Form 16 Issuance
*Complete by: within 10 days
- For businesses having 1 – 25 employees
- TDS Filing for Q4 with Annexure II
- Form 16 issuance
- ITR-1 filing for employees.
Form 16 Issuance to Employees
Form 16 is a certificate that employers issue to their employees. It is a validation that the TDS has been deducted and deposited with the government authorities on behalf of the employee of the organization.
Form 16 gives a detailed summary of the salary paid to the employees and the deducted TDS. TDS Form 16 contains all the information that an individual needs to prepare and file the income tax return.
The employers are required to issue a Salary TDS certificate every year on or before the 15th of June of the coming year immediately after the financial year in which the tax is deducted. There are two components of Form 16 Part A and Part B. If an individual loses Form 16 he can request a duplicate Form from the employer.
Startupportal can help you manage TDS compliance online. Our TDS experts will help you file all the TDS returns pay any overdue TDS deposits and also the issuance of Form 16 to the employees.
Eligibility Criteria for Form 16: Key Points
- Income Within Taxable Bracket: Form 16 is provided to salaried individuals whose income falls within the taxable income limits as per Indian tax laws.
- TDS Requirement: If an employee’s income is taxable, Tax Deducted at Source (TDS) will be applicable, and the employer is required to issue Form 16.
- No Form 16 for Non-Taxable Income: Employees whose income does not fall within the taxable brackets do not have TDS deductions and are not entitled to Form 16.
- Company Practice: Many companies issue Form 16 to employees as a good practice, even if TDS is not applicable, providing a comprehensive summary of earnings and other relevant details.
Structure of Form 16
Part A of Form 16
It provides the details of the TDS that is deducted and deposited. This form can be generated by the employers through the TRACES portal.
The employer must verify the contents before issuing the certificate. Here are a few components of Part A of the salary TDS certificate.
Part B of Form 16
It is an annexure to Part A, Part B is prepared by the employer for its employees and it contains details of the breakup of the salary deductions approved under Chapter VI-A. In case of a job change in one financial year, Form 16 should be obtained by both employers. Some of the components of Part B are:
How to Maximize the Benefits of Form 16
Form 16 is a key document that serves as proof of your income from salary and provides valuable insights into your tax liabilities. Here’s how you can use Form 16 to your advantage:
- Simplify Income Tax Return Filing: Use Form 16 to file your Income Tax Return accurately and on time.
- Proof of Income: Submit Form 16 as evidence of your income when required by authorities or institutions.
- Tax Computation Breakdown: Understand how your tax was calculated, helping you identify any discrepancies.
- Track Tax-Saving Investments: Keep all your tax-saving investments in one place for easy reference.
- Loan Approval Process: Financial institutions use Form 16 to assess your loan eligibility.
- Visa Applications: Form 16 is often required as proof of income when applying for a visa.
- Job Transition: When changing jobs, Form 16 helps your new employer calculate tax liabilities based on the deductions made by your previous employer.
- Check for Overpaid Taxes: Use the document to identify any overpaid taxes, allowing you to claim potential refunds.
By leveraging Form 16, you can manage your finances more effectively and ensure you’re not overpaying taxes.
Why is Form 16 Essential?
Form 16 is a critical document for several reasons:
- Tax Deduction Proof: It serves as evidence that the government has received the tax deducted by your employer on your behalf.
- Income Tax Return Filing: Form 16 simplifies the process of filing your income tax return with the Income Tax Department.
- Proof of Salary Income: It acts as official proof of your salary income, required for various financial processes.
- Loan Verification: Banks and financial institutions often request Form 16 to verify your income and credentials when applying for loans.
- Deadline for Issuance: Employers must provide Form 16 to their employees by June 15th each year. If the employer fails to issue it on time, they are subject to a penalty of Rs. 100 per day until the default is resolved.
Form 16 is a vital tool for ensuring accurate tax filing and is commonly used in loan applications and income verification.
Form 16 Verification and Correction Process
When reviewing your Form 16, it’s important to carefully check the following:
- Accuracy Check: Upon receiving Form 16 from your employer, ensure all the details provided are accurate, including income and deductions.
- Verification: Double-check key information such as income amounts, TDS deductions, and tax calculations listed in Form 16.
- Immediate Action: If you spot any discrepancies, immediately contact your employer’s HR, Payroll, or Finance department for clarification.
- Correction Process: If errors are found, your employer will correct them by submitting a revised TDS return and updating the TDS amount against the correct PAN.
- Updated Form 16: After the TDS return is updated, your employer will issue a revised and accurate Form 16.
Ensuring Form 16’s accuracy is crucial for maintaining correct tax records and ensuring a smooth income tax filing process.
How to Obtain Form 16: Options Available
To obtain Form 16, you can follow these methods:
- Through Your Employer: Your employer is the primary source for providing Form 16 for the current financial year (e.g., FY 2022-23). Employers are legally required to issue Form 16, which summarizes your earnings and tax deductions.
- After Leaving Your Job: Even if you have switched jobs during the year, you can still request Form 16 from your previous employer’s HR or finance department by contacting them directly.
Form 16 is an essential document for accurate tax filing and income verification.
Here is the list of deductions
TDS on Salary
TDS is calculated on the income tax rates that are prescribed for the financial year in which the payment of the employee is made. An individual responsible for paying the taxes can increase or decrease the amount that is deducted based on any adjustments in the previous deficiency or excess deduction.
The total amount of the TDs will be determined by the following elements:
If an individual is employed by more than one employer during a financial year then tax will be deducted on the aggregate salary by one of the employers as chosen by the employee by submitting information in Form 12B.
Thus if an employee has more than one employer in a financial year then he is required to furnish information in Form 12 B to one of the employers. Once Form 12B is submitted it becomes an obligation for the employer to deduct TDS.
Deposit of Tax to Government by Employers
The deducted tax from the employees’ salary should be deposited by the employer along with an income tax challan ITNS 281 on or before the 7th of every month for the previous month.
Recently, from 2008 all the corporate assessees and assessees are subject to tax audit are required to make all the TDS payment online through an internet banking facility.
An assessee can also make payment of taxes from the account of any other person. However, the challan for making should indicate the PAN of the assessee on whose behalf the payment is made.
Due Date for Filing TDS Returns by Employers
TDS return must be filed with the Government every quarter as follows:
Annexure-II of TDS Return in May 31st
Issuance of Form 16 to Employees
After the TDS returns are filed by the employer, the Government would issue TDS certificates to the employer – which in turn is provided to the employees.
Form 16A provides details about TDS from salary. Form 16B provides details of TDS Other than salary, Form 16C for TDS under Section 194-IB, Form 16A for TDS from other than salary, and Form 27D for TCS.
The due date for issuance of Form 16 is on or before June 15th of the financial year immediately following the financial year in which the tax is deducted. In the case of Form 16A, the same should be issued every quarter.