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What is Form 16 and how does it work?

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What is Form 16 and how does it work?

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If you are a salaried employee, you may have heard of the Form 16. This is a document that is highly important 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 what this form is and why it is crucial for salaried individuals. 

However, it is essential to know what this document is, why it is required, and how to download Form 16 when you need it. Here’s a rundown on all the key things about Form 16 and how it works. 

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 Rs. 2.5 lakhs. This TDS is then deposited by the employer to the government, against the concerned employee’s PAN. Form 16 contains the details of the tax deducted at source for such employees. 

This certificate is issued by the employer to salaried individuals under section 203 of the Income Tax Act, 1961. If you are a salaried employee earning more than Rs. 2.5 lakhs per annum, your employer may also have issued this certificate to you. It tells you the exact amount of tax that has been deducted from your salary during the financial year. 

The information contained in Form 16 is divided into two parts — Part A and Part B. Want to know more about what you can find in each of these components? Check out the key details below.

Part A of Form 16

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. 

Here are some of the key details typically found in Part A of Form 16 —

  • 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 

Part B of Form 16

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, as well as 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. 

Here are some of the key insights contained in Part B of Form 16.

  • 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

When is Form 16 issued?

Since the Form 16 contains the details of tax deducted from salary during a financial year, it needs to be issued by employers on an annual basis. Typically, employers issue Form 16 after the end of the financial year.

The last date for issuing Form 16 for any given financial year is June 15 of the next financial year. So, for instance, the Form 16 pertaining to FY 2021-22 will have to be issued on or before June 15, 2022. This gives employees sufficient time to use the details in their Form 16 to file their tax returns by the due date for ITR filing, which is July 31 of the assessment year.

If your employer delays the issue of Form 16 and does not issue it by the specified date, they will be liable to pay a penalty of Rs. 100 per day of delay or default. The penalty should not exceed the tax deducted, though. 

How to get your Form 16?

Since Form 16 is a certificate that is issued by your employer, you will typically receive this document from your employer directly, either as a hard copy or as a soft copy. In some cases, employers may make the Form 16 available for employees on their outsourced online payroll platform. If your workplace has this policy, you can download your Form 16 online from the concerned platform. 

How to download Form 16 from TRACES?

TRACES is an online web-based application provided by the Income Tax Department. On this portal, it is possible for payers and deductors of TDS to 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.

As an employee, you cannot download your Form 16 from the TRACES portal. Only employers can do so, since they are the deductors of tax at source. However, if you are an employer, here is how you can download Form 16 from TRACES.

  • Step 1: Visit the TRACES portal login page at tdscpc.gov.in/app/login.xhtml 
  • Step 2: Log in using the employer login ID and password and the TAN of the deductor.
  • Step 3: Head to the ‘Downloads’ tab.
  • Step 4: Look for the ‘Form 16’ option.
  • Step 5: Fill in all the required details of the employee, such as their name, address and PAN.
  • Step 6: You will also have to fill in the employer details as needed.
  • Step 7: Then, the generated Form 16 can be downloaded or sent to the employee.

What is Form 16 used for?

Form 16 is an essential document for salaried employees. In case 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. You can find 

2. It can be used as a proof of income

Your Form 16 is a valid proof of income that is accepted by various third parties like banks and financial institutions. You can use this certificate as a proof of income when you are applying for a loan, a credit card or even your VISA.information about your salary, your tax deductions and your tax-saving investments. This makes it easy to file your tax returns promptly, before the due date.

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

In case you switch jobs during a given financial year, your new employer can find the details of tax deductions from your previous employment 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

In case you have paid more taxes than what’s due during the financial year, you will be eligible for a tax refund. Since your Form 16 will contain the details of the taxes due and the taxes deducted, you can quickly check if you are eligible for a refund or not.

What happens 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.

Is Form 16 different from 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 keep in mind that Form 16, Form 16A and Form 16B are three entirely distinct certificates or documents. 

It is important to know the distinction between these forms, so you can ensure that you get the document that pertains to you. Check out what Form 16A and Form 16B are.

What is Form 16A?

Form 16A is a certificate of tax deducted at source, from incomes other than salary. Some examples of such incomes include interest from fixed deposits, freelance income, rental income, insurance commission etc.

Unlike Form 16, Form 16A is not issued by your employer. Rather, it is issued by the deductor — who may be any entity that has deducted tax at source on your non-salary income. Some common examples of deductors include banks and financial institutions, tenants, or clients of your freelance business. 

Aside from this key difference, the details contained in Form 16A are quite similar to the insights that Form 16 offers. Some of the main details present in Form 16A include —

  • Your personal details
  • Your PAN
  • The details of the deductor like their PAN and TAN
  • The nature of payment made
  • The amount of tax deducted on the payment
  • The date of tax deduction 

What is Form 16B?

As per section 194 of the Income Tax Act, 1961, in case of a sale of an immovable property, the buyer has to deduct TDS at the rate of 1% on the payment made. Form 16B contains the details of tax deducted at source in case of such a sale of an immovable property. Here, the buyer issues Form 16B to the seller of the property. 

Some of the key details contained in Form 16B include the following —

  • The name and address of the deductor 
  • The name and address of the deductee
  • The PAN of the deductor 
  • The PAN of the deductee
  • The financial year in which the deduction has been made
  • The amount paid or credited for the transaction
  • The tax deducted at source

Form 16 vs Form 16A vs Form 16B

To help you understand the differences between Form 16, 16A and 16B even more clearly, here is a tabular comparison highlighting the key distinctions among these documents. 

Particulars

Form 16

Form 16A

Form 16B

What is it?

A certificate that acts as a proof of TDS deducted from salary

A certificate that acts as a proof of TDS deducted from income other than salary

A certificate that acts as a proof of TDS deducted from the amount paid to buy an immovable property

Who issues it?

The employer 

The deductor who pays the income

The buyer of the property 

Whom is it issued to?

The employee 

The deductee who receives the non-salary income

The seller of the property

Summing up

This should give you a good idea of what Form 16 is all about. If you are an employee. Ensure that you get your Form 16 from your employer promptly, and on time. In case you switch one or more jobs during the year, make sure you have the Form 16 pertaining to each job. You can use your Form 16 as a proof of income for many official purposes, such as loan or credit card applications and visa processing.

If you are an employer, it is important to know how to get Form 16 online on time, so you can issue it within the due date to each of your employees. You may now be aware of how to download Form 16 from TRACES. You can make use of the steps outlined above to get the document from the official income tax portal. 

Frequently Asked Questions

1. How is Form 16 generated?

Form 16 is pre-filled with the details of the employee’s salary income and the tax deducted at source on such salary. It can be automatically generated online by the employer on the TRACES portal.

2. What are the due dates for the issuance of Form 16 and Form 16A?

The due date for issuing Form 16 is June 15th of the assessment year for which the form is being issued. So, for instance, if you want the form for FY 2021-22, the due date for issuing Form 16 would be June 15, 2022. 

In the case of Form 16A, however, the due dates are set on a quarterly basis, as follows. 

Quarter 

Due date for Form 16A

First quarter (April 1 to June 30)

August 15

Second quarter (July 1 to September 30)

November 15

Third quarter (October 1 to December 31)

February 15

Fourth quarter (January 1 to March 31)

June 15

3. When is Form 16A required?

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. 

4. How to get Form 16A?

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. How do I file a return if I don’t have my Form 16?

While your Form 16 certainly does make it easier to file your income tax returns (ITRs) each year, it is not mandatory to file your returns. You can get the details of your income using your salary slips. In fact, you can even find details of the deductions in your salary slips. 

You can also make use of Form 26AS, which can be downloaded from the TRACES website. This form also contains the details of your total income as well as the tax deducted from your income. So, you can easily file your tax returns even without your Form 16. That said, make sure that you approach your employer and get your Form 16 on time, since it is beneficial in many other ways.

6. Is the employer required to issue Form 16 if there is no TDS?

Form 16 is a certificate that contains the details of the TDS deducted from the salary of eligible employees, namely employees whose annual income exceeds the basic exemption of Rs. 2.5 lakhs. In case no TDS is deducted, Form 16 is not required. So, an employer need not issue this certificate for employees with no tax deducted at source. 

7. What are the benefits of Form 16?

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.

8. Can I get my Form 16 for previous years?

Yes, you can get Form 16 from your employer for previous years as well. In fact, Part A of Form 16 is available on the TRACES portal for the period from FY 2007-08 onward. However, keep in mind that you cannot access or download your Form 16 directly from the portal. Your employer has to do this for you. So, if you need Form 16 for any of the previous years, up to FY 2007-08, you can always ask your employer to issue it for you. 

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