Form 16 - TDS certificate for salaried employees

Employers are obligated to deduct tax from the salaries payable to employees, where the salary exceeds the basic exemption limit prescribed by the Finance Act. Such 'Salary TDS' is then remitted to the government by the employer. You can avail these details on a document known as Form 16, which is a TDS Certificate.

Form 16 helps the employees know how much tax is paid on their behalf. A TDS certificate includes salary paid, TDS deduction date, amount of TDS, and the date it is deposited or remitted to the government. If tax has been deducted at source from the salary paid to employees, then the employer has to issue Form 16.

However, in cases where the employee's gross annual salary is below the taxable limits or the employee has furnished Form 15G or Form 15H, the tax deduction will not be required. In these cases, issuance of Form 16 is not mandatory.

Components of Form 16

Form 16 is made up of two parts:

  • Part A
  • Part B

Form 16, Part A

Part A of Form 16 consists of:

· Name and address of the employer

· Name and address of the employee

· Tax Deduction and Collection Account Number (TAN) and Permanent Account Number (PAN) of employer

· Permanent Account Number (PAN) of the employee

· Summary of the amount paid or credited and tax deducted at source thereon in respect of the employee

· Payment wise details of tax deducted & deposited quarterly, certified by the employer

An employer can generate and download this part of Form 16 through the TRACES portal

Before issuing the certificate, the employer should authenticate its contents.

Suppose an employee is employed under only one employer during the year, then a certificate in Form 16 issued for the quarter ending on 31st March of the financial year shall contain the details of tax deducted and deposited for all the financial year's quarters.

On the other hand, if an employee is employed under more than one employer during the year, each of the employers shall issue Part A of the certificate in Form 16 pertaining to the period for which such employee was employed.

Part B (Annexure) of the certificate in Form 16 may be issued by each of the employers or the last employer at the option of the employee.

Form 16, Part B

Part B of Form 16 consists of:

  • Detailed breakup of salary
  • Detailed breakup of exempted allowances under Section 10
  • Any other income reported by the employee
  • Deductions allowed under Chapter VI-A
  • Relief under Section 89 (if any)
  • Details of tax payable, deducted and paid
  • Name, designation and signature of the person responsible for deduction of tax

Due date to issue Form 16

The employer must issue Form 16 within 15 days from the Due date for filing TDS of the 4th quarter. If the TDS filing due date for FY 2020-2021 is 31st May 2021, Form 16 is to be issued within 15th June 2021.

In other words, employers must issue Form 16 on or before 15th June of the next year, immediately following the financial year in which the tax is deducted.

Penalty

If the employer does not produce a TDS certificate within the due date, then the employer is liable to pay

· a penalty of Rs.100 per day of delay

  • per certificate

However, the amount of penalty cannot exceed the TDS amount deducted for the quarter.

Pointers:

· TDS certificates should be generated only from TRACES

· It will contain a unique Certificate Number

· The employee should produce details in this certificate while filing their Income Tax. This form is essential to adjust the amount of TDS against the tax payable by the employee.

· Therefore, employees should verify and ensure that it contains correct details such as Name, PAN, employer's TAN, TDS salary, TDS made and deposited.

· Many employers do not issue a TDS certificate unless employees ask them. Therefore, it is essential to ask for Form 16. Through this, the employee will know the exact amount of tax paid and deposited with the government.