The CBDT has notified a new format for Form 16 – the salary TDS certificate –‘ requiring a detailed break up of tax exempt allowances paid to the employee and also of all tax breaks claimed by him/her The earlier format allowed companies to give consolidated figures or break-up in different formats for both these thereby leaving some ambiguity regarding their individual composition.
Concurrent changes have been made in the format of the TDS return (details of TDS from employees’ salaries) filed by companies with the tax department to allow the tax man to cross check an employee’s ITR, Form 16 and the company’s TDS return easily.
Last year, the tax man had detected several cases of false claims of large income tax refunds made by some employees which is likely to be another reason for this streamlining exercise which is aimed at removing all space for such maneuvers in future.
The new format will allow the tax department to view a detailed breakup of the income and tax breaks claimed by a salaried individual at the first instance itself. Consequently, any discrepancy between the income and deductions shown in Form 16 and the ITR filed by the person can be immediately spotted. This new format is likely to help the department digitise cross checking of figures too because it takes away the leeway that companies earlier had in providing the breakup of income and deductions and fixes the format for providing these.
The new format for Form 16 was notified by the Central Board of Direct Taxes (CBDT) via a notification dated April 12, 2019. The format specified in the notification comes into effect from May 12, 2019 which is well before the last date for issue of Form 16 or the TDS certificate for salary by employers. Therefore, those issuing Form 16 after this date will have to do so in the new format.
As per the changes notified, Form-16 issued by the employer will have to specify the nature of tax-exempt allowances paid to the employee. The previous format of Form-16 was not providing the specific list of tax-exempt allowances on which the salaried person was not required to pay any tax. Now as per the revised format, the employer will have to specify the nature as well as amount of allowances which are exempt from tax. Similar details have also been asked for in this year’s ITR-1. The revised format provides a list of allowances such as Travel concession or assistance under section 10(5), house rent allowance under section 10(13A) and so on that are exempt under the Income Tax Act.
The Form 16 format has been revised this year by the Central Board of Direct Taxes (CBDT) which has to be given to you by your employer. The structure of Form 16 largely remains the same (containing Part-A and Part-B), however the information provided in it from this year is much more detailed and extensive as compared to that in the previous years.
In addition to that, both parts of Form 16, i.e., Part A and Part B, have to be downloaded by your employer from the income tax department’s TRACES website only. This means that both parts of the form will be standardised for all employees.
‘TRACES’ stands for TDS Reconciliation Analysis and Correction Enabling System. It is a website where a PAN holder can view the taxes that have been deducted and deposited against his/her PAN during a financial year.
This year the last date to issue Form 16 by your employer has been extended to July 10 from June 15. If you are confused about what figures you should check in the revised Form 16, here’s everything you need to know.
What you must check in Form 16:
The first thing you must check in your Form 16 is that the PAN mentioned in the form matches with yours. In case PAN mentioned is wrong, then the tax deducted from your salary will not be reflected in your Form 26AS and you will not be able to claim credit for it while filing ITR.
Form 26AS is your tax passbook. It consists of all the taxes that are deducted and deposited against your PAN by your employer bank or any other entity. Any advance tax and self-assessment tax deposited by you against your PAN will also be reflected in your Form 26AS
- Part A of Form 16
The next thing to check is Part A of Form 16. It consists of the summary of taxes deducted by your employer Part A consists of your name, address, PAN and your employer’s TAN and PAN and quarterly summary of taxes deducted and deposited with the government against your PAN in each quarter.
Part A also enables you to view the taxes deducted from your monthly salary. You can cross check these details with your salary slips.
Chartered accountants advise that it is important to match the tax deducted details shown in Part A of Form 16 with Form 26AS. TDS deducted and deposited which appears in Form 16 must be validated against TDS appearing in Form 26AS. Any discrepancy between your Form 16 and your Form26AS must be reported to the employer Post rectification, your employer is required to issue you a revised TDS salary certificate.
- Part B of Form 16
Part B of Form 16 consists of the details of income paid to you by your employer. The income details given in Form 16 are detailed and extensive. This year the format in which details are required to be mentioned in the ITR 1 is same as given in Form 16. Therefore, taxpayers are required to just copy the details from Form 16 and paste it on the required fields of ITR 1.
If you file your ITR 1 online on the income tax e-filing website, then these details will be pre-filled. However, individuals must cross-check such pre-filled information with Form 16.
If you have switched jobs during FY 2018-19, then Form 16 may also contain details of the income paid to you by your previous employer. If you have two Form 16s, check if the income from the previous employer is included in Form 16 given by a new employer If not, then you have to include income details from both Form 16 while filing ITR and may have to pay additional tax..
This year Form 16 will show detailed break-up of tax-saving deductions claimed by you in your investment declaration. You should ensure that the tax saving deductions and exemptions claimed and related proofs submitted by you to your employer (to allow for when deducting tax at source from your salary) should be correctly reflected in Form 16. However in case additional tax-saving investments are done by you at last-minute and therefore not accounted for by your employer while deducting TDS, then it is likely that those (tax saving deductions) might not be reflected in your Form-16.
From this year both the parts of Form 16 will have to be downloaded from the TRACES portal, therefore, Part-A and Part-B will have the TRACES logo on it and a unique ID. Earlier, only part A of Form 16 was downloaded from the TRACES portal and Part B was generated by employers using third-party software.
Now Part B of Form 16 shall be downloaded from TRACES. It will ensure that there is uniformity in the format of a TDS certificate issued by the employers. Now employees can verify the authenticity of the TDS certificate issued by the employer as Part B shall contain unique TDS certificate number and logo of TDS-CPC. The employees would also be able to check if exemptions or deductions reported to the employer have been considered at the time of calculation of TDS and filing of TDS return.
The revised format also shows the detailed break-up of the tax-exempt allowances that are received by you. In case of any discrepancies in the income details or tax-exempt portion of allowances, then you must bring it your employer’s notice and ask him for correct and revise Form 16.
What you should do
Before you start filing your ITR, it is important to cross-check and verify the information available in Form 16 with your salary slips and Form 26AS. In case there is any discrepancy in the information available, then you must bring it your employer’s notice immediately and ask him to give you a revised Form 16 with the correct information.