Form 16 is a certificate issued by an employer to his employee under Section 203 of the Income-tax Act, 1961 and contains all the details about the amount received by the employee as salary, Tax Deducted at Source (TDS) on salary, and any other deduction claimed by the employee during the year. The Income Tax Department has revised the format of Form 16 and notified the new format that will have more essential details about an employee’s income and deductions.

The amended format of Form 16 will come into effect from May 12, 2019. Thus, the Income Tax Return for the current financial year must be filed by an assessee on the basis of revised Form 16. This form is usually issued on or before 15th June of the financial year following the year in which the tax was deducted by the employer.

Parts of Form 16:

Form 16 is divided into the following 2 important sections:

  • ‘Part A’ that contains the basic details about the employer and employee like name, address, Permanent Account Number, duration of employment of employee with the current employer, details of Tax Deducted at Source, etc.  
  • ‘Part B’ that contains the details of the income of an employee and deductions claimed by the employee under sections 80C, 80CCC and 80CCD, 80D, 80E (interest on education loan), 80G (donations), 80T, 80U, etc.

Key changes made in Form 16:

The Income Tax Department has announced the new Form 16 with the following changes.

  • Detailed break up of income and tax breaks claimed by the employee must be provided in Form 16.
  • The new Form 16 enables reporting of all the allowance paid to the employees that are exempted under Section 10 of the Income tax Act to be reported in Form 16. This is a change from the previous rule where such allowance were clubbed under the same head
  • Salaried Employees can see a separate row in Form 16 which should be used for disclosing standard deduction of Rs.40000
  • Details of income received as salary from the previous employer or employers must also be provided in a separate row.
  • Income or loss from house property and income from other sources must be specified in Form 16 to claim TDS on such incomes.
  • Details of various deductions claimed under sections 80C, 80CCC and 80CCD, 80D, 80E, and 80G and any other deductions must be disclosed separately.

The additional details in Form 16 would, therefore, provide ease to the tax authorities to check tax avoidance or evasion and to conduct scrutiny in a better manner. It would be easier now for the employees to file Income Tax returns more accurately. Further, the Income Tax Authorities would also be able to understand better the income and deductions claimed by the Income tax payee.

 
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An MBA in finance, I like to cover the wide range of topics related to Taxation, SEBI, Finance and anything that is Public Helpful. The motive is always to make it simpler for the taxpayers understand the system better and take informed decisions.

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