Applicability and Importance of Form 16

There is a time of the year when you get frequent reminders from the Income Tax Department to file your income tax returns on time. Form 16 is the most common financial document you come across when filing your ITR. Form 16 is a certificate of the Income tax deducted at source (TDS) by your employer and then submitted to the Income Tax Department. Form-16 can be obtained by any salaried person whose tax has been deducted by the employer at the source. Even if your income falls under the tax exemption limit or not, the employer must issue a Form 16.

Basic Details of the Employee and the Employer

  • Name of Employee
  • Address of the employee
  • PAN of the employee
  • Name of the employer who deducts the tax
  • Address of the employer
  • PAN of the employer.

Form 16B contains a detailed breakdown of how your tax was calculated considering the investment declaration you made at the beginning of the financial year. One must ensure that the PAN mentioned on the Form 16 is correct, and we at Accounting4you will do it right for you. The PAN mentioned on the TDS certificate should always be ensured. If the wrong PAN detail is mentioned, then the amount of TDS will not reflect on your Annual Information statement.

TDS Certificate

If your income from salary for the financial year is more than the basic exemption limit of Rs. 2,50,000, then your employer is required to deduct TDS from your salary and deposit it with the government. Form 16A is also a TDS certificate. Form 16 is only for salary income. Form 16A is applicable for TDS on Income other than salary. And in this matter, you can take help from Accounting4you. Form 16A is issued when payments are non-salary. If you work as a freelancer, you will be issued Form 16A from the clients to whom you provide service (that is, if they have made TDS deductions from what they have paid you).

Another example is that of bank interest payments. The bank will issue Form 16A when TDS is deducted by them on the interest that you have earned on the fixed deposits. Please take note that the rate of tax deduction will vary depending on the type of non-salary income. Form 16B states that the tax has been deducted at source on the income earned from the sale of immovable property, be it a building, land, or other than agricultural land. The TDS has been deposited by the property buyer with the Income Tax department.

Digital Signature on TDS Certificate

Form 16/16A is the certificate of deduction of tax from source issued on the basis of the deduction of tax by the employer on behalf of the employees. The deduction for TDS on salary is mandatory under Section 192 of the Income Tax Act. Every employer who pays a salaried income to his employees needs to deduct TDS from the salary. If the income amount is over the basic exemption limit, In case no TDS has been deducted, the forms are not required to be issued. Dedicators can digitally sign the TDS Certificate using a digital signature certificate. A verified digital signature on a TDS certificate will be supported by a checkmark.

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