All you need to know about your Form 16 (Salary Certificate)

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Form 16 (or salary certificate in layman’s language) is a certificate issued by an employer to all his employees for a particular financial year at the end of the said year reflecting the total salary paid and amount of tax deducted (‘TDS’) during the year.  For a salaried employee, Form 16 is of utmost importance from income-tax point of view as it forms the base of his / her income-tax return.

The objective of this article is to attract attention of all those salaried employees who have been issued or are yet to receive their Form 16 for the financial year (‘FY’) 2012-13.  The following points are noteworthy in this respect:

Contents of your Form 16 – Part A

Part A of your Form 16 will be the TDS certificate issued by your employer.  It determines the total amount paid to you during the year and amount of tax deducted and deposited by the employer in your name with the Indian Government Treasury.  However, this certificate is valid only if it reflects all these following details:

 

– Heading – Certificate under Section 203 of the Income Tax Act, 1961 for tax deducted at source on salary

– Certificate number

– Your name and address and also that of your employer

– Your Permanent Account Number (‘PAN’) and that of your employer

– Tax Deduction Number (‘TAN’) of your employer

– Range of Commissioner of Income Tax (TDS) [‘CIT(TDS)’]

– Assessment Year (AY 2013-14 in this year’s certificate)

– Period for which the certificate belongs to (April 1, 2012 to March 31, 2013 in this certificate)

– Quarter wise details of amount paid to you, receipt numbers of the quarterly TDS returns filed by your employer, TDS amount deducted and deposited by your employer in your name

– BSR code of the bank branch, date on which TDS was deposited, Challan serial number relating to each amount of tax deposited by your employer

– Status of matching with Oltas – it should reflect as ‘F’ (indicating final). In case it reflects ‘U’ (indicating unmatched), immediately inform the employer of the same else appropriate credit shall not be available to you

– Verification details of the employer

– All the pages of Part A of Form 16 should have been digitally signed by the employer.  If not digitally signed, the same should have been at least manually signed by the employer

Contents of your Form 16 – Part B

Part B of Form 16 is usually Annexure to Part A.  It reflects your detailed salary components, taxability of the same and the total amount of tax payable by you for the year against which TDS has been deducted and deposited by your employer.  The contents of Part B are as under:

– Gross Salary

– Exempted allowances under Section 10 of the Income Tax Act – conveyance allowance, house rent allowance, medical allowance, children education and hostel expenditure allowance, etc

– Deductions allowable from the salary income – entertainment allowance and professional tax

– Total income chargeable under the head ‘Salaries’ based on the above figures

– Your any other taxable income, provided it is reported by you to the employer

– Tax saving deductions that you are eligible for like PPF, LIC, Mediclaim, interest on education loan, etc, provided the same are reported by you to the employer

– Tax on total income payable by you – This shall be the amount of TDS that the employer would have deducted from your salary.  However, it is possible excess or short TDS may have deducted by your employer.  In such a case, the excess amount should be claimed by you while filing your return, whereas short amount should be paid by you at the time of filing the return

– Verification details of the employer

– Digital / manual signature of the employer

 

Form 12BA

Form 12BA is a statement showing particulars of perquisites, other fringe benefits or amenities and profits in lieu of salary thereof granted by your employer to you during the year.  Perquisites (or perks) are additional monetary / non-monetary benefits that you may have been granted throughout the year like rent free accommodation, interest free or concessional loans, etc.  Profits in lieu of salary means any payment due to or received by you from your employer in connection with or at the time of termination of employment or modification in terms and conditions relating thereto like gratuity, pension, etc.  The form also confirms the amount of tax deducted from your salary and paid into the Government Treasury by your employer.  The statement should also contain declaration from the employer that the figures stated in the form are correct and accurate as per their books of accounts.

 

Annexure (salary details)

The last part of Form 16 consists of Annexure that provides summarized salary details for your reference purposes bifurcating the same into exempt and taxable components.  The Annexure provides details in the following tabular manner:

Description Amount paid Amount exempt Amount taxable
Basic Salary
House Rent Allowance
…… (other components) ……
Total

 

Lastly, it determines the total tax payable by you, tax deducted and deposited by the employer and net tax payable by / refundable to you.  Ideally, it should be Nil.  In case the figure reflects a refundable amount (represented by a negative sign), it does not mean that the employer is going to refund you the amount, so don’t catch them for this purpose.  The said excess amount is to be claimed by you in your return of income.  Similarly, in case of payable situation you are required to pay the balance tax amount while filing your return of income.

 

Considering the above, listed below are some FAQ’s on the discussed matter for your further assistance:

a) On what basis is your Form 16 prepared?

Your Form 16 is prepared on the basis of your CTC and declarations that you submit before your employer with respect to your other income and / or tax saving investments.

b) When should you receive your Form 16?

You should receive your Form 16 latest by May 31 of the subsequent year.  For eg Form 16 for FY 2012-13 should be received latest by May 31, 2013.

c) Is your tax-return replica of your Form 16?

It’s incorrect when you think that you have to only copy paste the stuff from your Form 16 into your tax return.  If you have earned any income during the year which has not been reported to your employer (eg bank interest), certainly the same will not be reflected in your Form 16 but should form part of your tax return.  Similarly, you may have made certain tax saving investments at the end of the year (in March) which would not be reflected in your Form 16.  Benefit of the same can be availed in the tax return even if not reflected in your Form 16.

d) Is there a need to submit your Form 16 at any point of time along with your tax return?

No, unless your case has been selected for scrutiny, in which case it will be required to be produced before the tax officer.

e) Can you confirm the amount of TDS deposited by your employer in your name?

Yes by checking your Form 26AS available on the website www.incometaxindiaefiling.gov.in.

f) What will the Gross Salary figure of your Form 16 represent?

It will denote your total CTC (excluding employer’s contribution to provident fund, if any) plus perquisite value and profit in lieu of salary as explained above.

 

Hope the above helps every salaried employee in understanding how their Form 16 should appear and be smart enough to get it replaced in case of any discrepancy.  Questions and comments are always invited.

 

– Prince Doshi

(Prince Doshi  is a qualified Chartered Accountant and a B.Com graduate from Narsee Monjee College of Commerce and Economics.  He has post qualification experience working as an Associate for BMR & Associates, a leading tax consultancy firm.  Presently, he has his own Chartered Accountancy practice specializing in the field of income tax consultancy, sales tax, service tax and audit compliance.)

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