Form 16 is somewhat a very important yet very confusing part of income tax filing. There are basically Form 16, Form 16A & Form 16B which are to be selected as a TDS certificate for different types of incomes.
This Form is for Salaried employees and as per the new rule if you are under Rs. 2.5 Lakhs annually then you don’t need to file Form 16, Form 16A and Form 16B, however, are different.
So, let’s understand the key difference between these forms and which one you need to file and which one you don’t.
Employers are required to issue the Form 16 on or before 15 June of the year which is immediately after the financial year ends.
Form 16 is divided into two components – Part A and Part B. If you lose your Form 16, you can request a duplicate from your employer.
Part A of Form 16
An employer can generate and download this part of Form 16 through the TRACES portal. Before issuing the certificate, the employer must verify its contents. If you switch your job in one financial year, it is important that every employer will issue a separate Part A of Form 16, for the period of employment.
Some of the components of Part A are:
a. Name and address of the employer
b. TAN & PAN of employer
c. PAN of the employee
d. Summary of tax deducted & deposited quarterly, which is certified by the employer.
Part B of Form 16
Part B of Form 16 is an annexure to Part A. If you change your job in one financial year, then it’s for you to make a decision if you’d want Part B of the Form from both the employers or from the last employer. Some of the components of Part B notified newly for the FY 2019-20 are:
a. Detailed breakup of salary
b. Detailed breakup of exempted allowances under section 10
c. Deductions allowed under the income tax act (under chapter VIA):
Specific fields are notified for deductions mentioned below:
1. Deduction for life insurance premium paid, contribution to PPF, etc., under section 80C
2. Deduction for contribution to pension funds under section 80CCC
3. Deduction for employee’s contribution to a pension scheme under section 80CCD(1)
4. Deduction for taxpayer’s self-contribution to a notified pension scheme under section 80CCD(1B)
5. Deduction for employer’s contribution to a pension scheme under section 80CCD(2)
6. Deduction for health insurance premium paid under section 80D
7. Deduction for interest paid on loan taken for higher education under section 80E
8. Deduction for donations made under section 80G
9. Deduction for interest income on savings account under section 80TTA
d. Relief under section 89
Form 16A: The TDS Certificate To Validate for Income Other than Salary
An individual can have income from sources other than his/her salary, such as returns on investments on fixed deposits, mutual funds, gold bonds, and other capital gains. Many of these returns incur income tax at a rate specified by the government from time to time, and in this case, financial institutions are bound to deduct tax at source, and thereby need to issue you the TDS certificate referred to as Form 16A.
Anyone paying a monthly rent of Rs 50,000 or more for a building/land too is required to deduct tax at source and thereby deposit the tax with the Central Bank Account. The tenant need to issue Form 16A to the owner of the property.
Anyone who is earning through a commission from the sale of insurance products is also liable for TDS by his/her employer, who in turn has to issue Form 16A to the agent.
Form 16B: The TDS Certificate For Sale of Property
Form 16B certifies that the tax has been deducted at source on the income earned from the sale of immovable property (building or a part of it/land) apart from agricultural land, and the TDS has been deposited by the property buyer with the Income Tax department.
According to the rules laid down by the Government of India, any person who purchases a property from a resident transferor needs to deduct tax at source on any money or consideration paid. TDS is deducted from all immovable property purchases in India. Immovable property is basically any property including land or a building that does not include agricultural lands.
While employers and financial institutions require a TAN before they will deduct/collect TDS, tenants and property buyers don’t require a TAN and may only furnish their PAN details while depositing the TDS with the government.
When it comes to filing your returns, it can be confusing to properly understand the differences between Form 16, Form 16A and Form 16B. Form 16 has two parts – Part A and Part B. These two parts of Form 16 are, however, different from Form 16A and Form 16B. It is important to remember these differences when filing your returns so that you don’t face any issues.