It is easy to understand Form 16 and its usage. It is provided by an employer to an employee along with the certification that tax has been deducted at the source for the purpose in question.
Taxpayers have increased in number since the implementation of this new tax regime and the demonetisation scheme since November 2016. Employers should file this form by the 15th of June, according to the latest revisions. Here you will know what is form 16 and how it works?
How Form 16 Works
Employers pay tax on behalf of the employee and this form supports their claim. Salaried individuals with income less than Rs 2,50,000 per annum are exempt from this tax burden. Different tax slabs for individuals are as follows –
- 5% tax for an annual income range of Rs 2.5 Lakh to Rs 5 Lakh.
- 20% tax for an annual income range of Rs 5 Lakh to Rs 10 Lakh.
- 30% tax for an annual income of Rs 10 Lakh & above.
Form 16 aims to help central authorities calculate the amount of revenue collected. It will assist them in estimating annual expenditures. A comprehensive form will be best suited to their requirements. It would be productive for them to know the complete breakup of an individual’s salary.
16 is the certficate from employers to the governemnt where they certify the salary of an employee along with the TDS on it.
Quarter-wise details of TDS are enlisted in this segment along with the employer’s TAN & PAN and employee’s PAN. Other details include employee and employer details as per the name and address, respectively.
The form also includes the breakup of an employees’ salary. It also includes the gross pay earned by an employee along with information like gross income, tax on total income, education cess and tax payable.
TDS is paid on the 7th day of the following month. An employer can file TDS on or before the 15th day of completion of a particular quarter.
The Basics of 16A and 16B
Form 16 A is similar to 16 as a TDS documentation. However, it deals with tax on income other than salary, such as on interests returns from FDs, insurance premiums, etc. The applicant directly submits the certificate to the government.
Form 16B is a TDS certificate used at the time of sale of property. It states that a buyer has paid tax and duly deposited it to the authorities. Tax is deducted at source for all immovable property except agricultural land. Buyers of property value equal to greater than 50 Lakh, need to furnish a certificate to respective sellers.
What is the Difference between Form 16A and Form 16B?
Both forms are tax deductions at source, which certify payment of the same to the government. The former is a TDS certificate on the income of an indivdiual other than their salary as employee, while the latter confirms that a buyer of a property has paid due taxes to the government. TDS deductions under 16A assist in filing of returns with Income Tax department. Form 16B is precisely for sale of immovable property and certified between the deductor and the deductee.
The regulations and mandates of these forms follow up from the Income Tax Act, 1961. Every employer should file TDS on or before their respective specified dates. The latest regulations mandate that it be submitted by the 15th day of next month.
Every individual should know the difference between form 16A and 16B and abide by them.
Paying these taxes can help create a positive credit history and CIBIL score. For any individual, advances such as home loans, personal loans and even conusmer durable loans are vital pre-requisites to modern living. Availing lump sum financial assistance against EMIs over a specific repayment tenor helps them achieve goals such as to buy a new home or a commodity other than numerous monetary requirements.
Premier finanical instituions such as Bajaj Finserv provide such advances with easy to afford EMIs as well as flexible repayment tenor options.
It is vital to understand what is Form 16 and its A and B variants. Each form applies to a specific scenario to pay the mandatory TDS. Pay your taxes duly to maintain a positive finanical portfolio and gain from the best financial prodcuts and services from top lenders across India.
Forms introduced under the Income-tax Act, 1961 such as the 16, 16A & 16B relate to TDS as per specific situations. The employer should understand what is Form 16 before issuing it to an employee, which specifies the total amount of tax deducted from an employees’ salary.
Civic duty includes paying tax regularly on or before the deadline. The salary for government employees’, expenses related to defence weaponry, agricultural developments and social welfare of the society are primary reasons to pay tax.
Form 16 has two significant parts to it, namely, Part A and Part B. First part includes necessary information about an employer and employee such as PAN, TAN (in case of the employer), address and the amount deducted from the salary as tax. The second part is a detailed breakup of salary of an employee and quarter wise split-up of TDS.
Form 16B is also a TDS certificate issued by a buyer to a seller stating total amount of tax deducted from sum value of property sold/bought. Form 16A is related to other income of an employee except for salary and issued by the deductor. A bank uses it to state total amount of tax deposited on any fixed deposit held with it.
The significant difference between Form 16A and Form 16B lies in nature of tax deducted at source. The latter is collected at the time of purchase of immovable property, while the former is a deduction against other income of the employee.
Do not miss tax deadlines to avoid hefty fines. A loyal citizen should duly file his/her income tax return regularly. It benefits not only the governemnt but helps the taxpayer generate a strong financial portfolio.