Income tax return: The Income Tax Act of 1961 (Income Tax Act, 1961) makes it mandatory to give Form 16 to all those employees whose annual income is more than ₹ 2.5 lakh.
Income tax return: Form 16 is the most important document for filing income tax return. It is important for all salaried class. Because, how much annual income was earned, how much tax was deducted and from which section you saved tax, all this information is available from Form 16. Form 16 contains all the details regarding income, tax-saving investment and tax deductions as well as tax deduction at source (TDS) applicable for the financial year. .
The Income Tax Act of 1961 (Income Tax Act, 1961) makes it mandatory to give Form 16 to all those employees whose annual income is more than ₹ 2.5 lakh. Companies/employers generally give Form 16 to their employees every year in May-June. If you have worked in many places in a financial year, then you will have to take separate Form 16 from each company.
Why is Form 16 necessary?
- Form 16 and the details included in it are very important for the employees to file their income tax returns. Form 16 keeps a completely accurate record of your salary and taxes paid. It essentially acts as a proof whether you have paid tax to the government or not.
- While filing tax, you have to provide Form 16 as a definite proof of your income and taxes paid.
- Apart from this, you can also use Form 16 as income proof while applying for loan or credit.
- Form 16 is also required to verify whether the taxes paid are correct or not.
- Form 16 can also be used as a supporting document during your visa processing.
Form 16 Part A and Form 16 Part B
Form 16 consists of two different parts, Form 16 Part A and Form 16 Part B.
Part A of Form 16 generally contains these details-
- Employee’s personal details like name, residence, PAN, and other information.
- Employer details like organization name, TAN and PAN.
- TDS deducted from the employee’s salary every quarter, as well as bank details and transaction information related to TDS deducted.
- Part A of Form 16 contains the details of the applicable financial year as well as the time period in which you were employed in the organization.
Form 16 Part B
- Part B of Form 16 contains all the details of your salary. Which includes various deductions, exemptions and payments from your salary.
- All split-ups like basic salary, house rent allowance, provident fund contributions, TDS, professional tax, etc. are included in Part B.
- Tax exemptions like HRA, medical allowance, conveyance allowance, etc.
- Any exemption claimed under Chapter VI A of the Income Tax Act, 1961.
- Details of the amount of tax fund outstanding with tax fund paid, as well as details of tax refund.
Difference between Form 16 Part A and Part B
- We should not have confusion in both the parts of Form 16. Form 16A is an income tax document that gives details related to TDS for all income other than salary. This includes TDS on freelance earnings, TDS on interest earned from FDs in banks, as well as TDS on commission, rent and other non-salary income.
- On the other hand, Form 16B is a tax document which contains the details of TDS for sale of property. The buyer of the property is responsible for deducting TDS and paying it to the government. Form 16B is issued to the seller as proof that TDS has been deposited with the government.
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