Form 16 is arguably the most important document that salaried employees require to file their Income Tax Returns (ITR). Form 16, also referred to as a salary certificate, is issued annually to salaried individuals by their employers, confirming that Income Tax has been deducted at source (TDS), and passed on to the collecting authorities.
While there is no hard and fast rule to understand Form 16, being aware of the various sections will aid you in the tax return filing process. With Form 16, an employee can be made aware of any refunds on overpaid taxes and, thus, claim the reimbursement. Banks and financial institutions also view Form 16 as income proof and the certificate can help employees apply for loan applications or increase credit card limits.
Therefore, reading and understanding Form 16 carefully is paramount to making the ITR filing process a walk in the park. However, Form 16 can only be issued by an employer. So, it’s good practice to check with your organisation/company’s HR team on the status of your Form 16.
Form 16 can be generated and downloaded by an employer on the TRACES website.
Step 1: Log in using the User ID, Password, and PAN for the taxpayer
Step 2: Once logged in, select ‘Form 16’ under the ‘Downloads’ tab along with the year of assessment in question.
Step 3: Finally, submit the document for download.
You can file your Income Tax Returns with Form 16 either offline (Java Utility/Excel Utility) or online (directly on the e-filing portal). Here, we can look at the steps on how to file ITR with the help of Form 16.
Here is how to file Income Tax returns offline with Form 16:
Step 1: Visit the Income Tax e-Filing portal.
Step 2: Select the applicable ITR utility under 'Downloads’.
Step 3: Fill in the required details on the ITR form.
Step 4: Validate all tabs and calculate tax.
Step 5: Generate information into an XML sheet.
Step 6: Upload the XML to the ITR e-filing portal.
Here is how you can file an income tax return online using Form 16:
Step 1: Visit the Income Tax e-filing portal.
Step 2: Log in using your user ID and password.
Step 3: Enter PAN and other essential details.
Step 4: Fill in the mandatory details (address, date of birth, e-mail ID, mobile number) on the online ITR form.
Step 5: Submit ITR for verification.
Generally, all salaried employees require Form 16 to file their ITR. However, in the rare case that your employer has not issued Form 16, you might require pay-slips to compute and forecast your gross income.
Employees can file their ITR without Form 16, however, it can be a tedious task. For this, an employee must derive his/her gross salary with the help of pay-slips and then calculate the exemption on allowances. The employee must then declare other sources of income as well, including house property and capital gains. After accounting for investments made under Section 80, the final tax liability must be cross-referenced against the TDS amount paid for that financial year. If an employee has paid less tax than what he/she was supposed to, they can make the due payment while filing ITR online.
On the contrary, if the taxpayer has paid more in taxes, they can file for a refund with the Income Tax Department.
Once an employee receives Form 16, he/she is responsible to ensure that all details mentioned in the document are correct. Most importantly, they must cross-check the PAN. If there are errors in their Form 16, the employee must inform the organisation/company’s HR team and have it rectified.
Only employers can generate and issue Form 16 online. Employees can view or download Form 16 that has been generated/uploaded by an employer on the organisation’s HR portal.
Form 16 is to be issued by an employer to an employee only if TDS has been deducted. If there is no TDS deducted for an employee, there is no need for an employer to issue Form 16. In India, people with gross annual income of ₹2.5 lakh and above are eligible for Form 16.
Filling Form 16 manually is not encouraged. Post digitisation, employers tend to issue Form 16 online.