Form 16 is an income tax form. This form is used to give the details of tax deducted at source. The form 16 is only applicable for salaried individuals. The form is filled by the employers and given to the employee. The employer gives details of tax deduction in this form. It is proof of tax deduction as well. The employee who has paid tax through the employer must get the form 16. The form 16 has many information such as your income details, the applicable exemption, availed deductions and tax payment challan details. The form 16 is used to fill information while filing income tax return.

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·                                 Every salaried Employee gets Form 16 from the employer.
·                                 The employers are bound to give form 16 to its employee.
·                                 The form 16 is like a receipt of tax deduction.
·                                 The employer deduct tax from the employee and deposits it to the the income tax department. The form 16 maintains transparency and assures that employer has deposited tax on your behalf.
·                                 Form 16 has all the details of your income, exemptions and deductions. It is an account of your income and applicable tax.
·                                 It gives challan details of taxes paid on your behalf.
·                                 The form 16 is issued every year after the end of a financial year.

Why Form 16 is Required

A person who is employed with an organisation gets monthly salary. Such salaried person do not pay income tax directly to the government. Rather the employer deducts tax from the salary of the employee. The employer deposits this tax on your behalf. Now you may ask following question to your employer.
·                                 How can you say that I am under taxable bracket. what is the basis of tax deduction?
·                                 How did you calculate my tax liability?
·                                 How would I know that your have really paid tax on my behalf?
·                                 Did you consider my investments for tax deductions?
·                                 What is the challan details of my tax deducted at source?
These questions are genuine and you must get the answer. It is also important for the credibility of government and employer. Thus government has made a provision to give answer of these questions to every employee. You don’t not to ask for it. Rather, every employer should give all the relevant information to its employee.
Indeed government has made a form ( Form 16) which should be filled by the employer. This filled form would give all the details of your income tax applicable taxes. Nowadays this form is directly printed by the employer. Every form 16 contains similar information.

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Importance of Form 16

The form  16 is important for both the employer and employee.
·                                 The form 16 is the main document to  file income tax return. In the income tax return you have to fill the taxable income, deductions and taxes paid. All these information is available at form 16.
·                                 It is the proof of tax deduction by the employer. It can be produced to income tax department if there is any issue in future.
·                                 It is also used as the proof of income. Banks ask forms 16 for home loan sanctions.
·                                 Form 16 is needed while processing visas. It is an important certificate for acquiring Income Tax Clearance Certificate (ITCC) through IT Department.

Other Points

Form 16 is the certificate of Tax deduction. If there is NO TDS deduction, then it is not mandatory to issue form 16.
 If the organisation does not have the TAN, it can’t deduct TDS. IN this case the organisation would not issue the form 16.
The self employed person can’t get form 16 as he/she is not an employee. Such person should file income tax return with the information available.

Information Form 16 Contains

The form 16 has details about your income, deductions and taxes. Following are the specific information given on form 16.

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Salary

Your employer provides the details of your salary. There would be gross salary, Perks, allowances and other deductibles. It would also tell income chargeable under the head Salaries. This amount is used for tax calculation.

Tax Deducted At Source

The employer deducts tax every month from your salary. But it deposits it to income tax department once in a 3 month. Thus, employer submits tax to the government four times. The details of these tax payment can be seen in the form 16. There would be four entries of the TDS payment. If there is not TDS deduction of first quarter, you would not see any tax payment in the first row. You can verify this tax payment through the income tax department. The form 26AS keeps all the details of tax payment against a PAN.

ax Deductions

There various expenses and investment which gives you the opportunity to cut the tax. These expenses and investments are called as the deductions. Examples of such tax deductions are investment in ELSS, PPF and EPF. These deductions are also part of the form 16. Your employer takes the details of these deduction from you. You would have given your tax saving details in the start of financial year and in the January-February of every year.  You must report all the tax saving deduction to your employer as early as possible. It will decrease your monthly TDS deductions.

Other Income

You can have income other than the salary. It may be other income, rental income or capital gains. The home loan interest is also a negative income. The employer don’t have any direct relation with such income but you can report it to the employer. It would make your tax deduction more accurate. If you report it to the employer, It is also entered in the form 16. Indeed all the information which affects your tax deductions become part of form 16.

Structure of Form 16

The form 16 is divided into two parts, the part A and Part B.

Part A of Form 16

The part A of the form 16 consist basic information about the employer and employee. It also includes the tax payment details. You would find following information in Part of A ofform 16.
·                                 TDS deducted by the employer
·                                 PAN of the employer
·                                 The current financial assessment year
·                                 The employee PAN
·                                 TAN of the employer
·                                 The employee/tax payer’s name, address etc
·                                 Name and address of the employer
·                                 Period of the employement
·                                 Receipt number of TDS deducted
·                                 Declaration by the employer

Part B of The Form 16

The part B of the form 16 contains all the details about your salary. It tells about gross salary, perks, exemptions and deductions. You would get following information on part B
·                                 Gross salary of the employee
·                                 Perquisites
·                                 Exempted Allowances
·                                 Other income if reported by the employee
·                                 Deductions under chapter VI A. It includes deductions under section 80C, 80CCC, 80CCD. The EPF, PPF, ELSS, NSC, insurance and tuition fees expense is reported under this head.
·                                 Total taxable income
·                                 Due income tax
·                                 Payable tax or refund, if any

How to Get the Form 16?

The form 16 is issued by the employer. The employer issue this form after the end of the financial year. Every employer must give form 16 on time as employee fill their income tax return on the basis of form 16. Generally Form 16 is distributed in May and June month. You have right to get the form 16 if there is any tax deduction from your salary.

Use of Form 16 While e-Filing

The efiling for salaried people has become very easy. The form 16 becomes the backbone of efiling of ITR-1. All the sensitive information required to enter in ITR-1 is available in the form 16.
Therefore you might have observed that CA asks only form 16 to file your income tax return. From the TAN of the employer to tax deductions of employee, everything is available on the form 16. The information about your salary is authentic in the form 16 because none other than your employer fills the form 16. You must take out the amount of net taxable income, tax paid details and deduction from the form 16 to file income tax return.

However, you should be careful about the deductions. You might have missed some deduction while giving declaration to the employer. If it is the case, you must include the missed deduction while filing income tax return.