Showing posts with label Tax Form 16 Part B. Show all posts

Thursday, 5 May 2016

Form 16 is an income tax form. This form is used to give the details of tax deducted at source. The form 16 is only applicable for salaried individuals. The form is filled by the employers and given to the employee. The employer gives details of tax deduction in this form. It is proof of tax deduction as well. The employee who has paid tax through the employer must get the form 16. The form 16 has many information such as your income details, the applicable exemption, availed deductions and tax payment challan details. The form 16 is used to fill information while filing income tax return.

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· Every salaried Employee gets Form 16 from the employer.

· The employers are bound to give form 16 to its employee.

· The form 16 is like a receipt of tax deduction.

· The employer deduct tax from the employee and deposits it to the the income tax department. The form 16 maintains transparency and assures that employer has deposited tax on your behalf.

· Form 16 has all the details of your income, exemptions and deductions. It is an account of your income and applicable tax.

· It gives challan details of taxes paid on your behalf.

· The form 16 is issued every year after the end of a financial year.

Why Form 16 is Required

A person who is employed with an organisation gets monthly salary. Such salaried person do not pay income tax directly to the government. Rather the employer deducts tax from the salary of the employee. The employer deposits this tax on your behalf. Now you may ask following question to your employer.

· How can you say that I am under taxable bracket. what is the basis of tax deduction?

· How did you calculate my tax liability?

· How would I know that your have really paid tax on my behalf?

· Did you consider my investments for tax deductions?

· What is the challan details of my tax deducted at source?

These questions are genuine and you must get the answer. It is also important for the credibility of government and employer. Thus government has made a provision to give answer of these questions to every employee. You don’t not to ask for it. Rather, every employer should give all the relevant information to its employee.

Indeed government has made a form ( Form 16) which should be filled by the employer. This filled form would give all the details of your income tax applicable taxes. Nowadays this form is directly printed by the employer. Every form 16 contains similar information.

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Importance of Form 16

The form 16 is important for both the employer and employee.

· The form 16 is the main document to file income tax return. In the income tax return you have to fill the taxable income, deductions and taxes paid. All these information is available at form 16.

· It is the proof of tax deduction by the employer. It can be produced to income tax department if there is any issue in future.

· It is also used as the proof of income. Banks ask forms 16 for home loan sanctions.

· Form 16 is needed while processing visas. It is an important certificate for acquiring Income Tax Clearance Certificate (ITCC) through IT Department.

Other Points

Form 16 is the certificate of Tax deduction. If there is NO TDS deduction, then it is not mandatory to issue form 16.

If the organisation does not have the TAN, it can’t deduct TDS. IN this case the organisation would not issue the form 16.

The self employed person can’t get form 16 as he/she is not an employee. Such person should file income tax return with the information available.

Information Form 16 Contains

The form 16 has details about your income, deductions and taxes. Following are the specific information given on form 16.

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Salary

Your employer provides the details of your salary. There would be gross salary, Perks, allowances and other deductibles. It would also tell income chargeable under the head Salaries. This amount is used for tax calculation.

Tax Deducted At Source

The employer deducts tax every month from your salary. But it deposits it to income tax department once in a 3 month. Thus, employer submits tax to the government four times. The details of these tax payment can be seen in the form 16. There would be four entries of the TDS payment. If there is not TDS deduction of first quarter, you would not see any tax payment in the first row. You can verify this tax payment through the income tax department. The form 26AS keeps all the details of tax payment against a PAN.

ax Deductions

There various expenses and investment which gives you the opportunity to cut the tax. These expenses and investments are called as the deductions. Examples of such tax deductions are investment in ELSS, PPF and EPF. These deductions are also part of the form 16. Your employer takes the details of these deduction from you. You would have given your tax saving details in the start of financial year and in the January-February of every year. You must report all the tax saving deduction to your employer as early as possible. It will decrease your monthly TDS deductions.

Other Income

You can have income other than the salary. It may be other income, rental income or capital gains. The home loan interest is also a negative income. The employer don’t have any direct relation with such income but you can report it to the employer. It would make your tax deduction more accurate. If you report it to the employer, It is also entered in the form 16. Indeed all the information which affects your tax deductions become part of form 16.

Structure of Form 16

The form 16 is divided into two parts, the part A and Part B.

Part A of Form 16

The part A of the form 16 consist basic information about the employer and employee. It also includes the tax payment details. You would find following information in Part of A of form 16.

· TDS deducted by the employer

· PAN of the employer

· The current financial assessment year

· The employee PAN

· TAN of the employer

· The employee/tax payer’s name, address etc

· Name and address of the employer

· Period of the employement

· Receipt number of TDS deducted

· Declaration by the employer

Part B of The Form 16

The part B of the form 16 contains all the details about your salary. It tells about gross salary, perks, exemptions and deductions. You would get following information on part B

· Gross salary of the employee

· Perquisites

· Exempted Allowances

· Other income if reported by the employee

· Deductions under chapter VI A. It includes deductions under section 80C, 80CCC, 80CCD. The EPF, PPF, ELSS, NSC, insurance and tuition fees expense is reported under this head.

· Total taxable income

· Due income tax

· Payable tax or refund, if any

How to Get the Form 16?

The form 16 is issued by the employer. The employer issue this form after the end of the financial year. Every employer must give form 16 on time as employee fill their income tax return on the basis of form 16. Generally Form 16 is distributed in May and June month. You have right to get the form 16 if there is any tax deduction from your salary.

Use of Form 16 While e-Filing

The e- filing for salaried people has become very easy. The form 16 becomes the backbone of e-filing of ITR-1. All the sensitive information required to enter in ITR-1 is available in the form 16.

Therefore you might have observed that CA asks only form 16 to file your income tax return. From the TAN of the employer to tax deductions of employee, everything is available on the form 16. The information about your salary is authentic in the form 16 because none other than your employer fills the form 16. You must take out the amount of net taxable income, tax paid details and deduction from the form 16 to file income tax return.

However, you should be careful about the deductions. You might have missed some deduction while giving declaration to the employer. If it is the case, you must include the missed deduction while filing income tax return.

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Income Tax Deduction under Section 80D in respect of health insurance premium for covering the health of self, spouse, dependent children and parents

Deduction eligibility in respect of Health Insurance Premium and health checkup charges paid from the income of the tax payer under Section 80D has been increased to Rs. 25,000 from the last year eligibility of Rs. 15,000. This deduction cap or Rs. 25,000 will be applicable for Medical Insurance premium paid for the health of self, spouse and dependent children.

As far as Health Insurance Premium paid by the tax payer to cover the medical expenses of his/her parents, yearly premium and health check-up cost paid up to Rs. 25,000 can be deducted from the income. Also in the case of senior parents health insurance premium up to Rs. 30,000 can be deducted.

In the case of sharing of premium payment for covering the health of Parents, the actual premium paid by each person can be deducted from his/her income.

Further, medical expenditure incurred for very Senior Citizen up to Rs. 30,000 can be deducted from the income of the person who has spent the same, provided the said very senior citizen has no insurance coverage.

Deduction in respect of health insurance premia.

80D. (1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted such sum, as specified in sub-section (2) or sub-section (3), payment of which is made by any mode as specified in sub-section (2B), in the previous year out of his income chargeable to tax.

(2) Where the assessee is an individual, the sum referred to in sub-section (1) shall be the aggregate of the following, namely:—

(a) the whole of the amount paid to effect or to keep in force an insurance on the health of the assessee or his family or any contribution made to the Central Government Health Scheme [or such other scheme as may be notified by the Central Government in this behalf] or any payment made on account of preventive health check-up of the assessee or his family as does not exceed in the aggregate [Twenty Five] thousand rupees; and

(b) the whole of the amount paid to effect or to keep in force an insurance on the health of the parent or parents of the assessee or any payment made on account of preventive health check-up of the parent or parents of the assessee as does not exceed in the aggregate [Twenty five] thousand rupees.

Following clauses (c) and (d) shall be inserted after clause (b) of sub-section (2) of section 80D by the Finance Act, 2015, w.e.f. 1-4-2016 :

(c) the whole of the amount paid on account of medical expenditure incurred on the health of the assessee or any member of his family as does not exceed in the aggregate thirty thousand rupees; and

(d) the whole of the amount paid on account of medical expenditure incurred on the health of any parent of the assessee, as does not exceed in the aggregate thirty thousand rupees:

Provided that the amount referred to in clause (c) or clause (d) is paid in respect of a very senior citizen and no amount has been paid to effect or to keep in force an insurance on the health of such person:

Provided further that the aggregate of the sum specified under clause (a) and clause (c) or the aggregate of the sum specified under clause (b) and clause (d) shall not exceed thirty thousand rupees.

Explanation.—For the purposes of clause (a), “family” means the spouse and dependant children of the assessee.

(2A) Where the amounts referred to in clauses (a) and (b) of sub-section (2) are paid on account of preventive health check-up, the deduction for such amounts shall be allowed to the extent it does not exceed in the aggregate five thousand rupees.

(2B) For the purposes of deduction under sub-section (1), the payment shall be made by—

(i) any mode, including cash, in respect of any sum paid on account of preventive health check-up;

(ii) any mode other than cash in all other cases not falling under clause (i).

Following sub-section (3) shall be substituted for the existing sub-section (3) of section 80D by the Finance Act, 2015, w.e.f. 1-4-2016 :

(3) Where the assessee is a Hindu undivided family, the sum referred to in sub-section (1), shall be the aggregate of the following, namely:—

(a) whole of the amount paid to effect or to keep in force an insurance on the health of any member of that Hindu undivided family as does not exceed in the aggregate twenty-five thousand rupees; and

(b) the whole of the amount paid on account of medical expenditure incurred on the health of any member of the Hindu undivided family as does not exceed in the aggregate thirty thousand rupees:

Provided that the amount referred to in clause (b) is paid in respect of a very senior citizen and no amount has been paid to effect or to keep in force an insurance on the health of such person:

Provided further that the aggregate of the sum specified under clause (a) and clause (b) shall not exceed thirty thousand rupees.

(4) Where the sum specified in clause (a) or clause (b) of sub-section (2) [or in sub-section (3)] is paid to effect or keep in force an insurance on the health of any person specified therein, and who is a senior citizen, [or a very senior citizen], the provisions of this section shall have effect as if for the words” [Twenty Five] thousand rupees”, the words ” [Thirty] thousand rupees” had been substituted.

[Explanation.—For the purposes of this sub-section, “senior citizen” means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year.]

(5) The insurance referred to in this section shall be in accordance with a scheme made in this behalf by—

(a) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central Government in this behalf; or

(b) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999).

Following Explanation shall be inserted to section 80D by the Finance Act, 2015, w.e.f. 1-4-2016 :

Explanation.—For the purposes of this section,—

(i) “senior citizen” means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year;

(ii) “very senior citizen” means an individual resident in India who is of the age of eighty years or more at any time during the relevant previous year.

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