How many notifications are you getting from the Income Tax department? Well, if it’s that time of the year or even getting closer to that time of the year – the reminders don’t stop. But honestly, most times, these reminders are good. You don’t want to be missing the dates of filing your income tax returns. Also, while we are talking about income taxes, the most prevailing attribute would be Form 16 – it is also one of the most commonly utilized documents across the country. So, while it’s time for you to file income tax, don’t forget about Form 16. If you want to know more about it – just keep reading.
Here’s how you can briefly understand Form 16, and also how it will help you while filing your income tax returns.
About Form 16?
So, exactly what is Form 16? It is a certificate that is issued under Section 203 of the Income Tax deducted at source by the employer. It is submitted to the IT department and contains the details of how much tax the employer deducted and when it was submitted.
If you’ve changed your job or worked with another employer at the time, and your tax has been deducted in both places you need Form 16 from both of them. But, if your employers did not deduct any tax, considering your income for the year – then there will be no need for Form 16.
Why is Form 16 Essential?
The primary reason for this form is to act as the proof of tax that has been paid at the time an employee earns income from salary. If an individual earns income lesser than 2.5 lakhs for a year then they are exempt from income tax. But employees who earn more than 2.5 lakhs for a year are eligible for Form 16.
It’s quite an important form for employees and employers. Here are the purposes of the form.
What Purposes is Form 16 Used for?
This form can be highly advantageous, so look at how they are used.
- It helps to file income tax returns: This form gives a breakup of your income. This includes bonuses, allowances, and the details of your tax-saving investments. These details will help file income tax returns online.
- It helps to verify whether the employer has deposited TDS: Your employer can issue you the form only when they’ve deposited the TDS to the central government. This form plays as the proof of this transaction, making sure the employer has not misused the money that was deducted.
- It helps to compute tax liabilities: While this responsibility is on your employer, the responsibility to pay taxes is yours. So, in some cases, if you’ve overpaid or underpaid your taxes, this will help you compute your liability.
- It helps to get loans approved: If you want a loan, you need to show the bank your Income Tax returns. The form gives you a breakup of salary and tax liabilities, making it very easy to apply for loans and show proof.
- It helps to get credit cards: When you want a credit card, you have to give your Form 16 of the last 2 years because it acts as a form of proof from the income tax statement.
Form 16A and 16B
Form 16 has information that you would want if you need to file your income tax returns, but it also has two prominent parts, and you need to know them.
A) Form 16A
Part A of this form has the basic information about the employer and the employee. It also has details of the tax that was deducted and when it was deposited in the central government account, along with the Challan issued by the government.
B) Form 16B
Part B of the form has a breakup of your tax that was computed at the beginning of the financial year, along with the proof of investment. It also has the info of your allowances and other info like house rent, medical bills, home loans, and more.
Difference between Form 16A and 16B
16A – It is issued for tax deducted at source on income outside salary like rent and more. This is not issued by the employer, but the financial institution.
16B – This form is issued for tax deducted at source on income from the sale of immovable property, and it is issued by the buyer to the seller.
If your tax deduction was submitted to the central government account by the deducted, then the details are available in form 26AS. You can download this form with a TRACES login.
(TRACES: TDS reconciliation, anytime, and correction enabling system).
How to get Form 16?
This form is issued by your employers, and when TDS is deducted. When your employer deducts TDS on income, then the income tax department needs that certificate, and it must be issued by the employer.
Now that you know about Form 16, you can reap all of the benefits it has to offer to you. Also, once you’ve got your Form 16 from the employer – it is your responsibility to make sure that all of the details are right.