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Before you file your tax return, note the key changes in Form 16
May, 15th 2019

Part B of Form 16 has been amended seeking more details about the allowances exempt under section 10 such as HRA, LTA, etc and deductions allowed under Chapter VI-A of the Income Tax Act, 1961.

Form 16 is the annual salary TDS certificate issued by an employer to an employee. The Central Board of Direct Taxes (CBDT) has notified amendments in Form 16. The new Form 16 is made effective from 12 May 2019. Employers issuing Form 16 for the financial year 2018-19 will have to issue them in the new format.

Part B of Form 16 has been amended seeking more details about the allowances exempt under section 10 such as HRA, LTA, gratuity etc and deductions allowed under Chapter VI-A of the Income Tax Act, 1961 i.e. section 80 deductions. The important changes are discussed below:

Exemptions under section 10:

Presently, an employer has the option to mention the nature of the allowances exempt under section 10 with the respective amounts. While some employers provided complete disclosure, others aggregated the allowances and disclosed the net amount exempt under section 10.

A summary of the allowances for which information is required against ear-marked fields is provided below:

Presently, employers have the option to present the details of deductions under section 80C to section 80U of the Act. Similar to the disclosure of exempt allowances, some employers provided complete disclosure of the deductions, and others aggregated the allowances and disclosed the total amount of deductions allowed as a single line item in Form 16.

A summary of the deductions for which information is required against ear-marked fields is provided below:

Disclosure of income (or admissible loss) from house property as reported by an employee to the employer
Disclosure of income under the head ‘Other Sources’ reported by an employee to the employer
Reporting the total amount of salary received from other employers
Standard deduction allowed under section 16 of the Act

The changes mentioned above to Form 16 will ensure that employers follow a uniform format for reporting of salary including the exemptions and deductions. Also, the amendment is in line with changes introduced in the income tax returns notified for AY 2019-20. This would facilitate employees in the filing of their tax returns for AY 2019-20.

In addition to the above, the move would facilitate the Income Tax Department to cross verify income reported by an employee with the TDS certificate/Form 16 issued by the employer.

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