What is Form 16?
According to the Income-tax Act 1961, employers have to deduct a certain amount of tax (or TDS - Tax deducted at source) from the salaries of their employees, based on the income tax slab rates applicable for that financial year. This tax calculation is done by the companies using the projected earnings and investment declarations given by the employees at the start or during the year.
The TDS deducted by the employer or organization is paid to the Income Tax authority, and Form 16 is proof of that. Employers have to issue Form 16 to their employees on or before 31st May of the next financial year following the year in which the income was earned and tax was deducted.
Parts of Form 16
Part A: Part A of Form 16 is a certificate confirming the amount of tax the employer deducts from the employee's salary and is paid to the government. It also contains the details of the employer's and employee's PAN and TAN and the period of employment. The employer can download Part A of Form 16 from the TRACES portal and verify its contents before issuing it to the employee. If the employee has worked with more than one employer in a financial year, he or she will receive a separate Part A of Form 16 from each employer.
Part B: Part B is a summary document that shows the salary earned by the employee, any other income reported by the employee to his/her employer, tax paid, and tax liability, if any. It gives a clear and organized picture of the income and the applicable exemptions and deductions in the prescribed format. Part B also includes employee details like name and PAN.
It is given after the end of the financial year and helps you file your income tax return.
Read More about Form-16 Everything You Need to Know.