Income tax Form 16 is a certificate issued by the employer to every employee for each financial year, and it is essential to file income tax returns every year. It lists out various things like the total salary paid to you during the period, the total tax that the employer deducted at source (TDS) and the deductions that you have claimed during the year.
It is issued under section 203 of the Income Tax Act, 1961. It has two parts-A and B.
Part A of the form contains the employee's personal details such as your name and address, employer's name and address, Permanent Account Number (PAN) of both the parties, employer's Tax Deduction Account Number (TAN), and assessment year, i.e., the year in which your tax liability is calculated for the income that you earned in the previous year. It also contains details of the period of employment with your current employer.
Apart from this, it has the summary of the periodic TDS on your income. This will include details on the amount of TDS deducted by your employer during the year, when it was cut, on what income and when it was deposited with the income tax department.
Part B has details of income earned during your employment with the employer. These are basic details such as gross salary, other income, house rent allowance and other allowances provided to you, if any.
It also has details of deductions under sections 80C, 80CCC and 80CCD (such as contributions towards Public Provident Fund, tax-saving mutual fund schemes, life insurance policies and pension). Apart from these, there are deductions under other sections as well. For example, under sections 80D (health insurance premium), 80E (interest on education loan), 80G (donations), and others.
Total deductions are aggregated under "Chapter IV-A" and reduced from gross income to arrive at the taxable income. Your tax liability is calculated on this amount. In the end, part B gives details of tax payable by the employee or refundable to her.
Penalty for delay in issuing Form 16
According to section 203 of the Act, if tax was deducted on the employee's income, the employer has to compulsorily furnish Form 16. However, if there was no TDS on the income, then the employer can decline to issue the form of that employee.
The Act further stipulates that if the Form 16 is not issued by the stipulated deadline (15 June), under section 272A(2)(g) of the Income Tax Act, the employer is liable to pay a penalty of Rs100 per day of default till it issues the form.
