The tax-filing season is here and it is time for you to file your income tax returns with details provided in your Form 16. Form 16 will provide you with details of the salary paid and taxes deducted from the salary during FY 2018-19. Essentially, Form 16 is a vital part of your tax filing process. Hence, it is crucial to have a proper understanding of it to ensure a smooth and quick ITR filing.
What is Form 16?
Form 16 is a certificate that is issued by the employer defining the amount of TDS deducted from the employee’s salary paid. Form 16 acts as a proof of the salary paid to the employee and the tax deducted on their income.
Form 16 has two parts – Part A and Part B
Part A consists of the following:
- TAN (Tax deduction & collection Account Number) of the employer.
- PAN (Permanent Account Number) of both the employee and employer.
- Name and address of both the employee and employer.
- Summary of the month-wise amount credited to the employee and taxes deducted thereon.
- Assessment year and the period spent by the employee with the employer.
Part B is an equally integral part of Form 16. This part provides details of the consolidated salary received through the year, allowances received, deductions claimed under chapter VIA, and tax deducted on the taxable salary. Chapter VIA allows for deductions such as Section 80C for PPF, NSC, life insurance premiums, Section 80D for health insurance, and Section 80G for donations.
Changes to Form 16 (Part B)
The Central Board of Direct Taxes, popularly known as CBDT, notified a few changes in Form 16 (Part B) for FY 2018-19 recently. Any employer filing TDS returns are expected to follow the new format of Form 16 as of 12 May 2019.
These are the changes made to Form 16 this year:
1. Part B has been revised to provide more details on the exemption of allowances under Section 10 such as leave travel allowance (LTA), house rent allowance (HRA), and deductions under Section 80C to 80U.
This is a list of exempt allowances that are to be disclosed in Form 16 this FY:
|Exempt Allowances required to be disclosed||Exempt under Section|
|Leave travel allowance||10(5)|
|Death cum retirement gratuity||10(10)|
|Commuted value of pension||10(10A)|
|House rent allowance||10(13A)|
|Any other amount exempted under Section 10|
Also, the new Form 16 will require disclosure for the following deductions:
|Deductions required to be disclosed||Section|
|Life insurance premiums/contribution to PPF||80C|
|Contribution to pension funds||80CCC|
|Employee/employer contribution to pension scheme||80CCD(1)/80CCD(2)|
|Self-contribution to notified pension scheme||80CCD(1B)|
|Health insurance premiums||80D|
|Education loan interest||80E|
|Interest earned from savings account||80TTA|
|Amount deductible under other provisions of Chapter VI-A|
2. The employees are required to disclose other income such as income from house property or other sources to their employers. Then the employers adjust their TDS and deduct taxes in accordance.
From FY 2018-19 onward, the employer will have to disclose the income mentioned by the employee in Form 16.
Also Read: Key Changes to ITR-1 & ITR-2 for FY 2018-19
3. Form 16 will also include the total amount of salary received from the other employers, if any.
4. Before these changes, the employees could download Part A of Form 16 from the TRACES portal and Part B was issued by a third party software. However, now both parts need to be mandatorily downloaded from the TRACES portal.
Moreover, employers are required to issue standardised Part B. They are not allowed to condense deductions and allowances data into one cell and issue non-standardised Part B. With these changes in place the information in Form 16 will be more accurate and detailed.
Is it mandatory for the employer to issue Form 16?
It is mandatory for the employer to issue Form 16 to an employee when TDS has been deducted. If the TDS has not been deducted, the employer may not issue the form.
The government will levy a penalty on the employer if he/she has deducted TDS for an employee and not issued Form 16.