Income from Salaries, Income Tax, Individuals

What is Form 16? How is it useful? What to do with the information in the Form?

There are two types of Form 16:

Form 16 (Income from Salary)

This form is issued by employer to employee and includes details of gross salary, exempt allowance such as HRA or Leave Travel Allowance, deductions that employee has communicated to the employer (for example, 80C).

A separate section of the Form contains details of income/salary that is taxable and amount of tax deposited to the Government.

Part A: This part contains information such as your employer’s name,amount of salary paid every quarter, amount of tax deposited and challan numbers (not useful to us as tax payers).

Part B: This part contains breakup of your salary income, the deductions claimed by you as communicated by you to your employer and the working of your taxable income and final tax payable.

It is important to note that you can claim certain deductions even if you have not informed to your employer (for example, medical expenditure or insurance premium). However, some allowances such as Leave Travel can only be claimed through your employer.

Form 12 BA: This include list of perquisites (mostly provided to Goverment employees or ESOPs) given to the employer. The details need to be mentioned in income tax return form.

Form 16 A (Income other than Salary)

This form is issued by Banks and include information on amount of interest paid or accrued to you during the financial year as well as tax deducted by the Bank on the interest.

Interest on savings bank (not fixed deposits) is exempt from income tax upto Rs. 10,000. You will need to ensure that you claim deduction under Section 80TTA for this.

Importance of TDS (Tax deducted at Source)

The TDS amount of above forms will be available as a credit in your income tax return (this is the tax payable on your income and has been deposited on your behalf with the Government by your employer/bank).

For more queries on your income taxes, you can try our robo based tax advice section (third box in the second half of the Home page).

What to do with Form 16

The details in Form 16 will have to be replicated in your Income Tax Return. Many websites including ours offers software which auto reads the form and inputs in the ITR with reasonable accuracy.

Important note

The details of tax deducted at source from your account are updated in Form 26AS. This form can be downloaded from your login at income https://www.incometaxindiaefiling.gov.in/.

It is critical that the details of TDS entered in your Income Tax Return match the TDS as per Form 26 AS otherwise there is a high chance of getting a notice from the Income Tax Department.

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