Need to know why the form 16 is required?

Form 16

Form 16 is a more specific term for a TDS certificate. A TDS certificate is proof of tax deducted from the employee’s salary and deposited to the Income Tax Department under the Central government. The tax amount to be deducted from the salary is computed based on the individual’s annual income over a financial year (April 30 of the previous year to March 31 of the assessment year).

The certificate bifurcates into two halves, namely Part A and Part B. The contents of both the parts combine to make Form 16 an elaborate document detailing the income and tax payments of an individual (given that his annual income qualifies as taxable income).

Part A of the TDS certificate consists of the necessary details of both the employer and employee, such as name, address, PAN card number, TAN card number. Part B of the certificate includes a breakup of the tax computation. It comprises gross salary, tax rebates, allowances, surcharges, cess, tax deductions (under 80C, 80E, 80G, 80TTA) as applicable.

A TDS certificate is a valid income proof by most financial institutions. Thus an individual must keep the TDS certificates ready while approaching financial institutions or any other nodal body who ask for an income proof in documentation formalities. Form 16 also makes the process of filing Income Tax Returns a simple one for a tax-payer.

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