If you are a salaried employee, you need to understand what Form 16 is. It is an Income Tax Return form and is used by companies for all their employees in the country. Form 16 is provided by an employer to the salaried individuals in the country. This form will contain all the details that an employee will need at the time of filing an Income Tax Return with the Income Tax department.
Whenever Form 16 is given by an employer to the employee, it becomes proof of filing of their income. The form has various components that need to be filled. It will show the salary income component of the employee, and it is mandatory for every employer to provide the form to the employees who fall in the tax bracket of the government. Those employees who do not fall under the tax bracket will not need the form.
Components of Form 16
The different components of the form are elaborated below:
Form 16 Part A will contain the Tax Deduction and Collection Account Number (TAN) and Permanent Account Number (PAN) of the employer and the PAN of the employee. In addition, it will contain the addresses of the employer and the employee. There will be details of all the payouts made by the employer to the employee in the financial year. It will also contain the details of Tax Deducted at Source (TDS) filed by an employer and paid to the government every quarter. There will be a monthly statement of TDS deduction as well.
Form 16 Part B will contain all the consolidated details about the salary paid to the employee in a particular assessment year. In this part, there will be a breakdown of the salary and details of all the deductions made by the employee under Section 80C of the Income Tax Act, 1961. These deductions could be an investment in national savings certificate (NSC), life insurance premiums, public provident fund (PPF), and much more. Tax refund or any payable due should also be included in this section.
In case of a change in the job by an employee, it is important to have Form 16 from both the companies.
Form 16 is very important for a salaried employee and it makes the return filing process extremely easy and straightforward. It is essential for an employee to ensure that all the details in the form are complete and there is no information missing. With a complete Form 16, it will become easier to file your annual tax returns. It also makes it easier for employees to claim a tax refund. The form has complete details about the TDS that has been deducted from your salary and it acts as a proof of tax payment. It can also be submitted as proof of your income when you apply for a loan.