What is Form 16? Here's everything you need to know

It is that time of the year when you frequently get reminders from the Income Tax Department to file your income tax returns on time. Form 16 is one of the most common financial documents you would come across when filing your ITR.

Here's a quick look at income tax Form 16, and how it can help you file your ITR easily.

What is Form 16?

Form 16 is a certificate (issued under section 203 of the Income Tax deducted at source (TDS) by the employer and submitted by them to the Income Tax Department (IT Department). It details how much tax the employer deducted and when it was submitted to the IT department.

If you have switched jobs during the year, or worked with different employers at the same time, and tax has been deducted at all places, you must obtain a separate Form 16 from each one of them. However, if your employer(s) did not deduct any tax at source from your salary, considering your income for the year is below the tax-exemption limit, they may not issue Form 16.

What are the eligibility criteria for Form 16?

Any salaried person whose tax has been deducted by the employer at the source is eligible to get Form 16. Irrespective of the fact whether your income falls under the tax exemption limit or not, the employer must issue a Form 16 if they have deducted tax at source.

Why is Form 16 required?

Form 16 helps you easily file your income tax returns. It is proof that the employer did submit the money to the authorities that it deducted as TDS from your salary.

It also details how your tax was computed based on the investment declarations you made at the beginning of the financial year. This comprises any allowances that your company gave and any other details necessary that may impact the tax amount like house rent, medical bills, loans, etc. These details will help you file your Income Tax returns.

When is Form 16 issued?

The employer is required to issue Form 16 on or before May 31 of the assessment year, which gives you enough time to file your Income Tax returns before the due date. For your understanding, the financial year (FY) is the period between April 1 to March 31, in which you earned income. The assessment year is the following year in which this income is assessed and taxed.

What is Form 16A and Form 16B

Form 16 contains the information you need to prepare and file your income tax return. It has two prominent components – Part A and Part B, which reflect most of your details bifurcated into parts. These aspects of Form 16 are crucial when filing IT returns. Here's a look at the components of Form 16 in detail:

What is Form 16A

Part A of Form 16 has basic details of the Employee and the Employer, such as

• Name of the employee
• Address of the employee
• PAN of the employee
• Name of the employer (tax deductor)
• Address of the employer (tax deductor)
• PAN of the employer
• Address of the employer

It also contains details of how much tax was deducted, dates when the amount was deposited with the Central Government Account, and details of the Challan issued by the government.

What is Form 16B

Part B of Form 16 contains a detailed breakdown of how your tax was computed considering the investment declaration you made at the beginning of the financial year and the proof of investment submitted afterwards. It also includes details of other allowances that your employer provided to you, which may be necessary for tax computation purposes. Any other details such as house rent, medical bills, EMIs paid towards your home loans and donations exempted from taxation that you may have furnished to the employer. The details include:

• Your gross salary
• Allowances exempt u/s 10
• Tax on employment
• Deductions u/s 80C, which include (the list is not comprehensive) details like Provident Fund (EPF/ PPF) Housing Loan, National Saving Certificate, Life Insurance Plans, tax saving mutual funds (ELSS), and any other investments in tax saving schemes
  
• Deductions under Other sections (80E, 80G, 80TTA), which include (not limited to) National Pension Scheme, medical claims, donations exempt u/s 80-G, and others
  
• Tax on total income
• Any cess levied (e.g. education cess, Swachh Bharat cess, levied by the government from time to time)
• Any rebate on tax
• Any surcharges

Here’s a look at the different components of Form 16.

Difference between Form 16, Form 16A and Form 16B

While all forms are certificates of tax deducted at source, they differ in terms of who has issued the certificate. Let’s examine the differences between Form 16, Form 16A and Form 16B in detail:

Form 16: Form 16 is issued by the employer as proof of tax deducted by them only on income from your salary, after considering your investments declared and proof submitted by you and other allowances.

Form 16A: Form 16A is not issued by the employer, but by financial institutions, entities or people (could be your tenant), who have deducted tax at source on your income other than the salary. For example, income earned through interest on your fixed deposits, mutual funds appreciation (applicable on liquidation), income from rent, insurance commission, etc.

Form 16B: Form 16B is issued for tax deducted at source for any income earned through the sale of immovable property. The buyer issues this certificate to the seller. The property buyer is obligated to deduct 1% of the sale value as TDS and submit the amount to the Income Tax Department. Form 16B certifies that the buyer has deposited the tax with the government.

If the tax deducted at source has been submitted to the Central Government Account by the deductor, the information is available in Form 26AS. The form can be downloaded from the TRACES (TDS Reconciliation, Analysis and Correction Enabling System) website.

While all Form 16A and 16B details are available in Form 26AS, not all information from Form 16 is available in Form 26AS. Form 26AS only has the details of the TDS amount deposited by the deductor with the Central Government account. The breakup of your salary and deductions under various sections are not available here.

Form 16 works as proof that your employer or deductor has deposited the TDS amount with the Central Government account and has committed any fraud or siphoned off any money for any other use. Along with these benefits, there are so many other uses of form 16 that you should know.

How can you use Form 16 to your advantage?

Form 16 also works as your ‘income from salary’ statement, which could be given to various authorities/ companies on demand. Its uses include:

• Help in filing Income Tax Return
• Proof of income
• Document stating how your tax was computed and check any anomalies
• One place document to check all your tax-saving investments
• Loan assessment and approval
• Visa issuance
• On switching jobs: Helps the next employer compute your tax liabilities based on what your previous employer has already deducted
  
• Since the document is related to tax credit, you can check for any overpaid taxes, which will help you claim your refunds, if any
  

How to get Form 16?

Form-16 is the TDS certificate issued by your employer when they deduct TDS. When an employer deducts TDS on salaries, the income tax act requires that a certificate be issued by the employer, where the details of tax deducted and deposited are certified.

Read more to find out how to get Form 16, and make most of it.

It is mandatory for every employer who has deducted any tax at source to issue Form 16 to you. Employers can issue Form 16 in print or soft copy downloaded from their account on the TRACES website. Your employer can also guide you to any outsourced online payroll platform, from where you can download your Form 16.

In case you have lost your Form 16, you can always ask for a duplicate copy from your employer.

How to download Form 16?

To download Form 16 PDF online, log in to the TRACES portal, navigate to ‘Downloads’, select ‘Form 16’, choose the financial year and PAN, submit the request, and use the TRACES PDF generation utility to create the PDF.

You can ask your financial institution to issue Form 16A to you. You can also check online by logging into your account to download Form 16A. In case of tax deducted on income from rent, ask your tenant to issue Form 16A to you. In case you work as a commission agent, ask your employer to issue you Form 16A for any taxes that they may have deducted from the commission due to you.

In the case of Form 16B, ask the buyer of the immovable property to issue Form 16B to you for the tax deducted on the sale value.

How to get Form 16 for previous years?

You will have to ask your employer to issue you Form 16 for previous years. It may be available online on your employer's outsourced payroll platform, where you can log in through the ID's generated by your employer. Form 16 is not available to employees from the TRACES website. The employer must log in to their deductor's account and issue Form 16 to you. You can always check the tax credit yourself through Form 26AS. However, it wouldn't have a detailed breakup of the deductions for tax computation.

Filing income tax returns with Form 16

Form 16 is one of the most important documents you need when filing your IT returns. Whether you're filing your returns on your own or seeking help from your Chartered Accountant (CA), it is important to understand the processes for filing returns with Form 16. Here's a lowdown on the online and offline processes for filing returns with Form 16.

Online process

It is mandatory for taxpayers with an income of Rs. 5 lakh per year to file their returns online on this website. You can either file your returns yourself or seek help from your Chartered Account or any other competent person to file returns online on your behalf.

You can also avail of services from paid online third-party services, which have simplified forms to allow you to file returns yourself. Alternatively, you can upload your Form 16 to these websites, which will allow their professionals to do the job on your behalf.

Additional Read: How to file income tax returns online

What to do after e-filing your tax returns

After e-filing your returns, you need to verify your returns online, which can be done by generating an e-verification code (EVC) using:

• Net Banking
• Aadhar Card OTP
• Demat account
• Receiving EVC by pre-validating your bank account

You can also e-verify your returns by printing an ITR-V, signing it and sending the physical copy by post to CPC.

Offline process for tax filing returns

If your income is less than Rs. 5 lakh for the Financial Year, and you want to file your returns offline, you can do so by downloading the required ITR form from www.incometaxindia.gov.in or by collecting it from the nearest Income Tax office. After filling these forms, they need to be submitted at the nearest 'Aaykar Sampark Kendra'. An acknowledgement form needs to be filled up too, which is stamped and given back to you by the accessing officer.

Is Form 16 mandatory?

Employers must issue Form 16 for any tax deductions done at the source. You must have Form 16, so you can:

• Check for any discrepancies
• Compute taxes
• Check if you have completed all your tax liabilities
• Look out for any refunds for overpaid taxes

While the employer has to deduct tax at the source, the onus to pay tax is on you.

Can filing of income tax returns be done without Form 16

Income tax returns can be filed without Form 16, provided you're aware of the details mentioned in Part A and Part B of Form 16.

• Ask for the Name, address, PAN and TAN of your employer/ deductor
• Refer to your salary statement to see details of your basic salary, allowances, other deductions, and gross salary
• Collate all your investment and other documents, which you may have earlier submitted as proof of investment to your HR department.

You can file your returns using the information available across all the documents mentioned above.

What to do if the employer deducts TDS but Form 16 has not been provided?

All employers in India must issue Form 16 in case tax deducted has been deducted at source. You can request your employer to issue you Form 16. You can also cross-check if your employer has deposited the TDS with the Central Government Account by going to the TRACES website and downloading your Form 26AS.

In case the employer hasn't deposited the tax, since the onus of paying the tax is on you, you will have to pay the tax online/ offline and claim it later from your employer.

If the employer has deposited the tax and still hasn't issued Form 16 to you, go back to the previous step. Though it is a tedious process, it will help you file your returns on time.

Filing your Income Tax Returns is one of the most important things you need to do, making Form 16 a prerequisite. As one of the most important tax forms, Form 16 contains most of the information required to prepare your income tax returns in India. With its different components, Form 16 enables you to streamline the processes for filing your ITR. It is therefore very important to understand Form 16 and its intricacies carefully.