Mentioning types of payments made by the employer to the employee will make it easier for the income tax department to electronically reconcile everything without human intervention.
Salaried people don’t have to worry anymore for paying advance tax on time or about paying interest and penalty for paying taxes late as the new format of Form 16, which will come into effect from May 12, 2019, will contain provisions to include all sources of income, such as – income from house property, remuneration from other employers, allowances received by the employee and income from other sources along with tax-saving investments. However, it will not be compulsory for emploees to disclose incomes from such other sources.
“It is not mandatory for employees to disclose their other incomes to the employers,” says CA Karan Batra, Founder & CEO of CharteredClub.com, adding, “However, reporting other incomes makes it easier for the employees as they don’t have to pay advance tax on such other incomes and the employer may directly deduct the TDS and deposit the same with the government.”
“So, in cases where the employee has disclosed his other incomes as well to the employer, such other incomes should also be reported in the Form 16,” he further said.
Stressing that disclosing all the incomes in Form 16 will make the computerised reconciliation process easy, Batra said, “When these other incomes are also reported in the Form 16, it gets easier for the computer system of the income tax department to electronically reconcile everything. Therefore, reporting such incomes not only reduces the hassles for the employees but also helps the income tax dept in electronic reconciliation.”
Talking on need of changing the format of Form 16, Batra said, “The ITR Forms require a lot of details like each exempt income etc to be disclosed separately whereas in the previous format of Form 16 – these were reported as a consolidated figure. As there were differences in the manner of reporting, the electronic system of the income tax department was not able to reconcile, and notices were electronically issued to explain the variance.”
Highlighting the instances of system generated notices due to considerable differences in the format of ITR Form and Form 16, he said, “These notices were issued as the department’s computer system was unable to understand the reason for difference in figures reported in ITR and Form 16. Most of these notices were uncalled for as these could have been easily taken care of by the computer system. So as to ensure that such notices are not issued in the future, the department has updated the Form 16 and has asked for each item to be disclosed separately.”
Praising the decision to upgrade the format of Form 16, Batra said, “Issuing of new Form 16 is a good move and the major reason for all these changes is to ensure that Form 16 is in sync with the ITR Form which will help the income tax department in electronically matching the data reported in ITR with all the data which it has gathered from various sources.”
Describing the new format highlighting the need to follow it, he said, “The new Form 16 is very comprehensive and everything is required to be reported in this form. All allowances like HRA, LTA, Pension, Leave Salary etc are required to be reported in the form as separate items. If there is no space for disclosing such allowance in the Form 16, such allowance is required to be reported as ‘Total amount of any other exemption under section 10’. If there is any item which is not disclosed in the manner prescribed – the income tax department may not be able to reconcile everything and a notice may be issued electronically to explain the variance.”