Form 16 is a crucial document that is essential when one is filing the income tax return (ITR) of a particular financial year. The document is essential for individuals earning a salary as it gives the whole breakup of Tax Deducted at Source (TDS), providing a comprehensive overview of an employee’s earnings, including salary, allowances, and additional perks, throughout a given financial year.
Read More: How can Form 15G & Form 15H save TDS on interest income?
If an individual is earning more than Rs 2.5 lakhs per annum, his or her employer should be issuing Form 16.
As per the usual schedule, employers issue Form 16 around mid-June, i.e before June 15. For FY 2023-24 (assessment year 2024-25), Form 16 should be issued by June 15, 2024.
The usual deadline set by the Income Tax department to file ITRs of the given financial year is July 31, unless the ruling government extends it this year. Therefore, if a company issues the Form 16 on June 15, the taxpayer exactly has 45 days to file his or her tax returns.
Form 16
Form 16 is divided into two distinct sections. Part A of Form 16 provides a summary of the tax deductions undertaken by the employer on behalf of the employee, which are then reported to the Income Tax Department. It is essential to note that while this part reflects the tax deducted at source (TDS), it should not be confused with Form 16 in its entirety.
Part B of Form 16 elaborates on various financial aspects including salary received, deductions applicable, and any other supplementary income of an employee. This section amalgamates information from both employer and employee perspectives thereby offering a detailed view of the individual’s financial status.
Both sections serve unique purposes; hence clarity about their distinct functionalities within Form 16’s scope is necessary for precise compliance and documentation.
Read More: Income Tax: How are e-filing and e-payment of taxes different? Know details here
Form 16 vs Form 16A vs Form 16B
Form 16 and Form 16A are distinct documents and should not be confused with each other. Forms 16 and 16A are essential for taxpayers since they are used to calculate the amount of tax owed. They are also required to file income tax returns. Taxpayers frequently mix up the two documents due to their nearly identical purpose.
Form 16 is a certificate furnished by employers to salaried employees, indicating that tax has been deducted at source from their salary and remitted to the Income Tax Department. This document serves as official confirmation of the payment on behalf of tax payment the employee.
On the other hand, Form 16A is a document that provides a concise overview of tax deducted by an employer or organisation from an employee’s salary and remitted to the I-T department. It is a representation of the employee’s tax deductions and issued on the employee’s behalf.
Form 16-B is a variation of Form 16 presenting a consolidated statement of diverse financial details associated with an employee’s income. This statement includes information such as the employee’s salary, potential deductions from the salary (if applicable), and any additional income disclosed by either the employee or the employer.
Points to note
Form 16 is important as banks or financial institutions ask loan customers to submit the document to ascertain your financial status. It acts as a document with details of your income and tax compliance, adding credibility to your financial standing.
When changing jobs in a particular financial year, it is essential to collect Form 16 from each employer to accurately calculate your taxable salary. This document will provide a detailed breakdown of your earnings and deductions, ensuring that you report your income correctly to the tax authorities.
Read More: ITR 1 Filing AY 2024-25: Documents You Need To File Sahaj Form, Check Full List Here
Failing to inform your new employer about the income received from your previous job could lead to discrepancies in your tax liability and potential penalties for underreporting income. Therefore, it is crucial to maintain clear communication and documentation with both employers to ensure that your overall income is accurately assessed for tax purposes. By following these steps, you can avoid any potential issues and ensure compliance with tax regulations.
