New FORM 16
July 24, 2019
New FORM 16: Important Changes You Should Know
Essentially, Form 16 is a format as given and time to time revised by the Central Board of Direct Taxes. It is a certificate issued by the employer, mentioning all details of the salary paid to his employees and taxes as deducted at source [TDS]. A Form 16 statement is the most important documents required at the time of filing the Income Tax Returns. It is prepared on a financial year basis and is a statutory requirement under Section 203 of the Income Tax Act, 1961. In totality, the form as specified in the said statute is divided into two parts. The first part is a general account of the employee’s personal details like address, name, bank account details, PAN card details. The account also mentioned the tenure of current and past employment and a chronological record of TDS deductions. The second part is a detailed record of income earned during the time of employment with the current employer, taxable income, deductions over such income, refundable tax. As we have seen that it is of absolute importance in the filing of IT Returns that the Form is made available. Therefore, it is important that both the employers as well as the employees know in detail about the changes in the said form lately in April. 2019. The format as revised by the Central Board of Direct Taxes shall continue to be applicable from 12th of May, 2019. Therefore, all form 16 after the effective date will have to mandatorily follow the new format. Here is a brief account of the changes that shall be held applicable, 12th May onwards:
1 Detailing of Part B to Form 16
Prior to the changes in 2019, the enumerations of Form 16; Part B were only salaries and deductions. However, the new format which has been introduced has the following details:
• A complete and detailed breakup of the salary of the employee.
• An account of the exempted allowances under Section 10 of the Income Tax Act, 1961
• Other concessions and exemptions as mentioned in Section 10 of the Income Tax Act, 196. For example, gratuity at the time of death or retirement or leave travel concessions etc.
• Particulars as mentioned in Section 10(10)A [commuted value of pension] and Section 10(10AA) [leave encashment].
• An account of House Rent Allowance as mentioned in Section 10(13A) of the Income Tax Act. 1961.
2. A new category of deductions as allowed under Chapter VIA of the Income Tax Act, 1961:
The new format of Form 16 allows for specific deductions, as mentioned in the statute. They are:
• Life Insurance Premium which has been paid, contribution to PPF and other deductions as mentioned in Section 80(C) of the Act;
• Deductions for contribution to pension funds as mentioned under Section 80CCC. This includes employee’s contribution to the pension, self contribution to the notified pension scheme and employer’s contribution to the pension scheme;
• Deductions for health insurance premium paid by the employee;
• Deductions pertaining to the interest paid on loan for higher education;
• Deductions for Donations etc.
Apart from the statutory list of deductions, the deductions as specified in the Budget of 2018 shall also be separately and clearly stated.
3. Particulars as mentioned in Chapter VI-A of the Income Tax Act, 1961 must be mentioned in detail in Form 16.
4. The relief claimed under Section 89 of the Income Tax Act, 1961 shall be clearly mentioned by the applicant in Form 16.
5. There also has to be a mention of all details relating to rebate or surcharge in the latest format as prescribed. Moreover, the earlier entry of an Education Cess has been replaced by Health and Education Cess in the new format by CBDT.
6. Detailed Account of TDS Returns: Similar to the account of exemptions and under Section 10 and Chapter VI of the Act respectively, all details relating to Chapter VIA i.e., TDS Returns shall also be mentioned clearly. Earlier this formed a part of Form24Q but after the 2019 changes, Form 24Q has been brought within the ambit of Form 16.
So, alert taxpayers! Keep in mind all the new details before filing for Form16 any further for a hassle-free experience!