Is Form 16 Issued To Employees For ITR Filing?

What is Form 16?

Form 16 is a crucial document for filing income tax returns (ITR) for salaried individuals. It is a certificate provided by the employer that includes information about your salary, allowances, and other benefits received during the year. Form 16 also shows the tax deducted from your salary and other benefits.

When Is Form 16 Issued?

Employers must issue Form 16 to employees if any tax has been deducted from their salary. According to income tax laws, employers must provide Form 16 to employees by June 15th. 

This certificate is for the previous financial year the salary was paid. Therefore, the Form 16 currently being issued by employers is for the financial year 2022-2023, which ended on March 31, 2023.

Form 16 provides essential information about an employee's tax deductions, salary income, and any exemptions or deductions claimed during the financial year 2022-23. 

This certificate will be used to file the Income Tax Return (ITR) for the same financial year (2022-23) or assessment year 2023-24. Remember, the deadline for filing the ITR is July 31, 2023.

Format of Form-16

Form 16, issued by an employer, consists of two parts: Part A and Part B. To obtain both parts, you need to download them from the TRACES portal, which will have the TRACES logo. 

Part A of Form 16 displays important details like the total tax deducted by the employer during the financial year, the employee's PAN (Permanent Account Number), and the employer's PAN and TAN (Tax Deduction and Collection Account Number). 

Part A of form-16 consists of the following details-

• All the required details of employer and employee such as TAN, address proof, PAN details, etc.

• Provide a detailed summary of salary income.
• Overview of deposited tax amount along with deducted tax.
• Challan number.
• BSR Code of the Bank.
• Tax deduction date.
• Tax deposited to date.
• Declaration number of TDS.
• Employment period in the fiscal year.
• Assessment year of income assessed.

On the other hand, Part B of Form 16 provides information about the employee's gross salary, allowances (such as House Rent Allowance and Special Allowance), and any additional benefits like a company car or accommodation (rented or rent-free) received during the financial year.

Part B of form-16 contains the following information.

• Details of salary breakup

• The precise breakup of exempted allowances under section 10
•  The employer needs to prepare it manually and share it with his employee
• The relief that can be claimed under section-89
• The list of allowances and exemptions is as follows
• Travel accommodation or allowance under section 10(5)
• compensation of death-cum-retirement under section 10(10)
• Commuted value of pension under section 10(10A)
• Cash equal of leave earnings encashment under section 10(10AA)
• House rent allowance under section 10(13A)
• Amount of any other exemption under section 10
• Total payable tax (19)
• Cess on Health and Education under section (16)
• Tax on gross income (13)
• Net taxable income (12)

How TDS is Calculated on Salary Income?

Under income tax laws, the payer of income (such as an employer) must deduct tax at the specified rate from the payment made to the recipient. For salary income, the employer deducts tax each month before paying the salary to the employee. 

However, the deducted tax is deposited with the government on a quarterly basis against the employee's PAN (Permanent Account Number). The employer is also required to file a TDS return to report the taxes deducted from salary income. Form 16, which contains salary details and tax deducted, can only be generated by the employer after filing the TDS return.

TDS (Tax Deducted at Source) on salary income is deducted based on the applicable income tax slab rate for your total salary. At the beginning of each financial year, you must inform your employer about the tax regime you chose for TDS on salary. 

The employer then deducts tax accordingly. You have the option to choose between the old tax regime, which includes tax exemptions and deductions, or the new tax regime, which does not include common tax exemptions and deductions.

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