Are you a person who is working in a company or an enterprise? If you are, and you are not quite aware of Form 16 – this post is for you. Well, in this post, we will be looking at form 16 in detail for all individuals who still are wondering what it is – this is a form that helps your Employer validate the financial deductions that they have made. It can also help you in several other ways – want to know all about it? Then just keep reading.
What is Form 16?
Now, there are a lot of individuals who keep wondering what is form 16 in income tax and how it works.
According to the Income Tax Act, your Employer is required to deduct tax at defined rates from the wage you get from them. The tax is deducted at the average rate of tax applicable to the respective employees and is submitted monthly by the Employer in the income tax department. According to the laws, an employer must file a quarterly TDS return detailing the amount paid as well as the tax deducted for each employee. Each year, one’s employers consolidate these quarterly facts. Employers will then provide a Form 16 containing all pertinent information.
What is the Use of this Form?
Form 16 is vital since it contains all of the pertinent information about your Employer’s salary, including the taxability of these amounts. It also confirms that the income tax on your earnings was deducted at the source and deposited in the Central Government account.
Form 16 is one of the most crucial documents needed to file your income taxes. It contains the majority of the information needed to file your return.
It serves as confirmation that taxes have been paid on time and that the money earned by an employee from his or her wage is legitimate, valid, and documented with the Indian Government.
Benefits of Form 16
Here are some perks of Form 16 that you have to know:
- Form 16 is only given after your Employer has deposited the TDS with the Government. It serves as proof that your company did not misappropriate the cash deducted from your salary as TDS.
- Form 16 provides a detailed breakdown of your salary, including bonuses and allowances, as well as information on tax-saving assets that you have declared to your Employer. These facts on Form 16 will assist you in filing your income tax returns online.
- When applying for a credit card, you must produce Form 16 from the previous two years. Credit card companies use Form 16 to verify the applicant’s income. They also learn about their income tax liability. This information assists credit card companies in determining the applicant’s financial situation. Many financial organizations use this certificate to establish the borrower’s credit limit. You will be able to obtain a bigger credit card limit if you have a higher salary.
- If you plan to travel overseas, foreign embassies and consulates may request Form 16 for the last two years to decide your financial soundness. This can assist you in determining whether you can manage your funds while traveling overseas. Form 16 can also be used as verification for income tax returns, mutual funds, or property sales. If you change jobs, you can request Form 16 from your prior Employer so that your new Employer can quickly obtain your tax responsibilities.
- While the Employer is responsible for TDS, it is your responsibility to pay taxes. Your Employer may deduct tax on the incorrect/omitted information you provided. In such cases, you may have either underpaid or overpaid your taxes. Form 16 assists you in calculating your tax responsibilities so that you can pay any outstanding taxes or get a refund by filing your returns on time.
- Form 16 summarizes your tax-saving investments as well as any other periodic investment programs that may be attracting your money. It enables the lender to assess your financial situation and loan repayment capacity. This might help you assess how much money they can lend you, for how long, and at what interest. You will get lower borrowing rates if you have a decent financial statement.
- According to the Indian Government’s laws, every paid individual who falls into the taxable band is eligible for Form 16, which implies that if your gross wage is more than 2.5 lakhs per annum, you must pay tax and are eligible for Form 16. Individuals who do not fit into a taxable bracket are excluded from tax deductions. In such instances, a company is no longer required to provide Form 16 to these employees.
Form 16A and Form 16B
Everything has a sub-text, and so does Form 16 – so, here they are:
It is further divided into two parts – Part A and Part B.
Part A comprises information about the tax collected from an employee’s salary by an employer or organization and deposited with the Income Tax department. Part A is on the employee’s behalf. Part B is a consolidated statement that includes information about the employee’s salary, deductions, and any other income declared. Parts A and B of Form 16 are described in detail below.
a) Part A
Part A of Form 16 provides fundamental information such as the employee’s name, address, and PAN, as well as the Employer’s PAN and TAN and other information to corroborate tax deposited by the Employer. It also includes the Employer’s name and address, as well as information about the amount of tax deducted, the date of deposit with the Central Government account, and the details of a challan issued by the Government. Through the TRACES site, an employer can produce and download Form 16. Before issuing Form 16 to the employee, the Employer must authenticate the contents.
b) Part B
Part B of Form 16 is an addendum to Part A. Part B is prepared by the Employer for its employees and contains information about the salary structure and deductions under Chapter VI-A.
Part B of Form 16 is a detailed breakdown of tax computation based on your investment declaration submitted to the Employer at the beginning of the fiscal year and subsequent investment proof submission; it includes details of allowances given by the Employer and is required for tax computation.
Other information, such as house rent, health insurance premiums, etc.
Do You Want This Form?
Are you looking at how to download this form? If you are – this is how you do it:
To get Form 16 from the Income Tax Department website, follow the instructions below –
- Log on to the Income Tax Department’s official website (https://incometax.gov.in). Look for the ‘Income Tax Forms’ option under the ‘Forms/Download’ section and click on it.
- The ‘PDF’ and ‘Fillable Form’ options are then available under ‘Form 16’.
- On the following page, click on the appropriate options to download the form.
Filing ITR With Form 16
Before beginning the filing procedure, gather all required papers such as Form 16, Form 26AS, final computation of tax liability, and others.
- Visit the Income Tax website and enter your credentials to access your PAN.
- Choose ‘e-File’ and then ‘Prepare and submit ITR online.’
- Navigate to the correct income tax return form and assessment year.
- Fill out all of the required information and then click the ‘Submit’ button. The website will ask you to upload all of the necessary forms, including Form 16.
- After successfully submitting the form, a message will reflect the status of ITR processing.
- You may utilize any of the three e-verification techniques available for your income tax return.
- If the return was not e-verified, print the ITR-V form, sign it, and return it to CPC within 120 days of the date of e-filing.
Conclusion
Most of the urban area and population are either employee of huge companies or other enterprises – this makes it quite essential for you not to skip certain parts in terms of taxes since you would not be the one doing it alone – so this was the tip of the iceberg for form 16 and everything that you need to know.