Sep 7, 20203 min read

Understand Income Tax Form No.16

Updated: Nov 30, 2023

Understand Income Tax Form No.16

This is the tax filing season. Many employers have already released Forms 16 to their employees and the employees are filing their income tax returns. For the salaried taxpayers, Form 16 is the primary document based on which they file their I-T Return. Therefore, it’s important to understand Form 16 and its components and parts. Please remember that Form 16 is not an Income tax return. The tax mentioned in Form 16 is not a final tax amount, it can be lesser or more than that.

Before last year, there used to be different Form 16 formats used by different employers as per their convenience. However, from last year, the entire Form 16 is to be downloaded from the TRACES portal of the Income-tax Department (www.tdscpc.gov.in). Form 16 issued by TRACES has the authentic logo of TRACES imprinted on it. TRACES mean TDS Reconciliation Analysis and Correction Enabling System. Your form 16 has to be auto-generated by your employer from this website and it does not generate this form until all the TDS dues are paid and deposited by your employer. This Form 16 has a unique number (Certificate Number) generated from this portal. So, let us understand Form 16.

What is Form No. 16?

The employer deducts tax on the income from the salary paid to an employee. The employer is required to deposit such TDS into a Government Account and furnish a statement of TDS to the Government. The employer is also required to furnish the details of such income and TDS deducted to an employee in a prescribed manner. Such a manner is prescribed as Form No. 16. The employer is required to furnish details of TDS to an employee in Form No. 16 before 31st May of the F Y immediately next Financial Year. This statement in Form No. 16 is very important for an employee to furnish his Income tax returns and he must examine each column and the details furnished by the employer in such columns and fields.

What are the components and structure of Form No. 16?

Form No. 16 is having two (2) parts i.e. Part A and Part B. Part A comprises of the details of the tax deposited by the employer to the Government Account. If the employer is a Government or a Government undertaking, the payment is made by it via book entry and identified through Book Identification Number (BIN) and if the employer is other than Government and semi-Government bodies, the payments are done through Challans and identified via Challan Identification Number (CIN).

The part A of Form No. 16 is as follows:

It is important to understand the Part-A of Form 16. Look for this in Part A

Your PAN must be mentioned correctly
TAN of the deductor/employer must be mentioned correctly
Book Identification Number (BIN) must be correct
Challan Identification Number (CIN) must be correct

If any of this is incorrect, then you may lose the credit of taxes (TDS) deducted and paid by your employer and you may have to pay that amount of tax as tax demand. The Part-B of Form No. 16 contains details about your income from salary and other heads. Income from salary is entered by the employer himself from your payslips and other incomes are entered from the details provided by you to the employer. Generally, these are income from house property and income from other sources. It also contains the details of various deductions and tax savings provided by you to your employer. The Part-B of Form No. 16 looks like this:

This part is an aggregate of your payslips. So, you must verify the entries in Part B with those in payslips. The taxes paid details herein are the tax amounts deducted by your employer and deposited with the Government. Whether the employer has shown correct tax or not can be verified by cross-verification with Form 26AS of yourself which also can be downloaded from the TRACES portal. This must contain all the deductions that you told your employer before he deducted your tax. In case of any discrepancy, you must contact your deductor and get the amended Form 16.