What’s 'Form 16' and what to do about it
It’s that time of the year when your employer hands over your Form 16. Many people, especially, first-timers, are unable to decode it. Here’s an explanation to what is Form 16 and what you should do with it.business Updated: Jun 28, 2014 10:41 IST
It’s that time of the year when your employer hands over your Form 16. Sneha Mitra, 24, a hotel manager in Cuttack, too, has recently received the form, but has no idea what to do with it. “This is my first Form 16. I have to figure out what to do with it,” said Mitra. She’s not alone; many people, especially, first-timers, are unable to decode it. Here’s an explanation to what is Form 16 and what you should do with it.
What is Form 16?
Every year your employer will issue this document. It gives details of the tax deducted by the employer. If you have not received your Form 16, you can use the worksheet that the income tax (I-T) department provides to calculate and declare the amount. Form 16 is useful in filing your income tax return (ITR).
What’s inside it?
Understanding the content of Form 16 helps you file your I-T returns; you may be able to do it yourself if your income comes entirely from your salary, and you have no other source of income. Form 16 has two sections—part A and part B.
Part A consists of your personal details such as your name and address, your employer’s name and address, Permanent Account Number (PAN) of both, the employer’s Tax Deduction Account Number (TAN), and others. Part A also gives details such as the assessment year (AY)—the year in which your tax liability is calculated for the income earned the previous year. This portion of the form also gives details of your period of employment with the current employer.
Next, it gives a summary of the TDS by the employer on behalf of the employee. This is the amount that the employer deducts from your salary as tax periodically and credits it to the I-T department.
Part B of Form 16 is the one that gives most of the details that you need to file I-T return, such as salary paid, other income, tax deducted, and more.
These include those under sections 80C, 80CCC and 80CCD (contributions towards Public Provident Fund, life insurance policies, pension, among others).
Remember, the aggregate amount deductible under these three sections should not exceed Rs 1 lakh. Then come the deductions under other sections such as 80D (health insurance premium), 80E (interest on education loan), 80G (donations), and others. The total deductions are reduced from the gross income to arrive at the taxable income.
How to use it?
Form 16 is one of the documents that you need to keep handy before or while filing your ITR, which has to be done till 31 July.
While all deduction related details are mentioned in Form 16, you should cross-check the amounts with your investment and other documents. “If there is an error in your Form 16, you will have to ask your employer to rectify it since it is the employer who has generated it for you,” said Rakesh Nangia, managing partner, Nangia & Co.
Remember Form 16 only declares TDS from salary. For other incomes, there are other forms. In case you have changed your job during the year, you have to get Form 16 from both employers and then file your ITR.
Who has to e-file?
If your annual taxable income exceeds Rs 2 lakh, you have to file income-tax returns. And if this is above Rs 5 lakh, you have to compulsorily e-file your ITR.
To e-file an ITR, you will have to log in to www.incometaxindiaefiling.gov.in (see graphic). While e-filing, you need to furnish your PAN and bank account details. Fill in the correct bank details as this is where a refund will come if you opt for direct deposit into your bank account.