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What is Form 16 Issuance?

Form 16 is essentially a certificate employers issue to their employees. In simple words, it is an acknowledgment which states your deducted tax has been deposited with the income tax department. It provides a validation that TDS has been deducted and deposited with the government authorities on behalf of the employee. It gives a detailed summary of the salary paid to the employee and the TDS deducted. Any person responsible for paying salary is required to deduct tax at source on the amount payable and issue Form 16 to the employees at the end of each financial year.

Eligibility for Form 16

Every salaried individual who falls under the taxable bracket is eligible for Form 16. If an employee does not fall within the tax brackets set, he/she will not need to have Tax Deducted at Source (TDS). Hence, in these cases, the company is not under an obligation to provide Form 16 to the employee. However, these days, as a good work practice, many organizations, even in these cases, issue this certificate to the employee as it contains a consolidated picture of the earnings of the individual and has other additional uses as well.

What is part A and part B of Form 16?

Part A of Form 16 has basic details of the Employee and the Employer, like

  • > Name and address of the employer & employee
  • > TAN and PAN of employer
  • > PAN of the employee
  • > Summary of tax deducted and deposited quarterly, which is certified by the employer.

Part B of Form 16 is an annexure to Part A. Part B is to be prepared by the employer for its employees and contain details of the breakup of salary, deductions approved under Chapter VI A. If you change your job in one financial year, you should take Form 16 from both the employers. It also has the details of other allowances that your employer-provided to you that may be necessary for tax computation purposes: and any other details- such as house rent, medical bills, home loans and donations exempt from taxation that you may have furnished to the employer.

  • a. Detailed breakup of salary
  • b. Detailed breakup of exempted allowances under Section 10
  • c. Deductions allowed under the Income Tax Act (under chapter VIA):
  • d. Relief under Section 89
The list of deductions mentioned are as below:
  • 1. Deduction for life insurance premium paid, contribution to PPF, etc., under Section 80C
  • 2. Deduction for contribution to pension funds under Section 80CCC
  • 3. Deduction for employee’s contribution to a pension scheme under Section 80CCD(1)
  • 4. Deduction for taxpayer’s self contribution to a notified pension scheme under Section 80CCD(1B)
  • 5. Deduction for employer’s contribution to pension scheme under Section 80CCD(2)
  • 6. Deduction for health insurance premium paid under Section 80D
  • 7. Deduction for interest paid on loan taken for higher education under Section 80E
  • 8. Deduction for donations made under Section 80G
  • 9. Deduction for interest income on savings account under Section 80TTA
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