Form-16 for Employees

The tax season is approaching and employers will soon start giving out the most important tax document to their employees – FORM 16. For the many who have never filed an IT return, it’s the first season of tax filing. In such case it becomes extremely important to understand all the major aspects of filing a tax return. FORM 16 is one such essential document that one must understand. Many who have filed ITR previously also may have minimal understanding of Form 16 and want to learn more. In this article we will help you understand contents and structure of Form 16.

Income Tax Act defines Form 16 as a document issued to salaried individuals by their employers. It contains details of salary paid, investments made, deductions claimed under the IT act and calculations of tax deducted at source.

From the perspective of an employee Form 16 is a very important tax document since it is a proof of salary received/ income earned and also tax deducted and paid to the government account.  The basic information a Form 16 includes is Name, Address & Permanent Account Number (PAN) of the Employee & Name, address and PAN and Tax Deduction Account Number (TAN) of the Employer.

There are two parts to FORM 16 – Part A, which is a certificate by the income tax authority which states that tax deducted, has been paid by the employer to the government account and Part B, which is a salary statement that includes details of employee’s income. Employee must ensure that Part A is downloaded from the Income Tax website to ensure that the taxes are correctly paid. Form 16 is used as the basis to file taxes and hence one must ensure that this document contains correct information.

Form 16 also reflects the declarations made by the employee with respect to tax saving investments made and reporting of any other income apart from salary. Typically the computation of total income as shown in FORM 16 contains income from salary, income from house property and income from other sources (mostly interest income from banks). The form contains investment details as per proofs submitted by the employee and hence shows the resultant amounts claimed as tax deductions. The tax deductions should be checked by the employee for accuracy. If there are any unclaimed deductions for which declaration and proofs couldn’t be submitted to the employer then these may be claimed later while filing ITR. This helps claim refunds from IT department for excess taxes deducted as per FORM 16.  

Hence Form 16 is a very important document that contains a lot of details of income and taxes of an employee. Preserving it and maintaining its confidentiality is of utmost importance!

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What are the important aspects of income tax filing from a salaried tax payers perspective?

If an individual is having taxable income it is always recommended to file his income tax returns. For a salaried individual, following are the key considerations that should be taken into account while filing Income Tax Returns.

1. Form 16: Form 16 is an annual statement of salary on which tax is calculated. Form 16 is given in two parts i.e. PART A and PART B. It is accompanied with Form 12BA which is calculation of taxable and non-taxable perquisites. If TDS is deducted, ensure that PART A of Form 16 is issued by TRACES.

2. Form 26AS: Form 26AS is an annual tax statement developed by Income Tax Department in which credit of TDS deducted for the financial year can be viewed by the employee. It is important to ensure that TDS deducted reflects in Form 26AS and matches the TDS deducted as per Form 16 (Part B). For any mismatch, one needs to contact the payroll department to rectify it.

3. E filing of income tax returns: E-filing is mandatory for an individual having income above Rs. 5 lakhs.

4. Other Income: Please ensure that the income from other sources like interest earned, house rent, capital gain etc. is declared while filing your tax returns.

5. Deductions: There could be certain deductions that are not considered by the employer. At the time of filing the return, one should include such deductions to claim the benefits given by law.

6. Last Date: For salaried employees, last date for filing income tax returns is 31st
7. Income Return Forms: Ensure that you select proper Income Tax Return Forms issued by the Income Tax Department i.e. ITR 1  or ITR 2

Source: http://blog.hrblock.in/