InvestorQ : What is Form 16 with respect to taxes and salary?
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What is Form 16 with respect to taxes and salary?

3 years ago
Form 16 is usually a declaration of your salary from your employer. It indicates your gross income, deductibles, tax free components and your investments, donations etc that reduce your taxable income. The final calculation is of your net income that is taxable, the tax applicable and the tax amount deducted.

3 years ago

Form 16 is a salaried individual’s most important tax document. It is a statement of the tax deducted at source (TDS) or the tax that the company deducts at its end from your monthly salary and deposits with the government on your behalf.

Form 16 comes in handy when you are filing your income tax returns as it helps you calculate how much tax you have already paid and how much is due.

If your company has deducted more TDS on your behalf, and hence if you’ve paid more tax than you are liable to, then you can claim a refund from the Income Tax Department.

Form 16 is issued annually, on or before June 15th of the next year and immediately follows the financial year in which tax is deducted.

Every Form 16 has two components to it- Form 16 Part A and Form 16 Part B.

Form 16 Part A

Part A for the Form 16 is generated and downloaded through the TRACES portal, by the employer. Before this certificate is issued, the employer checks it for its validity and accuracy of its contents.

Some of the components of Part A are:

  • Employer’s TAN or Tax deduction and Collection Account Number

  • Employer’s and Employee’s Permanent Account Number (PAN) details

  • Addresses of employee and employer

  • Assessment year

  • Period of employment

  • Summary of the amount of TDS deducted from your salary every quarter

  • Summary of the TDS deposited with the government

  • Certificate of monthly deductions

    Please note, if you change your job in a financial year, then every employer who has emplo*** you will issue a separate Part A of Form 16 for you, for the period you were emplo*** with the company.

    Form 16 Part B

    Part B of the Form 16 is a consolidated summary of salaries you received in a financial year as well as the deductions you claimed. If you have changed your job in a financial year, then it is up to you to decide if you want Part B of the Form 16 from both the employers or from the last employer only.

    Some components of Part B of Form 16 are:

    - Salary breakup

    - Deductions allowed under Income Tax Act (under Chapter VIA)

    - Total taxable income

    - Tax deducted from your income.