Form 16 is one of the most important documents for filing income tax return (ITR), especially for salaried individuals. This is a TDS certificate that contains details of salary, allowances, and other benefits that are given to an employee by an employer during a financial year. Form 16 also mentions the tax that has been deducted from the salary and other benefits paid during the financial year.
When is Form 16 issued?
It is mandatory to issue Form 16 to an employee if the tax is deducted from the salary income. Under the income tax laws, an employer or a company is required to issue Form 16 to an employee by June 15. The TDS certificate issued is for the previous financial year for which salary is paid. Thus, Form 16 currently being issued by an employer is for the financial year 2022-23 (which ended on March 31, 2023).
This Form 16 shows details of the tax deducted, salary income aid, tax exemption and deductions claimed for an employee during the financial year 2022-23. This TDS certificate will now be used to file ITR (last date is July 31, 2023) for the financial year 2022-23 or assessment year 2023-24.
What is included in Form 16?
Form 16 issued by an employer has two parts – Part A and Part B. Both parts must be downloaded from the TRACES portal and bear the TRACES logo. Part A of Form 16 shows the total tax deducted by an employer during the financial year along with the other details such as PAN of an employee, PAN and TAN of employer etc. Part B of Form 16 shows gross salary, other allowances such as House Rent Allowance, Special allowance etc., perquisites such as company car, rented or rent free accommodation etc. paid to an employee during the financial year.
How TDS for salary income is calculated?
As per the TDS concept under the income tax laws, the payer of income is required to deduct tax at the specified rate at the time of making payment or when payment is accrued, whichever is earlier. In the case of salary income, the TDS is deducted by the employer every month before crediting the salary to the employee’s bank account. However, the tax deducted here is deposited to the government (against the employee’s PAN) on a quarterly basis. Further, a TDS return must be mandatorily filed by the employer for the taxes deducted against the salary income. Form 16 can be generated by an employer only after the TDS return has been filed by the employer.
TDS on salary income is deducted on the basis of the income tax slab rate applicable to your total salary income. At the start of every financial year, an employee is required to communicate to the employer about the tax regime chosen by him/her for the purpose of TDS on salary. Based on the income tax regime chosen, the employer deducts tax from it. An employee can choose between the old tax regime (with tax exemptions and deductions) and the new tax regime (without common tax exemptions and deductions).
For instance, your gross salary income in a financial year is Rs 9,60,000. If you opt for the new tax regime, then your TDS will be deducted at a rate of 15%. The total tax that must be deducted from your salary income will be divided by 12 and every month your employer will deduct that much tax from your salary before crediting it.
Source By: economictimes
