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Decoding Form 16: A Salaried Employee’s Tax Proof Certificate

You must have received your Form 16 from your employer if you are a salaried employee. Here are the basic details and how to go about filing your income tax return

If you have worked as a salaried employee for some time, you are likely familiar with the deadlines and necessary paperwork for completing an income tax return.

If you have been a salaried employee for some time now, then you would be aware of certain dates and documents related to the filing of an income tax return. They are namely Form 16, Section 80C benefits, and July 31.

But if you started working recently, or say, last year, then this would be the first time you would be filing your income tax return, and in almost all likelihood, you would have probably received your Form 16 for tax filing purposes from your accounts department. So, what next? What do you do with your Form 16, and what exactly is Form 16? 

Let’s demystify the details of Form 16 here.

Simply put, this is a certificate issued by the Income Tax (I-T) department as proof for the tax deducted at source (TDS) from your salary under the head ‘income from salary’. It essentially corroborates the amount of tax the employee has paid on his income and which the employer has deducted from the salary paid to the employee.

If you have worked with multiple employers, then you would need to secure your Form 16 from all the respective organisations or employers you have worked with in the financial year. Do remember that it is mandatory for the employers to issue Form 16 to an employee where the employer has deducted tax from the salary of the concerned employee.

Essentially, there are two parts to Form 16. Part A includes details, such as the name and address of the employer, the Permanent Account Number (PAN) and TAN of employer, the PAN of the employee, details of the total emoluments paid in the year, and lastly, the amount of tax deducted at source out of the employee’s salary for the financial year.

Form 16 also comes with an annexure, which is issued by the employer. This is known as part B of Form 16 and includes, among others, details of the break-up of salary, and income tax allowances exempted, deductions allowed under Chapter VI-A of the Income Tax Act, namely sections 80C, 80D etc, any Standard Deduction otherwise available to the employee, and Relief under Section 89 of the Income Tax Act, 1961. 

Now that you have received your Form 16, you can crosscheck the details of the income that you have received and the taxes that you have paid on your income.

At the time of filing of your Income Tax return, you will have to include the details of the income received as salary under the head ‘income from salary’ in your respective income tax form. Then you will need to include any other income that you might have received from other sources, namely business or profession (if there are any), interest income from bank, income from dividend, rental income from house, and so on, under the respective heads, and then arrive at the total income and the total tax due. 

You also need to mention any other details of home loan or mediclaim or health insurance policies under the respective sections, if they are not mentioned in your Form 16, to arrive at the total tax due.

Do remember that an individual can claim a tax benefit of up to Rs 1.5 lakh under Section 80C, which would include his/her investments in Employees’ Provident Fund, Public Provident Fund, the premium towards life insurance policies, the principal amount paid towards home loan repayment, investments in equity-linked savings schemes (ELSS), National Savings Certificate (NSC), 5-year tax saving fixed deposits, and so on. 

Now that you have finally been able to compute your total income for the year and the total tax due on your income, you can either claim for a refund or pay the extra tax as required.

If for instance, the tax deducted from your salary is Rs 10,000 for the year and the total due from you is Rs 6,000, then you can claim a refund of Rs 4,000. The I-T department will issue you a refund along with an interest for the extra tax paid. However, if your total tax due comes to Rs 12,000, then you will need to pay an additional tax of Rs 2,000 along with the relevant penalty if you have not paid any advance tax within the due dates as specified under the Income Tax Act, 1961. 
 

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