What is FORM - 16?
Every salaried employee in an organization will get the salary after deducting tax by the employer. This process is called as Tax Deduction at Source (TDS). At the end of financial year, employer must issue a certificate (FORM - 16) which contains the details about the salary earned by that employee and how much tax deducted in a financial year.
In simple terms FORM - 16 is details about the tax deducted by the employer in behalf of employee. The same will be paid to government by the employer.
In terms of Income Tax Act: FORM - 16 is Certificate of deduction of tax at source under section 203 of the Income Tax Act, 1961. Employer provide TDS certificate to the employees on FORM - 16.
Part A
Part B
Part A contains following details about Employer and Employees as below:
Name and Address of the Employer.
Name and Designation of the Employee.
PAN & TAN of Deductor - Permanent Account Number and Tax Deduction Account Number. These numbers are allotted by Income Tax Department. TAN is required to be mentioned in all correspondence related to TDS/TCS.
PAN of the Employer - Permanent Account Number allotted by Income Tax Department. Its employee's responsibility to get it number from IT Department.
CIT (TDS) - Commissioner of Income Tax address where organization located.
Assessment Year - is different than Financial year. Assessment year is next year for current financial year. For ex. for financial year 2012-13 assessment year is 2013-14.
Period (From - To) - Period from which employee worked in that organization.
Summary of tax deduction at source - details of tax deducted from your salary and remitted to Income Tax Department by employer per quarter. Employer needs to maintain details for each employee.
Part B contains details related to income (salary paid by employer & other income) and income tax deducted by employer. It has following sections:
1. GROSS SALARY:
(a) Salary as per provisions contained in section 17(1) - includes salary drawn by individual throughout financial year (From April to March - including both months). Salary consists Basic Salary, HRA (House Rent Allowance), DA (Dearness Allowance), Conveyance or Transport Allowance, Medical Allowance, Leave Travel Allowance, Incentives, Bonus, Miscellaneous Allowance.In simple terms FORM - 16 is details about the tax deducted by the employer in behalf of employee. The same will be paid to government by the employer.
In terms of Income Tax Act: FORM - 16 is Certificate of deduction of tax at source under section 203 of the Income Tax Act, 1961. Employer provide TDS certificate to the employees on FORM - 16.
Components of FORM - 16 - Understand FORM - 16:
FORM - 16 mainly contains two sections:Part A
Part B
FORM - 16: Part A
Part A contains following details about Employer and Employees as below:
Name and Address of the Employer.
Name and Designation of the Employee.
PAN & TAN of Deductor - Permanent Account Number and Tax Deduction Account Number. These numbers are allotted by Income Tax Department. TAN is required to be mentioned in all correspondence related to TDS/TCS.
PAN of the Employer - Permanent Account Number allotted by Income Tax Department. Its employee's responsibility to get it number from IT Department.
CIT (TDS) - Commissioner of Income Tax address where organization located.
Assessment Year - is different than Financial year. Assessment year is next year for current financial year. For ex. for financial year 2012-13 assessment year is 2013-14.
Period (From - To) - Period from which employee worked in that organization.
Summary of tax deduction at source - details of tax deducted from your salary and remitted to Income Tax Department by employer per quarter. Employer needs to maintain details for each employee.
FORM - 16: Part B
Part B contains details related to income (salary paid by employer & other income) and income tax deducted by employer. It has following sections:
(b) Value of perquisites under section 17(2) - includes details from Form No 12BA - which contains fringe benefits or amenities and profits in lieu of salary. For example employer provided accommodation, cars / other automotive, Sweeper/ Gardner/ Watchman/ personal attendant, Gas/ Electricity/ Water, Interest free or concessional loans, Holiday expenses, Free meals, Free education, Free or concessional travel, Gifts/ vouchers, Credit card and club expenses, Stock options. Use of movable assets of employer by employee. Transfer of assets to employees by employer etc covered in this section. In this section above all fringe benefits (contribution of employer - contribution by employee) will be exempted from income tax.
(c) Profits in lieu of salary under section 17(3) - includes Gratuity, Pension Fund, Provident Fund, Salaries received from previous employer in same financial year (this is applicable if employee joined new organization in middle of financial year). This information should be declared by employee while joining new organization.
(d) Total = (a) - (b) + (c)
Allowance to the extent exempt under section 10 - includes Leave Travel Allowance Exemption [Section 10(5)], House Rent Allowance Exemption [Section 10(13A)], Transport / Conveyance Allowance Exemption & Children Education Allowance Exemption covered under Section 10(14), Payment made towards medical expenditure not more than 15,000/- per financial year covered under section 17(2), Leave Encashment Exemption [Section 10(10AA)] & Gratuity Exemption [Section 10(10)].
(d) Total - 2. Less
(a) Tax on Employment - Professional Tax is a tax on employment levied by state government.
(b) Entertainment Allowance - Entertainment allowance is also extempted from income tax.
Total of all Taxes on employment / entertainment allowances declared under 4(a) & 4(b). In simple terms its sum of all deductions under 4. DEDUCTIONS.
Its total salary earned by employee after deducting fringe benefits, allowances exemptions, tax on employments etc.
In simple terms: 3. Balance - 5. Aggregate of 4(a) & 4(b) [deductions]
(a) Income under the head Income from house property - If employee has house property and taken home loan on it. Employee can take exemption of interest paid for this home loan. Rent received on this home is not considered as income of individual. Amount displayed against this section is only interest paid for home loan up to 1,50,000/- is exempted. So (-) sign is displayed against amount.
(b) Income under the head Income from Capital Gains - Any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head capital gains. Examples of assets are a flat or apartments, land, shares, mutual funds, gold among many others. There are two type of capital gains: Short term and Long term. There is special method (Concept of Indexation) to calculate the Capital Gains.
(c) Income under the head Income from other sources - includes dividend, Wining lotteries, racing game, card game, bet, Any annuity due or commuted value of any annuity paid under section 280D, Income from let on hire of machinery, plant, furniture, buildings etc,
(d) Total - Total of (a) + (b) + (c) under 7. If this amount is negative then (-) sign is displayed before amount.
Total of INCOME CHARGEABLE UNDER THE HEAD "SALARIES" and Any other Income reported by the employee.
This section contains various tax exemption sections like 80C, 80D, 80CCF, 80E, 80G etc as below:
(A) Sections 80C,80CCC and 80CCF - includes tax exemption under section 80C, 80CCC and 80CCF. Combined limit of section 80C and 80CCC is 1,00,000/-.
(a) Section 80C - includes various deductions like Life insurance premium, PF, PPF, NSC, ELSS etc. For more details refer Section 80C.
(b) Section 80CC - includes contribution in certain pension fund by employee.
(c) Section 80CCF - includes infrastructure bonds issued by LIC, IFCI, infrastructure company or any non banking finance company which has been classified as infrastructure finance company by RBI limit up to 20,000/-.
(B) Other sections under chapter VI - includes tax exemption under sections 80D, 80E, 80DD, 80DDB, 80G etc as below:
(a) Section 80D - includes deduction like medical insurance premiym for self, spouse, children and dependent parents. For more details refer Section 80D.
(b) Section 80DD & 80DDB - includes medical expenditure of disabiliuty or specific diseases of self or dependent. For more details refer Section 80DD & 80DDB.
(c) Section 80E - includes tax exemption of interest paid for education loan taken for self, spouse or children's education. For more details refer Section 80E.
(d) Section 80G (100% & 50%) - includes donation towards charitable trust or institution. For more details refer Section 80G.
10. Aggregate of deductible amounts under Chapter VI - A
This section is the sum of all tax exemption under various above sections like 80C, 80D, 80CC, 80CCF, 80E, 80D, 80DD, 80DDB, 80G etc subject to limit of each section.
11. Total Income (8-10) (rounded off to nearest Rs. 10)
This indicates taxable income after deductions (various tax exemption, allowances exemptions etc).
12. Tax on Total Income
Tax calculated based on total income lies in which slab. For more information refer Income Tax Rates / Slab.
13. Education Cess (on tax at S.no 12)
Education Cess is calculated on Tax. Education Cess rate will be change by Income Tax Department and will be varied on each financial year. For more information on Education Cess refer Income Tax Rates / Slab.
14. Sec and Higher Educ Cess (on tax at S.No. 12)
Sec & Higher Education Cess is calculated on Tax. For more information on Sec and Higher Educ Cess refer Income Tax Rates / Slab.
15. Tax Payable(12+13+14)
Tax payable is summation of Tax, Education Cess and Sec & Higher Education Cess on Tax.
16. Less:
(a) Tax deducted at source u/s 192(1) - Income tax deducted by employer from salary. Every month employer deduct the income tax from salary and debit to Central Government account.
(b) Tax paid by the employer on behalf of the employee u/s 192(1A) on perquisites u/s 17(2) - Employer debited the income tax to Central Government account but didn't deduct from employee's salary.
(c) Tax Deducted by Previous Employer - Tax deducted by previous employer in case if employee changed job through the financial year.
(d) Tax Deducted from Interest / Others - Tax deducted on interest earned on Fixed Deposit in banks / company for current financial year.
17. Tax payable/refundable(15-16)
Tax payable less tax paid / deducted in above clauses (16.a to 16.d).
If employee paid more income tax (more than Tax Payable) then employee should get refund from Income Tax Department, in this case (-) sign is displayed beginning of amount. Employee should file income tax return and get refund from Income Tax Department.
If employee paid less tax then this amount is positive. It means employee needs to pay this remaining income tax. Before filing income tax return employee should pay remaining income tax.
Details of tax deducted and deposited in the Central Government Account through challan
Every month employer deduct the income tax from salary of employee and deposit to Dentral Government Account. It contains income tax amount, BSR code of bank branch, date and challan number through which income tax of employee deposited to Central Government Account by employer.
Declaration
Includes various details like Place, Date, authorized person of employer. Now a days Form - 16 are digitally signed by employer.
No comments:
Post a Comment