Form 16 is an annual certificate issued by an employer providing information regarding the tax deducted from the salary of an employee. It is mandatorily required to be issued by an employer on or before June 15 of the financial year for the previous year. Form 16 is divided into two parts, Part A and Part B.
Part A: It contains details regarding the monthly deductions of tax made by the employer from the salaries of the employee and deposits made with the government along with the summary of amount paid/credited and tax deducted at source thereon in respect to the employee.
Part B: This is the most important portion for a salaried individual that helps them file their income tax return. It contains the details of salary paid by the employer and any other income and the tax deducted thereon. It is important to note that in case of a switch of jobs during the year, a taxpayer must obtain a separate Form 16 from each employer. It is also mentioned in Part B whether a taxpayer is opting for the new regime or the old regime.
The salary head of the ITR asks for details regarding the gross salary received (including perquisites), the exempt allowances and the deductions claimed by the individual. The figure of gross salary can easily be taken from the form itself with the bifurcation provided thereon in Annexure-I of Part B of Form 16. The value of perquisites should be matched with form 12BA, which is a statement showing particulars of perquisites.
After that, the next thing a taxpayer has to fill in his/her return is the list of allowances such as house rent allowance that are exempt under section 10 of the Income Tax Act. This can also be easily found in Part B below the gross salary row. Consequently, the taxpayer can also find the deductions that are available to the taxpayer under section 16 of the Act under this portion of the form 16. If the salaried individual has also reported his/her income under house property or other sources to the employer, this will also be reflected under this part.
The next step in filing the ITR of the salaried individual is filing the amounts of deductions that may be taken by the taxpayer under the old tax regime. Some common sections under which deductions are taken by the taxpayer include in respect to life insurance premium, contributions to provident fund and deduction in respect of health insurance premium etc. These deductions are available in the old regime only. If the employee has reported the information regarding these deductions to the employer, then this would have been considered for calculating the amount of tax to be deducted from the salary of the employees. Such deductions are also reflected in Part-B of the form 16.
About the Author - Yeeshu Sehgal is Head of Tax Market at AKM Global, a tax and consulting firm.
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