Form 16 is a certificate of TDS on salary. Every employer issues Form 16 to an employee after the end of a Financial year. Employees usually receive it before 15th June of the next financial year. It contains details of income earned and the taxes deducted.
Form 16 is divided into two parts: Part-A and Part-B. The employer can download both the part from his account on TRACES.
It is easier to file your Income Tax Return using Form 16. You can simply upload it on Quicko and ITR will be prepared automatically.
Form 16 Part A
Part-A is the certificate of TDS. It contains details of TDS deducted by an employer. Part-A is generated by TRACES. The employer email’s this Form 16 Part A to their employees at the end of each quarter and/or financial year.
Form 16 Part A includes the following details:
- Employer Details: Name, Address, PAN, TAN
- Employee Details: Name, PAN
- Tax details: Tax deducted and deposited on the employee’s behalf
Sample Form-16 Part A:
Form 16 Part B
Part-B is an annexure containing details of Income Chargeable under the head of ‘Salary’. Form 16 in their detailed breakdown of Salary includes allowances, perquisites, bonus, income tax deductions, Taxable Income, Taxes and TDS.
From FY 2018-19 Form 16 Part-B should be issued in a standardized format. An employer can download Form 16 from TRACES.
Sample Form-16 Part B:
1. Salary Breakdown
1 a. Gross Salary
Gross salary is the employee’s total remuneration. It includes basic salary, allowances, overtime, bonus and any other amounts before any deduction made.
- Basic Salary: is the predefined fixed pay that an employee receives each month. It also includes compensation like gratuity, pension, advance salary, commission, etc.
- Perquisites: are additional benefits provided by the employer like rent-free accommodation, concession in rent, etc. It also includes expenses incurred by the employer on behalf of the employee like medical, education, etc.
- Profits: amount received from a current employer or former employer in connection with their termination like a bonus, etc.
- Salary from the other employer(s): the current employer will include your salary from the previous employer in the Gross Salary. It the case usually when, the employee switched jobs or have multiple employers during the financial year.
1 b. Allowances u/s 10
Additional compensation received by employees over and above their salary is Allowances. Employers give allowances to their employees to help them meet certain particular requirements. Some of the common allowances include:
- Leave Travel Allowance: for employees when they are on leave and traveling alone or with family within India
- House Rent Allowance: for employees to cover their accommodation expenses. Salaried individuals who live in rental premises can claim tax benefits for the amount of rent they pay every year
- Death-cum-retirement gratuity: for employees covered under the Gratuity Act, 1972. There is a predefined formula to calculate the amount that is tax-exempt.
- Commuted Value of Pension: for government employees and other employees who receive a commuted pension from the employer.
- Cash equivalent of leave salary encashment is a retirement benefit allowed to employees. There is a predefined formula to calculate the amount that is tax-exempt.
1 c. Deductions u/s 16
Tax deductions are subtracted from taxable income (adjusted gross income). An employee is eligible to claim these deductions based on the investments made and expenses incurred during the year. These deductions help reduce the overall tax liability.
Some of the most commonly used deductions u/s 16 are:
- Standard Deduction: It is a flat deduction allowed from the salary. No proof is required to claim the standard deduction. The standard deduction allowed for FY 2018-19 is INR 40,000 and for FY 2019-20 is INR 50,000.
- Entertainment Allowance: is exempt only for government employees. Entertainment Allowance up to Rs. 5,000 is allowed.
- Employment Tax: Also known as professional tax. An employer pays it on behalf of the employee to the state government. It ranges from INR 2,400 to INR 2,500.
1 d. Total Income from Salary
Total Taxable Salary is after deducting the allowances u/s 10 and claiming deductions u/s 16.
2. Other Income
Other Incomes under Form 16 include:
- Income from Other Sources: dividend, interest income from the savings account, fixed deposit, etc.
- House Property: rental income from house property including flats, office spaces, farmhouses, etc. Also includes interest and principal repayment of loan taken on self-occupied house property.
3. Chapter VI-A Deductions
- 80 C: ELSS, Provident Fund, Life Insurance Premium, etc.
- 80CCC: Pension Funds
- 80 D: Medical Insurance Premium
- 80 E: Interest on Loan taken for Higher Education
- 80 G: Donation to Charitable Trusts, Institution
- 80TTA or 80TTB: Interest on Savings and Deposits
4. Total Taxable Income
It includes the total income earned from salary, house property and other sources, after claiming all the exempt allowances and deductions during the financial year.
4 a. Net Tax Payable
Net Income: Income on which tax is deducted at the slab rate. Tax includes Income Tax, Surcharge, Health & Education Cess, Interest Penalties etc.
Tax Payable: Tax is calculated at Slab Rate on Net Income. Surcharge and
Health & Education Cess is levied on it. Rebate u/s 87A and Relief u/s 89 are given based on total income earned by an employee.
You can file ITR-1. Any individual who earns only salary income can file ITR-1.
If your employer has not provided you with a Form 16, no need to worry. You can always download Form 26AS from the income tax e-Filing website to check TDS credit. And you can use salary slips to determine taxable salary income.
A salaried individual cannot download his/her Form 16. Form 16 can only be downloaded by the deductor (employer) from his TRACES account.
Yes, you can claim deductions that are not shown in Form-16 while filing your ITR. But make sure to keep supporting documents with you for future reference.
If someone has switched jobs during the year, he’ll have multiple Form-16. You need not worry. Just upload one, save it and add another. Quicko will add up all your salaries and deductions from multiple Form-16s.
Yes, an employer can still issue Form 16 to you. An employer will not issue Form 16 Part-A since no tax is deducted at source. However, your employer can issue Form 16 Part-B which is a salary statement.