When you get Form 16 this month, know how to read it for tax purposes

It is a document that employers must submit while filing their taxes to account for income and expenses

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As the deadline for filing Income Tax returns (ITR) approaches (last date to file ITR is July 31), salaried individuals are receiving their Form 16 from their employers. This certificate is needed for filing returns accurately and avoiding any potential issues with the Income Tax Department. Let us know how to read and understand Form 16.
 

What is Form 16?
 

Form 16 is a certificate issued under the Income Tax Act, 1961, by the employer to the employee. It contains the details of the tax deducted, also known as Tax Deducted at Source (TDS), and the income earned by the employee in a financial year. This document serves as proof of income and tax paid by the employer on behalf of the employee.
 

Component of Form 16
 

Form 16 contains key information in two sections: Part A and Part B. The segments provide detailed income and tax deductions.
 

Form 16A
 

Form 16A contains the employer and employee's details and provides a summary of the TDS deducted by the employer and deposited with the government on behalf of the employee.

 

Part A of Form 16 includes such details:

 

Unique TDS certificate number.

Name and address of the employer.

Name and address of employee.

PAN and TAN of employer.

PAN and reference number of employees.

Financial year and period of employment.

Total TDS deducted and deposited for the year.
 

Form 16B
 

Form 16B provides a complete picture of the salary earned by an employee, and the exemptions and deductions they have claimed in a financial year.

 

Part B of Form 16 includes the below details

 

Detailed breakup of salary.

Detailed breakup of exempted allowances under Section 10.

Standard deductions and other deductions allowed as per Section 80C of the Income Tax Act.

Total taxable income.

Rebate and surcharge, if applicable.

Your net tax liability.
 

Before filing your ITR, check and verify the information in Form 16 against your salary slips and Form 26AS. If you find any discrepancies, then you must bring it to your employer's notice immediately and ask him to give you a revised Form 16 with the correct information.