Easy to Understand TDS Form 16 with Components & Benefits

Form 16 is a TDS certificate, which is given by employers to employees certifying that TDS has been deducted from their salary. According to the tax rules of India, every employer must deduct a certain amount of salary as TDS at an average rate of income tax. The basic funda is if your net earnings are beyond the exemption limit of Rs.2.5 lakh, your employer would be authorized to deduct a fixed amount from your remuneration and pay it to the government.

However, if it comes below the prescribed exemption limit, then no deduction in the name of TDS will be made and this form may not be issued to you. Note that if you have more than one, you’ll get more than one Form 16.

Form 16 has two prominent components, which reflect most of your details bifurcated into parts. They are very important while filing IT returns.  Let’s have a look at them in detail.

What is Form 16 (Part A)

Form 16 (Part A) incorporates TDS on salary. Part A of Form 16 contains the details about TDS deducted from salary and the amount paid as salary in each of the quarters of the financial year. If an employee has worked for more than one employer during the financial year, then he will get 2 Part A of Form 16.

Components of Form 16 Part A TDS Certificate

1. Name, TAN no., PAN card no., and Address of the employer
2. Name, PAN card no. & Address of the employee
3. Details of tax deducted & deposited quarterly with the government
4. Assessment year for which the TDS has been deducted.
5. The time period of employment with the employer
6. The TDS payment acknowledgement no.

What is Form 16 (Part B)

Part B of Form 16 contains details about the computation of taxable income and tax to be paid / refundable. It also includes salary & its breakup that has been paid to the employee during the financial year, whether from one employer or from more than one and particulars of any other income reported to an employer by the employee.

Components of Form 16 Part B TDS Certificate:

• Detailed salary particulars like HRA, deductions claimed like PPF, NSC, Pension, Gratuity, Leave Encashment, LTA, etc.
• Deductions are allowed under the Income Tax Act of Chapter 6A.
• Education tax and surcharge (if any).
• If you have more than one job in a year, you’ll get more than one Form 16.
• The employer prepares the Part B Form himself and issues it along with Part A.

Recommended: New Approach to File TDS Returns Online

Form 16 Benefits

• This Form contains each and every detail about how much TDS has been deducted and deposited. The particulars, which are filled in Form 16 are required to be presented in the Income Tax Return, however, at the time of filing the return, there is no need to get a copy of it.
• Once this TDS Certificate has been issued to you, it becomes the most authorized proof of your income accompanied by the tax you’ve paid thereafter. This is the most prominent evidence that can be shown to the banks at the time of Home Loan Application.

Form 16 Revised Format Released

The income tax department has recently announced the revised salary TDS certificate i.e. form 16 with individual break up for income and taxes paid. The IT department would be able to go through the break-up in an easier manner and would further help them with any incorrect claims against the taxes. The new revised form 16 will include the tax exemption allowed in the form.

About TRACES

TRACES stands for TDS Reconciliation Analysis and Correction Enabling System. TRACES online services allow registered TDS deductors or employers to download Form 16. TRACES are the detailed records of the TDS Tax Deducted at Source which allows the taxpayer to effortlessly file an income tax return.

Mandatory for Employers to Provide Form 16 to the Employees Only From the TRACES Portal

The I-T Department has already alerted the employers about downloading and generating Form 16 only from the TRACES. Now the department also wants the employees to make sure about the same.

To be remembered, the final date for the taxpayer to file an ITR. TRACES is an online application operated by the Income Tax Department which facilitates the taxpayer to view and download challan status, Form 16 or Form 16A (verifying the status of TDS) and Form 26A (the annual tax credit form).

For salaried individuals, verifying Form 16 and Form 26A is mandatory. Form 16 has details of income received from the employer, TDS deducted by the employer, and other tax deductions in A.Y 2024-25 (F.Y 2023-24). Form 26A has all the calculated knowledge of deducted tax by the deductor, collected tax, advance or self-assessment tax, and refunds paid by the Income Tax Department.

To avoid future faults, here are the tips to check the validity of Form 16 from TRACES:

• There will be a unique 7-character alphabet certificate number on the original Certificate downloaded from TRACES.
• The document will contain a TDS-CPS logo on the left corner and on the right corner there will be an image of the national emblem.

Form 16 Re-designed Under New Laws

Form 16 is re-designed under new laws, therefore it is important to download the new format of Form 16 from TRACES. Form 16 has two segments A and B. Segment B of Form 16 was reviewed recently by the Central Board of Direct Taxes (CBDT). CBDT has already issued a notice for the employers to issue Part-B of Form 16 to the employees received only from the TRACES portal.

To be noted, Part B of Form 16 contains details of all the allowances and other requisites the employer has provided to the employee.

Lastly, employers must file form 24Q which requires the salary description in the last quarter of FY 2023-24.

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