Form 16 is a certificate or a document issued by companies to their salaried individual in India. The certificate carries all the required details that help the employee in filing their tax returns with Income Tax Department of India.
The Income Tax Act of 1961 and the Income Tax Rules of 1962 are the governing laws of the Income Tax Department of India. Form 16 is provided by an employer to the employee and used by the employee as a reference as well as proof while filing Income Tax Returns. The form has various details such as Salary Income components of the employee, Tax Deducted at Source (TDS) by the employer and tax paid by the employer to the Income Tax Department.
Every employer should provide Form 16 to their employees who fall under the tax brackets set up by the Finance Ministry of the Government of India. If an employee does not fall under the tax brackets, then he/she does not receive this form because he/she will not need to pay taxes either will they need to have TDS.
Components of Form 16
- The personal details of the employee, like name, Permanent Account Number (PAN) etc.
- The employer details, name, PAN, Tax deduction and collection Account Number (TAN), etc.
- An acknowledgment number of the taxes paid by the employer.
- Details of the salary; Gross salary, net salary, deductions, Perquisites etc.
- Total income and tax deductions.
- Details of Education Cess and Surcharge.
- Taxes deducted as per sections 191A.
- Declaration of tax payments from the employer.
- Balance Tax Payable by the Employee or Refundable to the Employee.
- Receipt Number of the TDS payment.
- Details of the tax payment, like Challan number, cheque number, Demand Draft number etc.
Parts of Form 16
Form 16 has two parts, Part A, and Part B
Part A contains the address of the employer and the employee, PAN of both the employer and the employee, TAN of the employer. This parts also contains the TDS filed by the employer, the taxes deducted from the employee and paid to the government every quarter.
Part B contains details of salaries paid to the employee during the financial year, the breakup of the deduction under section 80C, other deduction as per income tax, TDS, tax refunds or any payable etc.