You may have heard of ‘Form 16’ if you are a salaried employee. If you are a salaried employee earning more than ₹2.5 lakhs per annum, your employer may also have issued this certificate to you. This document is essential whenever tax filing season comes around each year.

But in case you’re just getting started on your journey of understanding personal finance, chances are, you may not be aware of this form and why it is crucial for salaried individuals. In this blog, we will explore what is form 16, and how to download it and fill it out before the income tax filing due date.

What is Form 16?

• Every financial year, employers need to deduct tax at source from the salary of any employee whose annual income exceeds the basic exemption limit — which is ₹2.5 lakhs. The employer then deposits this TDS against the concerned employee’s PAN to the government. 
• The Form 16 contains the details of the tax deducted at source for such employees. The employer issues this certificate to salaried individuals under section 203 of the Income Tax Act, 1961.
• The information contained in Form 16 is divided into two parts — Part A and Part B.

Why is Form 16 Required?

If you fall within this category of taxpayers, ensure that you keep your Form 16 safe because it can be beneficial in many ways. Check out the various uses of Form 16 below:

1. It makes filing of tax returns easier

Your Form 16 contains every detail you need for your tax filing, making the entire tax filing process efficient and faster.

2. It can be used as a proof of income

Your Form 16 is a valid proof of income accepted by various third parties like banks and financial institutions. You can use this certificate as proof of income when applying for a loan, a credit card or even your VISA. Information about your salary, your tax deductions and your tax-saving investments.

3. It has the consolidated details of your tax-saving investments

As you saw earlier, part B of Form 16 has all the details of your tax-saving investments. This data can be crucial in your tax planning exercise. You can use this consolidated information to plan your tax-saving investments better for the next year.

4. It helps your new employer deduct taxes appropriately

If you switch jobs during a given financial year, your new employer can find the tax deductions from your previous employment details on your Form 16. This can help your new employer deduct taxes appropriately.

5. It is useful if you have to claim a tax refund

You will be eligible for a tax refund if you have paid more taxes than what’s due during the financial year. Since your Form 16 will contain the details of the taxes due and the taxes deducted, you can quickly check whether you are eligible for a refund.

When is Form 16 Issued?

• Form 16 contains details of tax deducted from salary and is issued by employers annually.
• Employers must issue Form 16 by 15 June of the next financial year.
• If your employer delays issuing Form 16, they may be penalized Rs. 100 per day of delay, up to the amount of tax deducted.

What is Part A of Form 16 or Form 16A?

Part A of Form 16 gives you insights into the tax deducted at source on your salary, during each quarter of the financial year. If you change your job during any given financial year, you will receive a separate Part A of Form 16 from each employer.

Key components of Form 16A: 

• Name and address of the employer
• Name and address of the employee
• PAN (Permanent Account Number) of the employer
• TAN (Tax Collection Account Number) of the employer
• PAN of the employee
• The period for which the employer has calculated the tax on salary
• A summary of the amount paid as salary and the tax deducted at source (TDS) for the said employee

Can we Download Form 16 A Online?

Yes, one can download the Form 16A online on the TRACES website.

What is Part B of Form 16 or Form 16B?

Part B of Form 16 is essentially an annexure to Part A. In this part of the form, you will find details of the breakup of your salary and the deductions under chapter VI-A that you are eligible for. It also contains the details of whether you have opted for the old income tax regime or the new one.

Key components of Form 16B: 

• A detailed breakup of the employee’s gross salary
• Salary as per provisions in section 17 (1)The value of perquisites in section 17 (2) The profits in lieu of salary in section 17(3)Any allowances that are exempted from income tax under section 10
• Other deductions like the standard deduction available to salaried employees
• Relief under section 89, if any
• Deductions allowed under Chapter VI-A of the Income Tax Act, such as the following —

• Deduction for life insurance premium paid, contribution to PPF, home loan principal repayment etc. under section 80C
• Deduction for contribution to pension funds under section 80CCC
• Deduction for the employee’s contribution to pension schemes under section 80CCD(1)
• Deduction for the employer’s contribution to pension schemes under section 80CCD(2)
• Deduction for health insurance premiums paid under section 80D
• Deduction for the interest paid on loans taken for higher education under section 80E
• Deduction for donations made under section 80G
• Deduction for interest income obtained from savings accounts under section 80TTA

What is the Difference Between Form 16, Form 16A, and Form 16B?

Often, people confuse part A and part B of Form 16 with Form 16A and Form 16B. However, you need to remember that Form 16, Form 16A and Form 16B are three distinct certificates or documents.

It is important to know the distinction between these forms to ensure that you get the document that pertains to you.

Form 16 In Case of a Job Change

If you change jobs during any given financial year, you will have multiple employers during that year. In that case, each of these employers will issue a Form 16 for you, for the salary they have credited to your account and the tax deducted thereon. You need to ensure that you submit the Form 16 from your old employer to your new one, so the new employer can deduct taxes on your income appropriately.

If you do not submit Form 16 from your old employer to your new one, the latter may end up deducting more tax than necessary. You will then have to go through the hassle of claiming a tax refund.

Step-by-step Guide for Employees on How to Fill Form 16

TRACES is an online web-based application provided by the Income Tax Department. On this portal, payers and deductors of TDS can view the taxes paid online, reconcile any differences before filing returns and seek refunds, if any. Form 16 is also available on this web-based platform.

You cannot download your Form 16 from the TRACES portal as an employee. Only employers can do so since they are the tax deductors at source.

However, if you are an employer, here is how to download Form 16 from TRACES.

What are some common mistakes to avoid when filling out Form 16?

Common mistakes to avoid when filling out Form 16:

• Incorrect personal information
• Inaccurate income details
• Mismatch in tax deductions (TDS)
• Missing or incorrect deductions
• Failure to report tax-exempt allowances
• Inadequate disclosure of perquisites
• Missing Form 12BB submission
• Neglecting previous employment details
• Mismatch in TDS and TCS
• Late filing
• Ignoring amendments
• Not keeping a copy for your records

Summing Up

Form 16 is important for both employees and employers. It serves as proof of tax deducted at source (TDS) and contains crucial information about income and tax liabilities. Employees can use Form 16 for tax filing, loan applications, and visa processing. Employers should ensure timely issuance of Form 16 to employees.

Frequently Asked Questions

1. Who is eligible to receive Form 16?

Form 16A is required if you need to file income tax returns for a particular financial year, and if you have income from sources other than salary during the said year. It is also required if you have income from sources other than salary, and want to apply for a loan or a credit card, since the certificate can be used as a proof of income.

2. What are the different types of Form 16?

The information contained in Form 16 is divided into Part A and Part B. Part A of Form 16 gives you insights into the tax deducted at source on your salary, during each quarter of the financial year. Part B of Form 16 is essentially an annexure to Part A. In this part of the form, you will find details of the breakup of your salary and the deductions under chapter VI-A that you are eligible for.

3. Can I see my Form 16 online?

You cannot directly check your Form 16 online. Only your employer can download the form from the TRACES website. However, you can view certain details that appear on your Form 16 on the TRACES website too. 

4. How to download Form 16?

You can get your Form 16A directly from the deductor. Alternatively, if you are the deductor of TDS, you can download Form 16A from the TRACES web portal. Here is what you need to do to get Form 16A from TRACES.

• Visit the TRACES portal login page at tdscpc.gov.in/app/login.xhtml
• Log in using the deductor login ID, password and TAN.
• Head to the ‘Downloads’ tab.
• Look for the ‘Form 16A’ option.
• Fill in all the required details of the deductor and the deductee.
• Form 16A will then be generated and available for download.

5. Can I get Form 16 if I change jobs during the year?

You will have multiple employers if you change jobs during any given financial year. In that case, each of these employers will issue a Form 16 for you for the salary credited to your account and the tax deducted thereon. You need to ensure that you submit Form 16 from your old employer to your new one, so the new employer can deduct taxes on your income appropriately.

6. What is the significance of Form 16 in income tax filing?

Form 16 is a very important tax-related document. It can be beneficial to employees in several ways. The top benefits of Form 16 are listed below.

• It helps you file your tax returns more easily.
• It can be used as a proof of income for your loan and credit card applications.
• It is helpful in case of visa processing if you are travelling abroad.
• You can find the consolidated details of your tax-saving investments in one place.
• You can use the details for tax planning.
• The form is helpful in case you need to get a tax refund.

7. Do I need to keep a physical copy of Form 16?

You do not need to keep a physical copy of Form 16. A digital or electronic copy is sufficient for record-keeping.