Form 16 is a tax certificate issued to employees from their employer when the employer deducts tax from the employees salary.
WHAT IS FORM 16?
In simple terms Form 16 is an acknowledgement which give information to the employees that their deducted tax has been deposited with the Income Tax department by their employers for the financial year.
Our dedicated team of tax experts at ACE ALLIANCE will help you easily manage your TDS compliance online through our platform. Once an organization subscribes to our services, our team of TDS experts will file all your TDS returns, help to pay any overdue TDS deposit and issue Form 16 to all your employees.
The details of what comprises Form 16 to both employee and employer is explained below under the different headings.
1) TAX DEDUCTED AT SOURCE(TDS) ON SALARY
The TDS for each employee is calculated at the income tax rates prescribed for the the financial year in which the payment to employee is made. The employer has a choice to increase or decrease the TDS amount to be deducted basis any adjustments in previous deficiency or excess deduction. The total amount of TDS each month is determined by the following factors.
- EXEMPTION LIMIT
- LEAVE ENCASHMENT
- NOTIFIED ALLOWANCES
- HOUSE RENT ALLOWANCE
- DONATION BY EMPLOYEES u/s 80G
- OTHER DEDUCTIONS
- BONUS OR INCENTIVES
- ESTIMATED SALARY
If a person n is employed by more than one employer during the said financial year, tax will be deducted on the aggregate salary by one of the employers which is chosen by the employee while submitting information in Form 12B. The employee has to give the information in form 12B to one of their employers. After form 12B has been submitted to that employer it becomes the duty of that employer to deduct TDS from the employee.
2) TAX DEPOSITED BY EMPLOYERS TO THE GOVERNMENT
The tax deducted by an employer from their employees salary must be deposited by the employer along with an income tax challan ITNS 281 on the government portal or before 7th of every month for the previous month dues. Since the year 2008, all the corporate assesses and assesses that may be subject to tax audit are required to make the TDS payment online through internet banking facility.
An assesses can also make this payment of taxes from the account of another person. However, the challan or receipt while making payment should clearly indicate the PAN of the assessee on whose behalf this payment is being made.
3) TDS RETURNS FILED BY EMPLOYERS
Every employer is required to file quarterly TDS returns with the Government providing details of tax deducted from salary. Information about tax deduction from salary under Section 192 is filed in Form 24Q. The employer at the time of filing TDS return would furbish the following information to the Government.
1) TAN No. of the employer
2) PAN No. of the employer
3) Salary of the employee
4) The details of tax deposited with Government with challan identification number
5) Any amount if any paid to employees without deducting TDS
Due Date for Filing TDS Returns by Employers
The TDS return must be filed with the Government every quarter as per the following schedule:
|Quarter||Due Date for Filing TDS Return|
|April – May – June||July 31st|
|July – August – September||October 31st|
|October – November – December||January 31st|
|January – February – March||May 31st|
Annexure II of TDS Return in May 31st
The TDS return that is filed by an employer on May 31st, contains various details about the employee such as details of TDS deducted and deposited. The Annexure II of the TDS return has various data points and is s prepared by the Human resources and accounts department of the employer’s company.
Issuance of Form 16 to Employees
Once an employer files the necessary TDS returns, the Government issues TDS certificates to the employer. These TDS certificates are then provided by the employer to the employees. This Form 16 provides details about the tax deducted at source (TDS)from the salary.
Form 16B gives details of TDS under Section 194-IA. Form 16C for TDS under Section 194-IB, Form 16A gives details about TDS from other sources than salary and Form 27D for TCS.
The due date for issuance of Form 16 is on or before June 15th of the financial year immediately following the previous financial year in which the tax is deducted. In the case of Form 16A, the same should be issued every quarter.
Salary TDS Certificate in Form 16
A salary TDS certificate in Form 16 comprises of two parts namely Part A and Part B.
1) Part A of Form 16 contains the information of employer such as name, address, PAN/TAN no’s of the employer. It also contains details such as assessment year, period of employment, address of communication, summary of TDS return filed, salary paid, amount of TDS and details of TDS deposit.
2) Part B of Form 16 includes details of salary paid, other incomes, amount deductible under Chapter VI-A, tax payable and relief under section 89. Part B of Form 16 also contains separate verification. In verification, the deductor will certify that salary/tax details are complete and correct on the basis of account books and other available records.
3) If a person is employed by more than one employer, then each of the the employers will issue Part A of Form 16. Part B of Form 16 can be issued by the respective employers or the last employer.
Form 16 with Digital Signature
Part A of Form 16 can be issued by the employer by downloading the form from the TRACES Portal. Part B of Form 16 is usually manually prepared by the employer. The employer ensures that all the content in Part and Part B of Form is correct before they issue this certificate to their employees.
The three different packages that Ace Alliance offers for TDS compliance for companies are as follows.
- Basic Package
For businesses having 1 – 25 employees. Includes TDS Filing for Q4 with Annexure II, Form 16 issuance and ITR-1 filing for employees.
- Standard Package
For businesses having 26 – 100 employees. Includes TDS Filing for Q4 with Annexure II, Form 16 issuance and ITR-1 filing for employees.
- Premium Package
For businesses having 101 – 500 employees. Includes TDS Filing for Q4 with Annexure II, Form 16 issuance and ITR-1 filing for employees.