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Filing ITR- Understand your Form 16

Archit Gupta     July 19, 2019

Form 16 is a certificate issued by employers to their employees. It confirms that the employer has deducted TDS on salary paid and deposited it to the tax authorities on behalf of the employee. It has all the essential details that you have to report while filing your income tax return.

Employers must issue Form 16 on or before 15 June of the immediately following financial year. This due date had been extended to 10 July 2019 for Form 16 related to FY 2018-19.

Form 16 has two segments - Part A and Part B. If you misplace or lose your Form 16, then you can request a duplicate copy from your employer.

Also Read: DIY guide to ITR filing: How you can file income tax return online

Part A of Form 16

Employers generate Form 16 from the TRACES portal and this validates the details of TDS and other information at the time of issuing Form 16.

If you change your employer in a single financial year, then you will get more than one Form 16 as every employer issues separate Part A of Form 16 for the tenure of your employment.

Form 16 will contain the following details in Part A:

  • Name of the employer
  • Address of the registered office of the employer
  • Employer's TAN and PAN
  • Employee's PAN
  • Certification of the TDS deductions and quarterly deposits
  • Month-wise details of tax deducted at source

Also Read: ITR filing: Don't submit fake rent receipts! You may get income tax notice

Part B of Form 16

Part B is a supplement of Part A. Form 16 will contain the following information in Part B:

  • Detailed breakup of your salary
  • Detailed breakup of the allowances which are exempt from tax under Section 10
  • Deductions and tax calculations

Following are the key changes made to Form 16 in the financial year 2018-19:

1) Online generation of Part B details: Employers were previously required to prepare Part B on their own or by using a third-party software. As per the recent amendments, employers can now download the same from the TRACES portal.

2) In-depth disclosure of allowances and deductions: Earlier, employers could enter the aggregate details of allowances and deductions in Form 16. After the change is made by the tax department, an employer will have to provide full details of various deductions claimed and allowances paid or claimed exempt by the employee. This amendment is made to make sure that there is a standard format of Form 16 (TDS certificate) for salaried taxpayers.

Also Read: ITR filing: Over 1.46 crore income tax returns filed already; here's how you can choose correct form

Following are the exemptions and deductions that have to be reported separately by the employer in your Form 16:

Section 10 exemptions:

  • Leave Travel Concession (LTC)
  • Commuted Pension
  • Gratuity
  • House Rent Allowance (HRA)
  • Leave Encashment
  • Any other amount claimed exempt under section 10

Chapter VIA deductions:

  • Section 80 C deductions such as life insurance premiums, PF contribution,  and so on
  • Sum deposited towards pension funds
  • Contribution towards NPS
  • Sum paid towards premiums of medical insurance
  • Sum paid toward the interest of education loan
  • Donations made towards charitable trusts, institutions, and funds
  • Savings account interest deduction
  • Any other eligible deductions

3) Describing income from other sources: Previously, the employers were not required to provide the details of an employee's income from other sources. The revised format of Form 16 includes disclosure of the income earned from 'Other sources'. Where an employee chooses to report income from other sources or loss or income under the head house property to their employer, the employer will include it in separate sections in Form 16.

Also Read: ITR forms for FY18-19 notified: Here are new details taxpayers need to fill

(The author is Founder & CEO ClearTax)

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