You must all be knowing of the three main seasons in our country. After summer, it comes the monsoon and after monsoon comes the winter. You must have heard about another season as July 31st of every year rapidly approaches. Yes, I am referring to the taxation season. You will receive money from the Government if you are one of the fortunate ones. Yes I am talking about the contract employees who work for organizations in India whose tax is deducted at source as they are regarded in the professional category. They can fill up the Form 16 A and claim refunds at a later date provided their salary is less than INR 2 Lakhs per annum. Next To Being Shot At And Missed There Is Nothing Better Than An Income Tax Refund. Let us now talk of the other unfortunate subjects of this country who have to pay the Government their Income Taxes. You have to first collect that Form 16 which is the very basis of you filing your tax returns. This form is given to you by your employer .Don’t Know What Is This Form 16? Care To Find Out?
What is this Form 16?
Let us first understand what is meant by Tax Deducted at Source. This is mainly a tax collection mechanism where tax is deducted by your employer and directly deposited with the Government. Your TDS is deducted directly from your salary by your employer. Your employer estimates your tax liabilities taking into account your tax deductions under Section 80 C, LTA and HRA and deducts a certain amount directly from your salary and pays it as income tax to the Government. Your Company issues you the Form 16 which contains the details of the tax deductions made by your employer on behalf of you. The Form 16 consists of the income earned by you in the previous year, your tax liabilities as well as your tax deductions. The Form 16 gives your salary for the entire assessment year or for the duration of your stay in the Company. The deadline for filing your income tax return is July 31st. Your Form 16 consists of the details of the PAN (Permanent Account Number) and the TAN (Tax Deduction and Account Number) of your employer who deducts the tax at source. You need to note that if you have worked for more than a single Company in a financial year you need to obtain two Form 16’s.
What are the components of Form 16?
Permanent Account Number
This is basically a 10 digit alphabetical as well as numerical code generated by the Income Tax Department of India. This contains your name, Your date of birth, Your father’s name as well as your gender.
Tax Deduction And Collection Account Number
This is basically a 10 digit alphabetical as well as numerical code generated by the Income Tax Department Of India. These TAN Numbers are unique to each Company. These are required by all the companies which are responsible for collecting and deductions of tax.
You must be knowing that this is basically your total remuneration which includes allowances, overtime, commissions, and bonuses and so on before deductions are made.
You must be knowing about the perks provided to you by your employer such as rent free accommodation as well as loans at subsidized rates and certain other perks in addition to salaries and wages. These are known as prerequisites.
House Rent Allowance
House Rent Allowances are given to you by your company to meet your rent expenses. It is exempt from tax subject to the following conditions:
- House Rent Allowance received by The Employer.
- Rent paid minus 10 % of the Salary
- 40% or 50% of the salary depending on the city you reside in. It is 50% if you reside in a Metropolitan city.
Whichever is least among the three, is considered and deducted from the HRA and tax is paid on the difference.
Some Of The Deductions Available To You Shown On Form 16
The deductions available to you are an important feature of Form 16.
Deductions Available Under Section 80 C
These mainly include Public Provident Fund , Bank Fixed Deposits, Payment Towards Education Fee Of Children, National Saving Certificates of five and ten year tenure, Payment Towards Employee Provident Fund, Life Insurance Benefits, Home Loan Benefits, Five Year Post Office Time Deposits, National Pension Saving Scheme and Equity Linked Saving Schemes.
Deductions Available Under Section 80 D
Under this section, Health Insurance premium deposited under a scheme made by an insurer approved by IRDA (Insurance Regulatory & Development Authority) can be deducted up to Rs. 15,000 (Rs. 20000 for the senior citizens) from the taxable income.
Deductions Available Under Section 80 E
You can claim deductions on the interest of a loan taken by you from any financial institution or any approved charitable institution for the purpose of pursuing your higher education .Here, you get a deduction for the interest paid during the year for that particular year. Tax benefit is only for the interest paid and not on the principal amount. Tax benefit can be availed only for 8 years from the date you start your first instalment. After 8 years you will not be eligible for further tax benefit. So, it is better to repay before 8 years.