Obtaining a Correct Form 16 Early is Beneficial

What is Form 16?
Form 16 is a certificate issued by the employer to its employees in the beginning of the next financial year. This certificate contains details of your salary income (along with segregation under each head of salary i.e., HRA, perquisites etc.,) as defined in the monthly pay slip/pay structure and the TDS deducted from your income. A COMPLETE and CORRECT Form 16 is all you need to file your income tax return, but the point to remember is that you should have reported all your income to the employer to get a complete Form 16.

Do you need to obtain Form 16 early?
Yes. You should always pinch your employers to issue you the Form 16 at the earliest, so that you can file your income tax returns early. The hidden idea behind this is that the earlier you file your income tax return, the faster you will get refund.

Benefits of Filing Income tax return early and within due date:

  • You get the refund amount faster as the income tax return is processed faster (Simply put, like many other things, this too works on ‘first come first serve basis’).
  • You get full interest on refund amount which is receivable by you.
  • In case of some mistake in the ITR filed, you get ample chances to revise the return up to two years.

Point to remember:
The Income tax Act says that the last date for issuing Form 16 is 31st May of next year.

Form 16 in case of more than one employer during the year?
Since job hopping is a very common phenomenon in corporate environment, you have to remember that Form 16 has to be collected from all the employers for whom you have worked in that year.

Importance of checking Form 16 received as it is our Money at the end..!!
Human mistakes are unavoidable, but intimating about these mistakes at the earliest will help all causes. Employers do issue Form 16 to you, but verifying its correctness and completeness is your duty. Mistakes that are commonly made are stating your wrong PAN, your wrong salary declaration, your other income missed to be considered as part of the total income earned for TDS deduction. These small mistakes can create havoc if you happen to file the Income tax return at the last moment and then it’s not possible to chase the employers for correction.

Point to remember:
A correct Form 16 comes with an impression of Income tax department watermark. This certificate is one which is downloaded from the TRACES website (A website launched by the Income tax department solely for the reconciliation and management of TDS). So avoid collecting other than this Form 16.

Knowing Form 16A:
Similarly for other incomes received by you, and if there is any TDS deducted by the payer, you will be issued Form 16A which is similar to Form 16. The only difference is that for Salary income, Form 16 is issued and for income other than salary, Form 16A is issued.

Verifying your Income Tax Return with ITD database is important too!
The monthly TDS deducted from your salary or from any other source of income against your PAN gets reflected in your Form 26AS. This form is maintained and updated regularly by the Income tax department to track financial transactions of the taxpayers. Matching of your ITR data with the transactions database of ITD (like Form 26AS), prior to e-filing, is called verification of ITR. Such returns are called Verified Tax Returns. Verified returns eliminate the chances of receiving notice from ITD due to data mismatch with Form 26AS.

Some such instances of data mismatch are:

  1. TDS has been deducted from your income but not yet reflected in ITD database against your PAN
  2. TDS amount claimed in ITR and TDS amount reflecting in ITD database do not match.
  3. Some amount of advance tax has been paid but missed to be claimed in the ITR.
  4. TDS has been deducted on your interest income and gets reflected in ITD database but has been missed to be put in the ITR.

E-filing of Verified Tax Return with an authorized ITR filing intermediary is now just a matter of few minutes. Once you enter the Form 16 details, our servers will match your ITR data with the transactions against your PAN. Any mismatch detected and the solution to fix it would be brought to your notice instantaneously. Then our system would automatically generate the correct tax return form for you.

Other mistakes you should avoid:
Though this is the time when return filing is the sole thing in the minds of taxpayers, this is also the time when you need to pay attention to your tax savings. It is essential that you start planning your taxes in the beginning of financial year itself and create a full-fledged plan of action on where to invest, what to buy and which claims to declare.

TaxOptimizer – our tax planning solution, caters to this need by offering a dedicated Chartered Accountant as part of an annual subscription that includes optimization of your salary package, updates on tax saving options, ITR filing and premium support. For more details, write to tax.optimizer@taxspanner.com.