Monday, July 23, 2012

Understanding Form 16

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Employer provided Information

 

Taxable Salary

Your employer will provide key information such as Gross Salary, Perquisites, Various allowances and deductibles. From a tax perspective Field-6, Income Chargeable under the head 'Salaries' is relevant. This is your taxable salary and you have to report this amount to the Income Tax Department.

Tax Deducted at Source (TDS)

The other relevant information your employer will tell you is Tax deducted at source by them. This is field-18(a). This tax deducted is what you have paid to the Income Tax Department already. Note that the Income Tax Department provides Form-26 AS. This is a Tax Credit Statement. This statement tells you how much Tax was deposited on your behalf with the Income Tax department. The employer provided TDS information should match the Form 26AS provided by the I-T Department. It is strongly recommended that you check your Form-26AS before you file your tax return.

Information you already have

Deductions

Deductions under Section 80C, 80D, 80E, 80CCF, 80G, 80DD, 80U, etc are reported by you to your Employer. You may or may not have reported all deductions to your employer. That is no problem. You can still claim them in your Income Tax Return by filling up the relevant columns of the Income Tax Return. In general, it's a good idea to report your tax deductions to your employer to minimize the TDS by employer. That way you get to keep most of your paycheck during the year.

Income other than

Salary If you receive any other Income, like interest from a bank account or rent, etc. You may have informed your employer about it. This is mentioned in Field-7.

Typically, people who have a housing loan report it to their employers. The Interest paid on the housing loan gets you a tax deduction.

In case you haven't declared your Income or Losses to your employer, there is no cause for worry. You can directly report your additional Income or Loss in the Income Tax Return.

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