All you want to know about FORM 16

Most of us are aware of Form 16 given by our employers before April 30th each year that give details of the income earned, and tax deducted at source and paid to the government.

This certificate proves useful in filing income tax returns.

If you haven’t received your Form 16 yet, you can write an application for Form 16 or a request letter for Form 16 to your employer.

In addition, banks also issuing Form 16 and Form16A to pension holders and those that earn interest income, with no Form 16 required when TDS is not deducted from salary.

For government employees using the IFMS system, an IFMS Form 16 may also be available online through the respective state portal.

Knowing about Form 16 helps us to be a well-informed taxpayer and do better tax planning .

What is Form 16 and Why is it Important?

Form 16 is an official certificate issued under Section 203 of the Income Tax Act, 1961.

It acts as proof that your employer has deducted Tax Deducted at Source (TDS) from your salary and deposited it with the government.

It contains details such as your total income, deductions, and total tax paid during the financial year.

In simple words, Form 16 is your annual income statement — crucial for filing your Income Tax Return (ITR) accurately.

Who Issues Form 16 and When Is It Issued?

Form 16 is issued by employers to all employees whose salary is subject to TDS.

As per the Income Tax Department’s latest guideline, employers must issue Form 16 by June 15th of the assessment year.

If no TDS was deducted, you can still request a No-TDS Certificate from your employer.

Banks and pension disbursing authorities also issue Form 16 or Form 16A for pensioners and interest income earners.

Difference Between Form 16, Form 16A, and Form 16B

Many taxpayers confuse these three. Here’s how they differ:

• Form 16: For salaried employees; issued by employers showing salary and TDS details.
• Form 16A: For income other than salary, like interest, rent, or professional fees.
• Form 16B: For property buyers; issued by the buyer to the seller for TDS deducted on property transactions.

Understanding these forms ensures you report your income correctly while filing your ITR.

Even if you work for a government organisation, you can access IFMS Form 16 through the Integrated Financial Management System portal.

The 13 components of Form 16 are:

1) PAN that stands for Permanent Account Number, a 10-digit alpha-numeric code that is generated by the Income Tax Department of India.

It is mandatory for everyone-NRI, PIO & companies that wishes to conduct business, file and pay taxes, invest, buy and sell property, open a Demat or bank account to have this number in India.

2) TAN is best known as Tax Deduction and Collection Account Number is another mandatory 10-digit alpha-numeric number that is very necessary for all persons and companies that are responsible for collecting taxes.

It proves useful to note that this number is unique in case of different companies.

3) Gross salary, the common term used in practice includes all regular incomes in an employee’s remuneration.

It would include allowances, overtime pay, commissions, and bonuses, with all other amounts before the deductions are made.

4) It is best to know that perquisites are just additional benefits in addition to the fixed salaries.

Known popularly as perks this term could include rent free accommodation, loans at subsidized rates and others.

5) Profits in lieu of salary are just payments given instead of salary that is given by at or in connection with retrenchment or termination of employment.

This item forms a part of taxable income and includes gratuity, commuted value of pension, retrenchment compensation.

However, the contribution made by the employee or interest thereon is not taxed.

6) Next allowances in Form 16 are certain payments made or allotted to employees for bearing of certain expenses.

It could include allowances like health insurance , and travel allowances that are generally taxable in the hands of the employees.

7) House rent allowance or HRA in Form 16 refers to a special allowance paid to employees to meet the cost of housing.

There is tax exemption on HRA and it is limited to the least of either the HRA received from employer, or rent paid in excess of 10% of the salary, or 50% of salary in metropolitan cities and 40% in other cities.

The term salary here includes basic, dearness allowance and other commissions put together, this exemption not available to those that do not pay rent.

8) It is best to understand conveyance allowance as an allowance paid to an employee to meet commuting expenses between his/her home and place of work.

There is a maximum exemption of Rs.800, with a special provision for an orthopedically handicapped employee until Rs.1600.

9) The term medical allowance paid for medical treatments and medicines is fully taxable.

However, reimbursement of medical expenses against submission of bills could get you a maximum exemption of Rs.15000 annually.

10) The allowance received to employees for entertainment services or entertainment allowance is allowed as a deduction for government employees.

However, in other cases one can avail of deduction as a least of actual allowance received, or 1/5th of salary excluding all other allowances and perquisites or Rs.5000.

11) Deductions as in Form 16 is given as an incentive given by the government to invest in certain long term savings schemes. This includes long term savings for retirement, insurance schemes and others that give tax breaks.

12) All taxes in India are subject to an education cess that is 3% of total tax payable. This contribution is made towards the Secondary and Higher Education development in the Indian economy.

13) It is lastly important to understand the relief granted to employees when salary is paid in arrears in a lump sum best known as Relief u/s 89.

This includes salaries received in arrears/advance, family pension received in arrears, retirement benefits such as gratuity, commuted pension, VRS and retrenchment compensation.

If you have not yet received your Form 16, make sure to send a polite application for Form 16 or request letter for Form 16 to your employer’s HR or finance department.

You can also use a Form 16 application format available online for easy reference.

Sample subject line for such letters:

“Application for Issuance of Form 16 for FY [Year-Year]”

Common Issues While Requesting Form 16

Sometimes, employees face challenges in obtaining Form 16. Common problems include:

• Delay in TDS upload by the employer.
• Incorrect or mismatched PAN/TAN details.
• Multiple Form 16s if you switched jobs during the year.
• Difficulty downloading IFMS Form 16 for government employees.

If you face any of these, immediately send a request letter for Form 16 or email your HR department to get it resolved.

Analysing Form 16 helps you plan your taxes better.

Why Knowing Your Form 16 Matters?

Understanding your form 16 helps you in many ways like planning for taxes, filing your income tax and so on.

Knowing how to write an application for Form 16 can also be useful if you change jobs or need to file belated income tax returns.

Analysing form 16 helps you plan your taxes better.

A well-structured Form 16 also simplifies your interaction with online systems like IFMS Form 16 or employer portals.

The tax plan to be more effective it should be in sync with your overall financial plan.

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