Understanding Form 16: Everything You Need to Know
Form 16 for salaried employees acts as a report card for their tax payments. It is a type of tax document that serves as a certificate for Tax Deducted at Source (TDS) on salary payments for the financial year. When applying for a loan, it serves as proof of income and tax compliance, making it essential for lenders to assess financial stability.
A clear and accurate Form 16 can significantly improve loan eligibility, showcasing earning capacity and responsible financial management. Read on to know more about it.
What is Form 16 in Income Tax?
The Form 16 refers to a TDS certificate, which is issued by an employer under Section 203 (Income Tax Act). This form contains information about the TDS deduction on salary for the financial year. It can also be used as proof of income.
What Information is Listed in Form 16?
The Form 16 consists of two parts, A and B. There is a Form 16 Part A and Part B difference, as the components listed in them are different.
- Part A of Form 16
- Details of Employee – Employment details such as the name of the employee, their Permanent Account Number (PAN).
- Details of Employer – It contains the name, address, Tax Deduction and Collection Account Number (TAN) of an employer.
- Year of Assessment – It is the year for which TDS occurs.
- Total Employment Duration – It states the duration for which an employee has worked with an employer during the financial year.
- TDS Information – Part A also contains information specific to tax deducted and deposited with the government, along with their Challan Identification Number (CIN).
2. Part B of Form 16
- Salary Components -Contains details of salary components like an employee’s basic salary, prerequisites, deductions and allowances.
- Calculation of Taxable Income – A computation is done of the whole taxable income after any applicable deductions.
- Tax Payable and Rebate -The refund amount and final tax payable are also listed in Part B.
- Deductions Under Section 80 -It includes details of all deductions applicable under Section 80C, 80D, 80E, etc.
- Details of Paid Tax -A final summary of the total deducted TDS is mentioned.
What are the Eligibility Criteria of Form 16?
If your annual income falls under the taxable category of the government, your employer does a TDS deduction from your salary. As a result of this, you will get Form 16. However, if your income does not fall under the set taxable bracket, then your employer will not deduct your TDS. As a result, you will not get the Form 16.
What are the Benefits of Form 16?
Form 16 has great importance of Form 16 for salaried employees, as it helps to simplify the income tax filing procedure. Here are a few benefits of Form 16:
- Helps to Verify Income – Form 16 can help verify the income that you generated from your employment within a given financial year.
- Ensures Tax Compliance – This form helps to confirm the TDS of a financial year by the employer on behalf of the employee.
- Helps Claim Tax Deductions – Form 16 is useful in claiming applicable tax deductions during ITR filing (according to information provided in Part B of the form).
- Aids in Verification of Employment – There are a few companies that require Form 16 to verify earned revenue and proof of job.
How to Download Form 16 Online?
It is employers who issue Form 16; however, if you want to download the Form 16 blank form by yourself, to check the template, follow these steps:
The steps to downloading Form 16 online are fairly easy. Here are:
- First, visit the official site of the Income Tax Department of India.
- If you are an existing user, then log in by entering your credentials. However, if you are a first-time user, register on the portal by providing information like name, date of birth, contact information, and PAN.
- After logging in, click on the tab labelled ‘My Account’. Go to the ‘Forms/Downloads’ section and click on ‘View Form 16‘. It will appear in the dropdown menu.
- Now select a suitable assessment year for which you require Form 16.
- There will be two parts of Form 16, comprising different components. Download them.
Note: Make sure that the information you provide is correct and aligns with your records. Fill out the form very carefully.
Read more: Tax-Saving Investment Options in India
How Does Form 16 of Income Tax Help When Availing Loans?
When anybody applies for a loan at a financial institution or Non-Banking Financial Company (NBFCs), the first thing that they look for is proof of income. It speaks of the borrower being able to pay back the borrowed money. In a similar way to a salary slip, Form 16 serves as a record of income.
For instance, Ram takes a car loan, but he does not have any forms of traditional income proof to show. In that case, he can submit Form 16 as proof of his income.
Can One Get Form 16 For Previous Years?
If you are looking to get your Form 16 for previous years, you will have to directly approach your employer and use online payroll platforms. You need to ask your employer directly and request Form 16 for the previous years.
On the other hand, if your employer has an already outsourced payroll platform, avail Form 16 for the previous years directly from there at your convenience.
Final Words
Form 16 is a vital document that serves as proof of income not only for ITR filings but also for availing loans. If you are someone who is looking to get a car loan, a car loan from Kogta Financial is the best option! With a hassle-free loan application process, you can get easy financing for your dream car. So, what are you waiting for? Get in touch with us today.
Frequently Asked Questions (FAQs)
You can request a duplicate copy from your employer or download the TDS details from the TRACES portal.
Yes, you can use Form 26AS and salary slips to file your ITR manually.
While not mandatory, Form 16 strengthens your loan eligibility by serving as verified proof of income and tax compliance.
It’s advisable to keep your Form 16 for at least 6 years, as it can be needed for audits or loan applications.
