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Form 16 is not just a salary certificate containing some tax and salary details, but it is much more than that. Let's understand and demystify what is Form 16 and what all compliances and benefits Form 16 has.
1. Form 16, what exactly it means?
Form 16 is a certificate issued under section 203 of The Income Tax Act, 1961, for the tax deducted at source by the employer on the taxable salary of the employees. This certificate is provided by the employer to the employees.
Tax deducted from employees is counted under Direct Tax and Direct Tax accounts for more than 50% of the total tax collected by the Income Tax Department. The employees could be Government employees, private company employees, cooperative employees, NGO employees, etc. In the past when there was no concept of TDS, then those earning more than taxable income did not file their return, and the Income Tax Department did not have enough resources to trace them. Since the TDS concept is introduced the Government can collect tax even if the employee or person does not file his/her return. The following data as published by the Income Tax Department show the exact figure.
2. What is the Due Date of Issuing Form 16?
The employer files its quarterly returns for the tax deducted on employees and in the last quarter i.e. January to March, files quarterly and annual data of employees for the generation of Form 16. The last date of the last quarter of TDS return by the employer is 31st of May as per the Income Tax Act, 1961 and another 15 days for the generation of issuing Form 16, hence, by June 15th the Form 16 must be downloaded from TRACES and provided to the employees, unless and until the date is extended by the Government.
As for the current year due to Covid-19, the date was extended to 15th August 2020. After receiving Form 16 from the employer the employees must get their return filed by some tax expert or on their own before the last date, which in normal conditions is 31st of July every year, if not subject to Tax Audit. For the current Financial Year 2019-20, the last date of ITR filing is 30th November 2020.
3. Form-16 contents / break-up
The content of Form 16 consists of tax deducted and paid to the credit of the Government Treasury and the detailed breakup of salary as well as allowances and deductions.
Form 16 is break-up in two sections, Part A and Part B. Part A contains the details of tax deducted from the salary of individual and the tax deposited to the credit of Government, viz. challan details with the date. For Government deductors the payment of tax is allowed through book adjustment, hence, Book Identification Number (BIN) is to be mentioned in Form 16 in place of challans, for Government employees only.
Part B contains details of the salary income of employees and the deductions claimed for which proof submitted to the employer, to compute the taxable income as per income tax law and the tax deducted and deposited thereon.
4. Why should I file a return if, TDS is already deducted from my salary income?
There is a misconception among some salaried class employees that, they are not required to furnish the Income Tax Return as TDS is already deducted from their Salary and Form 16 issued thereon. Few are even more sure as they get Form 16A from banks for TDS deducted on their interest income. The feeling is strong for non-filing of return as they have both Form 16 and Form 16A (if applicable).
To clarify the doubts of such individuals, it is important to let them know that, filing of tax return is mandatory, once Form 16 is received by them. The employer computes tax based on Salary Income paid by him to the employees and the disclosures made by the employee to its employer in Form 12BB i.e. Investment Declaration Form.
One practical issue comes here which each employee faces, viz. savings bank interest details. The employee is required to submit investment details maximum by January end or in some case February end and the tax is computed by the employer accordingly, but. the bank interest income details are available only at the end of March. So, there is always a possibility that the employee will need to re-compute his/her tax and pay the same and consequently file ITR. Even more so, there can be details regarding home loans, donations by the employee, property sold, mutual fund redemption, etc. which can change the tax impact, and the total tax of employees is needed to be recomputed, deposited, and accordingly return filed. Your liability is to file your return, even if your employer defaults in performing his duty of Tax deduction, deposition, and issue of Form 16.
Even after the responsibility of filing returns many individuals fail to furnish their return due to the confusion that TDS is deducted and Form 16 issued hence there is no need to file ITR. See the below figures as obtained from MIS of the Income Tax Department.
One can clearly see that the number of taxpayers is 8,04,45,511 but, the number of persons filing Income-Tax Return (Return Filers) are only 5,95,44,767 a clear shortfall of 2,09,00,744 (8,04,45,511 - 5,95,44,767). This goes to show as to how many people who are under the impression that if tax is deducted then filing ITR is not necessary. Data has been refined and presented for sake of easy understanding. Data not concerning individuals has been intentionally removed. It can be found on incometaxindia.gov.in portal.
5. Due date of filing ITR for an individual salaried person
For an individual with no tax, audit compliance is required to file their Income Tax Return by 31st July every year, unless extended. The due date shall be 31st July every year. For the Assessment Year (A.Y.) 2020-21, the due date for filing the tax return is extended to 30th November 2020 due to the pandemic COVID-19 with an announcement on 31st May 2020.
6. Relevant FAQ's
Q.: No tax has been deducted from my salary as it was below the taxable limit, is the employer bound to issue Form 16 to me?
A.: Since there was no tax liability and Form 16 is a form of a certificate that certifies TDS deduction, hence the employer is not liable to issue Form 16. However, the employer can issue a salary certificate mentioning your annual salary with all the relevant breakup.
Q.: If I switch to another job during the year, then what will happen?
A.: Each employer will issue you a Form 16, provided you were in the taxable bracket.
Q.: How do I verify that the TDS deducted has been deposited with the Government treasury?
A.: Employer after deducting and depositing the TDS files quarterly TDS returns and an employee can verify the same by logging into his Income Tax account and check the correctness of Form 26AS from there. Form 26AS will get updated every quarter.
Q.: I want to download Form 16 on my own, from where to get it?
A.: As of now, this is not possible. The employer only issues Form 16 to you, after downloading it from the TRACES portal. Only an employer can issue Form 16 to you, so keep it in safe custody as it may be needed in the future for various purposes, from return filing to loan supporting document.
Q.: What details shall I provide to the employer to get a From 16?
A.: Your employer will need an investment declaration in Form 12BB from you for the provisional computation of tax on your income. In the financial year-end employer will need actual proofs of your investment declaration for the final computation of tax. So, you must give correct details of your LIC Premium paid, Housing loan EMI certificate, Tax savings FDs, Mediclaim premium paid, medical expenses incurred for serious diseases, donations made receipts with PAN, tuition fees of children paid, etc. You must also provide the exact PAN number and cross-check with your employer so that the tax gets deposited to the credit of correct PAN.
Form 16 not only serves as a supporting document for filing the ITR but also as a certificate of confirmation of tax deduction. Every deductor mandatorily is required to deduct tax on taxable income and provide Form-16 to the deductee within the prescribed due date. TDS deducted can be cross verified with Form 26AS as the same gets updated there every quarter after filing of return by the employer. Once Form 16 is verified with 26AS you can proceed to file the ITR. In case of any discrepancy in Form 26AS, you may get the details checked by your employer and intimate him to take corrective steps. People sometimes claim an incorrect refund by quoting the wrong figures in ITR as compared to the details as mentioned on Form 16 and in turn get notice form CPC of the Income Tax department. Filing return is necessary but verifying the correctness of Form 16 with Form 26AS is equally important, hence, all the documents submitted to the employer must be correct so that you get accurate Form 16, for purpose of filing your tax returns.