Salaried employees have traditionally relied upon the details available in Form 16 for filing their income tax returns.
The income tax return filing due date is round the corner and taxpayers are gearing up to comply with the deadline. As per the Budget Speech delivered by the Finance Minister, a majority of taxpayers filing their returns are salaried class employees. Salaried employees have traditionally relied upon the details available in Form 16 for filing their ITRs.
Form 16 is a certificate issued by an employer, evidencing the tax which is deducted by him from your salary and deposited with the Government Treasury. This form is divided into two parts – Part A provides a summary of income credited to an employee and taxes deducted thereon, while Part B provides a detailed break-up of salaries paid (separating taxable component). Thus, Part B of Form 16 aids a tax payer to compute his taxable salary for the purpose of return of income.
In today’s world, employees are always looking out for better job prospects which prompts them to switch employers. This results in an employee having two or more Form 16 issued by the respective employers. Employees usually tend to panic with their return filing process in case they have more than a single Form 16 which in actual shall not be the case.
Form 16 mainly comprises of the following details, viz, i) Gross Salary, ii) Allowances / Deduction available from salary, iii) Deductions under Chapter VIA and iv) TDS.
The ITR form provides separate schedules to report income received by the employees from multiple employers. Accordingly, reporting of information pertaining to Gross Salary and Allowances / Deduction available from salary have to be reported in the schedules pertaining to the respective employers.
The most crucial part in return filing in case income from multiple employers is factoring of deductions under Chapter VIA. The ITR form provides an independent schedule “Schedule VI-A” wherein the filers have to report the amount of deduction they are eligible for. Here, filers need to be cautious and ensure that they do not inadvertently add up the amount reported by respective employers. Deductions under Chapter VIA are available on yearly basis as per the ceiling limit specified for them and not on employer basis. Therefore, filers have to claim deduction based on the contribution (in qualifying investment) made by them during the year subject to the maximum amount available for deduction (For example – maximum amount under Section 80C is Rs 1,50,000).
Even for the TDS deducted by the multiple employers, filers have to report such amount of TDS at separate columns of the “Schedule TDS” against the Name and TAN of the respective employers.
Further, in cases when employees switch jobs during the year, the salary earned from the previous employer and TDS deducted thereon may not be correctly factored by the new employer. This may be due to complete details not furnished by the employee or due to internal policies of the employer. This may result into tax liability not being entirely discharged by way of TDS. Therefore, the employee may have to discharge the balance tax payable by way of Self-Assessment Tax before filing his ITR.
(By Gopal Bohra, Partner-Tax, and Aniket Shet, Associate-Tax, N. A. Shah Associates LLP)