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Form 16 will now have more details of your income and deductions
April, 24th 2019

In yet another attempt to increase transparency and minimize tax evasion, the Central Board of Direct Taxes (CBDT) has notified various changes in the formats of Form 16 and Form 24Q. The new amendments are in line with the changes in income-tax rules and new income tax return (ITR) forms recently notified by CBDT for assessment year (AY) 2019-20.

The forms

Form 16: It is a certificate issued by an employer to its employees for each financial year, under Section 203 of the Income-tax Act, 1961. It has two sections—part A and B.

Part A contains the employee’s personal details such as name and address, the employer’s name and address, the Permanent Account Numbers (PAN) of both and the employer’s Tax Deduction Account Number (TAN). It also contains details of the period of employment with your current employer, and details of tax deducted at source (TDS) on your income.

Part B has details of income earned during your employment with the employer, total deductions and taxable income. This part also gives details of the tax payable or refundable.

Form 24Q: The employer has to furnish Form 24Q to the tax department. “It is a comprehensive statement furnishing the details of salary and tax deduction for all employees. It is required to be filed on a quarterly basis," said Sanjoli Maheshwari, director, Nangia Advisors (Andersen Global), a chartered accountancy firm.

The changes

As of now, Form 16 contains the aggregate amount of salary and deduction, but will now have to include details of salary components and deductions. “The type and amount of allowances which have been claimed to be exempt must now be reported separately in Form 16. For example, house rent allowance, leave travelling allowance and other exempt portions will have to be reported as a separate line item," said Archit Gupta, founder and CEO, Cleartax.com, a tax and investment consultant.

In Form 24Q, the employer will now have to provide the bifurcation of salary—gross salary, value of perquisites and profits in lieu of salary, exempt allowance and deductions claimed by the employee.

There are some other changes aimed at increasing the responsibility of employees. “Earlier employees could disclose any income earned by them to their employer for TDS deduction, so that they didn’t have to separately calculate and pay tax on it," said Gupta Now employees can only report house property income (loss) or other sources income to the employer. Capital gains income cannot be reported to the employer for TDS deduction, added Gupta.

The changes will come into force from 12 May 2019 and all employers issuing Form 16 after that date will need to adhere to the new rules. The last date to issue Form 16 is 15 June of each assessment year.

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