Form 16 is an important document for the salaried class. It helps employees to know the total taxes that have been deducted from their salary income, gross salary that is paid during the financial year, tax exempt allowances etc. As per the income tax laws, an individual must receive his/her Form 16 from the employer by June 15.
It is important for individuals to check their Form 16 once received by the employer to ensure that all the information is correct, and all the correct information is filled in the applicable income tax return form.
One must note that at present ITR forms come with a lot of the information pre-filled. This makes it all the more important that you check the information furnished in the TDS certificate, i.e., your Form 16.
Parts of Form 16
Form 16 has two parts – Part A and Part B. Both the parts must be downloaded from the TRACES website by your employer before it is issued to you. Thus, both the parts will have the TRACES logo on it.
Things you must check in Part A of Form 16
To start off, one must first check the PAN mentioned on the TDS certificate. Abhishek Soni, CEO, Tax2win.in – an ITR filing website says, “One must ensure that PAN mentioned on the Form 16 is correct. If the wrong PAN detail is mentioned then, the amount of TDS will not reflect on your Annual Information statement (AIS) and Form 26AS. Consequently, you will not be able to claim the tax credit at the time of filing the ITR.”
Along with PAN, one must also cross-check the name, address and employer’s TAN and PAN is reflected as well.
The next thing to cross-check is the summary of taxes that have been deducted by your employer. Though your employer deducts taxes on a monthly basis, the taxes deducted will be reflected on a quarterly basis in the Form 16. Thus, you must total taxes for each quarter to cross check.
Soni says, “One must cross-check the actual tax deducted on salary income matches with the taxes reflected in your Form 16, AIS and Form 26AS. If there is any discrepancy, then tax amount that you are eligible to claim credit for will be what is reflected in AIS/Form 26AS. You will be required to get your Form 16 corrected from your employer so that correct details are reflected in your AIS and Form 26AS. Once the correction has been made, a revised Form 16 will be issued to you.”
In November 2021, the income tax department the introduced AIS containing details of all the financial details undertaken by an individual during the financial year. The details will be mentioned irrespective of whether the tax has been deducted or not. Further, if any taxes have been deducted on the income received, then they will be reflected as well.
On the contrary, Form 26AS is your tax passbook. The document reflects all the taxes that have been deducted on your various income and deposited against your PAN. The taxes deducted can be from the salary income received from your employer, interest received from banks, dividends received from mutual funds and/or companies. Any self-assessment tax deposited will also be reflected in Form 26AS.
As AIS is recently launched, it may happen that it has errors that does not match with the information provided in Form 26AS and Form 16. Thus, one must cross-check the information with all the three documents.
Things you must check in Part -B of Form 16
Part B of Form 16 contains details of the salary income that is paid to you by your employer. The details include gross salary income, allowances that are exempt from tax (such as House Rent Allowance, Leave Travel Concession etc.), deductions under section 80C, 80D etc. that you are eligible for.
Part B shows has a detailed break down of gross salary paid to you, allowances that are exempted from tax, etc. You can cross-check the information from your salary slips. Further, if the amount of tax-exempt allowance is less than your calculations, then such discrepancy must be alerted to the employer.
Do note that tax-exempt allowances and deductions will be reflected in your Form 16, provided you have opted for the old income tax regime and have submitted the documents for the same to the employer.
If an individual opts for the new income tax regime while filing ITR for FY 2021-22 (AY 2022-23), then he/she will not be eligible for tax-exempt allowances and deductions. Effective from FY 2020-21, an individual has the option to either continue with the old income tax regime (by availing tax exemptions and deductions). He/she can opt for the new income tax regime and forego commonly availed tax exemptions and deductions.
Do note that these days ITR forms come with pre-filled information from various TDS certificates, AIS/ Form 26AS. Further, information reflected in the Form 16 is in sync with the information requested in ITR form under the head ‘Income from Salary’. Thus, individual taxpayer can easily cross check the information.
What if you have switched jobs in FY 2021-22
If you have switched jobs in FY 2021-22, then the pre-filled ITR form applicable to you will reflect information of salary income from both the employers (current as well as previous). You will be required to collect the TDS certificate from your current as well as previous employers to know the total salary that is taxable in an individual’s hands.
Soni says, “It may happen that additional tax might be payable by you due to job change. This will be ascertained once the net taxable income (Gross taxable income less of tax exemptions and deductions) has been calculated and total tax liability on it (less of TDS which is deposited with the government).”