Many taxpayers still nurse doubts about the purpose and use of Form 16. Let’s get some frequently asked question out of the way.
This year’s tax season is behind us behind but the question marks surrounding the filing process have in no way eased. While most taxpayers know all about Income Tax Returns (ITRs), many still nurse doubts about the purpose and use of Form 16. This is especially true if you are a self-employed professional earning commissions, or if you are receiving income other than a salary.
Form 16 is a document initiated by the Indian Income Tax Department under Section 203 of IT Act, 1961 to list the Tax Deducted at Source (TDS). It is also intended to make the taxation process easy and transparent. Here are six queries commonly asked by taxpayers in connection with Form 16.
Q1: What is Form 16?
A: Form 16 is a certificate issued by your employer that acts like a salary certificate for a financial year. Form 16 lists the annual salary the company paid you as an employee and the amount of tax deducted during a financial year. It clearly mentions your gross income, net income, deductions claimed by you, tax liability and the tax already deducted by your employer. Form 16 is usually issued in April every year.
Q2: What is the difference between Form 16 and Form 16A?
A: Form 16 is the TDS certificate issued by an employer for an employee. Form 16A is the TDS certificate for income received from sources other than salary where a tax deduction is involved. It includes the commissions or payments you might have received as a contract employee or a freelancer, deduction of TDS from Fixed Deposit interest, etc. Any income that you earn, on which a TDS has been deducted, is listed in Form 16A. Both Form 16 and Form 16A are important documents and are required to file your income tax returns without hitches.
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Q3: I changed my job in the middle of a financial year? Do I need to furnish Form 16 from both employers?
A: Yes. You will have to collect Form 16 from your existing as well as the previous employer before filing your returns for the financial year. Some companies may ask you to furnish your previous TDS details as part of the joining formalities. Also, it is mandatory to have the Form 16 of your previous employer to claim the TDS taken by them.
If no tax was deducted by the previous employer, you can request them to send a salary certificate clearly mentioning your gross salary during your stay with the company during that financial year.
Companies usually issue Form 16 once as per law. Also, the Income Tax Department can fine companies if they delay the issuing of Form 16. So, once you have collected the document, keep it safely with you until you furnish a copy to the new employer.
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Q4: What do I do in case my Form 16 has errors in it, or if some information is missing?
A: Most salaried taxpayers stash away their Form 16 without a second glance and remember to read it only when it is time to file their tax return. It is a smart practice to check the contents of your Form 16 as soon as you receive it. This will give you enough time to fix errors if any.
The PAN mentioned in the document is very important. If you happen to find an error in your Form 16, especially with the PAN, bring it to your employer’s notice immediately. If the employer has wrongly filed the tax, they will have to rectify it by filing the revised returns of TDS to initiate the credit of the proceeds against the correct PAN. It is also good practice to check your Tax Credit Statement (or Form 26AS) online once you get your Form 16 just to confirm that the TDS amounts deducted reflect against your name in the form of tax credit.
Q5: Do I have to attach Form 16 while filing my IT returns?
A: Many people harbour a misconception that they need to attach a copy of their Form 16 or 16A while filing their taxes. Form 16 or 16A is not required to successfully file income tax returns. They are essentially used to compute how much tax you have paid and the amount due.
There is, however, no harm in handing over your forms to your CA. They will help with the computation process. If you are filing taxes by yourself using third-party websites, you can upload these forms for faster and accurate computation. Make sure to keep the original document(s) safely for your financial records.
Q6: What if I am self-employed and do not have Form 16A to know the deductions?
A: If you have not received Form 16 A from the source concerned, you can still file your returns without any hassle. Just login to your e-filing account (https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/LoginHome.html), and access your Form 26AS from there. TDS deducted from your relevant incomes will appear in this form.
Post this, fill up the tax return with your income details as per your bank statement. Include all other incomes like interest on Fixed Deposits and any other income received during that financial year. Fill the tax details as shown in Form 26AS. Now you can pay the balance tax amount, if any, or claim a refund if an excess tax has been deducted at source.
Form 16 is a user-friendly tax document. It is your last line of defense in case of a discrepancy in tax deductions or credits. Next year, make sure that you have your Form 16 in hand ahead of the ITR filing deadline .
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