As Unlock 1 takes effect across the country, this would normally be the time we’d be “unlocking” our financial statements to file our Income Tax Returns. However, this new normal comes with a set of new timelines as well.
Timelines
Companies usually send across the Form 16 to their employees by 31st May every year. This year, the due date has been extended to 30th June. So, if you haven’t received your Form 16 yet, don’t worry. You should get it by the end of this month.
Dates aside, I notice that there tends to be a lot of confusion around the different forms for incomes and taxes. So, let’s go over some basics around the first all-important Form 16 document, – how to read it, and how to understand it better.
What is Form 16?
Consider your Form 16 a collection of all your pay slips for the year, a summary of your income for the year. It is the proof your employer provides to you stating the amount that has been deducted from your salary in the form of TDS paid to the government. You use this certificate to file for your Income Tax Return by 31st July every year (this year’s due date – 30th November).
Taking a look at the various components of the form
Form 16 is divided into two parts, Part A and Part B.
Part A
- Name and address of the employer
- TAN (Tax Deduction Account Number) & PAN numbers of employer
- PAN number of the employee
- Summary of tax deducted & deposited quarterly, which is certified by the employer
Part B
- A detailed break-up of your salary
- A detailed break-up of your exempted allowances
- Deductions allowed under the Income Tax Act
- Relief / Lump-sum amounts in case you receive arrears on your salary or take the voluntary retirement scheme in the current financial year
Allowances
Allowances are expenses the employer covers within an employee’s salary to make up for additional expenditure incurred during employment. For example, an employee paying for fuel for his/her vehicle or for cab fare to get to work is additional expenditure due to employment. These are also taxable amounts.
The different types of allowances on your form are:
- HRA (House Rent Allowance)
- Conveyance allowance or travel allowance
- Medical allowance
- Entertainment allowance
- Education Cess
Deductions
- Investment in Tax Saving Mutual Funds
- Life insurance premium paid
- Health insurance premium paid (aka Mediclaim)
- Principal amount paid on Home Loan
- Contribution to Pension fund
- Interest paid on loan taken for higher education
- Donations made to certain registered NGOs/Charitable institutions
- Interest incurred on savings account upto ₹10,000 per year
This is not an exhaustive list, but covers the most common deductions.
Note: All these exemptions and deductions are applicable for FY 2019-20. However, going forward, they will only be applicable if you opt for the Old Regime of Income Tax.
Form 16 versus Form 16A
Form 26AS
Coming to the last of the three forms, Form 26AS. This is provided by the Income Tax Department, and not your employer. It’s where the tax authorities populate all the TDS that has been deposited in your name against your PAN, be it from your employer or from your bank (for the interest earned on any fixed deposits you may have). Head over to this article to learn more about this form – Check Your TDS in Form 26AS.
While the due dates have been extended due to COVID-19, I urge you not to wait until the last minute to file your Income Tax Return. Stay on top of your finances, time is on your side. I’m here if you have any questions whatsoever.
