What is salary TDS certificate Form 16 – All you need to know

Form 16 is a certificate issued by the employer certifying the total amount of tax that has been deducted and deposited against employee’s permanent account number for the whole previous year. It’s also known as salary TDS certificate.

Form 16 contains all the information that employees are required to prepare and file an income tax return.

Before getting into what is salary tds certificate form 16 and what are its different components, we must discuss why salary TDS certificate is issued in Form 16 by employer to employees and when it should be issued to employees.

Why employer issues salary TDS certificate form 16?

Every employer is required to deduct tax while paying salary to employees if their income from salary for the financial year is more than the basic exemption limit. Tax has to be calculated on the taxable income based on the slab rates in force for the financial year in which it has to be deducted. Basic exemption limit for the financial year 2018-19 and 2019-20 is Rs 2,50,000.

Employers need to do the tax calculation based on the forecasted earnings and investment declarations made by the employee at the beginning and during the year. For further details, we have written a different article on how TDS on salary is calculated and deducted out of employee’s salary.

Tax deducted by the employer from employees salary has to be deposited monthly with the IT department. Quarterly TDS return in form 24Q has to be filed on or before the due date of filing with all the information of tax deducted and deposited on salary.

Now the question is how an employee will know the total amount of TDS that has been deducted and deposited by the employer out of salary.

To let employees know the amount of tax deducted and deposited by the employer, the government has made it mandatory vide section 203 of the income tax act, 1961 for all employers deducting tax from employee’s salary to issue form 16 (salary TDS certificate) by certifying tax deducted and deposited against Permanent Account Number or PAN of the assessee.

Based on this provision, the employer is bound to issue form 16 by certifying the total amount of tax deducted and deposited with the government to the employee with all the prescribed details.

Is there any other way to check tax credit regularly

Yes, as an employee, you can do it by checking form 26AS online every quarter after the due date of filing TDS return, to know how much tax credit your employer has given you for the quarter.

For each quarter, the due date of filing TDS return in form 24Q is the last date of the following month of each quarter. The only exception is the last quarter of the previous year. For the last quarter (starting from January 1 to 31st march), the due date of filing TDS return is 31st May.

You can cross check tax deposited amount in 26AS with salary slip to know whether entire deducted amount has been deposited or not.

What details form 16 provides to employees

Form 16 contains all the salary details given by the employer to employee and tax deducted out of it for the whole previous year.

Employer has to download form 16 from tax department’s traces portal after filing TDS returns for the whole year against the permanent account number of all eligible employees.

Form 16 has two components: Part A and Part B. 

Part A

Part A of form 16 is downloaded from employer’s traces portal login. This part gives quarterly summary of tax deducted and deposited by the organisation from the salary income of employees. These details are derived from quarterly TDS return filed by the organization.

Form 16 has all the details of TDS amount including who has deducted tax from salary and how much has been deducted with quarterly break up.

Employer has to send digitally signed Part A and Part B of form 16 to all employees on or before 31st May of the following year to the previous year for which TDS amount has been deducted. For instance, in case of financial year 2018-19, form 16 must be issued on or before 31st May 2019. The government has extended it to 10th July 2019 for the financial year 2018-19.

Part A of form 16 includes following details;

  • Name and address of both employer and employee.
  • TAN of the employer.
  • PAN of both employer and employee.
  • The assessment year for which tax has been deducted and deposited.
  • Period of employment
  • Summary of salaries paid
  • Date on which tax has been deducted from employee’s salary
  • Date on which tax deposited with the government.
  • Summary of tax deducted and deposited every quarter with tax department.

It provides all the details to know who has deposited tax against your PAN, when and how much they have deposited.

Part B

Part B of form 16 is actually an annexure to Part A. Recently tax department has amended part B of form 16 to provide section wise break up of exemptions allowed under section 10 and deductions claimed under chapter VI-A.

It provides the following details to employees;

  • Detailed breakup of salaries
  • Exemptions allowed under section 10 of the income tax act, 1961.
  • Tax deduction allowed under chapter VI-A.

In cases where the employee has worked for two or more employers during the financial year, separate reporting is required for such salary income in new form 16.

In addition to salary income from current and previous employers, form 16 also has fields for income from other sources and income from house property. These fields will be filled up only when employee has reported these incomes to employer and they have filed it in TDS return with the income tax department.

Standard deduction under section 16 and tax rebate u/s 87A is also mentioned in form 16.

What is the difference between form 16, 16A and 16B

Do not get confused between form 16, 16A and 16B, they all are different. All these forms are downloaded from traces portal. TRACES refers to TDS Reconciliation Analysis and Correction Enabling System.

Form 16A is issued when tax has been deducted from non-salary payments such as for TDS on professional fees, TDS on rent, interest on bank deposits and commission. Form 16B is issued when tax has been deducted under section 194IA by the buyer for purchasing property valuing Rs 50,00,000 or more.

If you have worked for more than one employer during the previous year, then you will receive Form 16 from each of these employers.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.