Employees should review the accuracy and completeness of the information provided in Form 16.
They should confirm that all the tax deducted has been credited correctly.
Over the next couple of months, salaried individuals across the country will turn their attention to filing their income-tax returns.
Central to this task is Form 16, a certificate of tax deducted at source issued by employers to their employees. Companies's human resource departments have started e-mailing it to employees.
Form 16 contains details of salary income, deductions, and exemptions, and is crucial for accurate filing of tax returns.
Suresh Surana, founder of RSM India, emphasises on the importance of timely issuance of Form 16.
"Employers should furnish Form 16 to employees by June 15 of the subsequent financial year. For instance, employees should receive their Form 16 for the fiscal year 2022-2023 no later than June 15, 2023," he says.
Form 16 consists of two distinct parts: Part A and Part B.
Part A includes essential details such as taxpayer and employer information, service period, and the amount of tax deducted.
Meanwhile, Part B provides details of the tax computation carried out by the employer.
Review Form 16
Upon receiving Form 16, employees should carefully check basic details, such as permanent account number.
If the PAN is incorrect, the tax deducted by the employer will not get reflected in Form 26AS, potentially affecting the employee's ability to claim credit for it while filing the income-tax return.
Next, employees should review the accuracy and completeness of the information provided in Form 16. They should confirm that all the tax deducted has been credited correctly.
Compare the details of TDS in Form 16 with those in Form 26AS.
Form 26AS has details of all the payments made to the employee and the corresponding TDS.
Sandeep Bajaj, managing partner, PSL Advocates & Solicitors, says, "Form 26AS reflects both the annual tax credit statement and the annual information statement (AIS), as well as personal details of the employee and the tax deduction and collection account number (TAN) of the employer."
A careful comparison of the details in Form 16 and Form 26AS helps prevent discrepancies during the ITR filing process.
Apart from PAN, the employee should also cross-check the accuracy of other personal details such as their name, address, employer's TAN, etc.
In case of any discrepancy in the details, employees may approach their employers.
"The employer will amend the details," Bajaj says, "file a revised TDS return to credit the TDS amount against the correct PAN, and then issue an updated Form 16."
"If the tax-saving deductions and exemptions claimed by an employee are not correctly reflected in Form 16," Surana adds, "she can also separately claim such deduction or exemption while filing tax return."
If you have multiple Form 16s
If you switched jobs in 2022-2023, you will get two Form 16s -- one from your current employer and another from the previous one.
Surana says, "An employee who has switched jobs must inform her new employer about the details of her income from her previous employment via Form 12B."
The new employer will incorporate these details while computing the total tax liability.
Shashank Agarwal, advocate, Delhi high court, also underlines the importance of such an assessee consolidating all her Form 16s to accurately ascertain both her total income and the tax payable.
Maneet Pal Singh, partner, I.P. Pasricha & Co, adds, "Duplication of deductions must be avoided, particularly in areas such as standard deduction, leave travel allowance, house rent allowance, and other exemptions under Section 10 of the Income-Tax Act."
The TDS amounts from multiple Form 16s should also be aggregated.
Finally, it is important to maintain proper documentation even after filing your tax return.
Singh says, "Keep copies of all your Form 16s and related documents to substantiate your income and tax deductions. This documentation will come in handy during a tax assessment or audit in the future."
Multiple jobs, but one Form 16
When you only have Form 16 from your current employer, collect salary slips and salary break-up from your previous employer.
Compute total gross salary by adding income from Form 16 (from current employer) and income from salary slips (from previous employer).
Deduct tax exemptions (HRA, LTA, etc) and standard deduction from salary income.
Claim deductions under Sections 80C, 80D, etc from total taxable income (salary income, interest income from savings and term deposits, etc).
Once net taxable income is calculated, calculate income-tax liability, and deduct TDS.
If there is any additional tax liability, pay it first before filing return.
Feature Presentation: Ashish Narsale/Rediff.com