As per the latest Union Budget of 2020, citizens with an annual income of up to Rs.2.5 lakh are not liable to pay taxes on their income. Above that, they have to pay taxes as per the slab.
If your annual income from salary is more than Rs.2.5 lakh, your employer will deduct tax at source or TDS and issue Form 16 as proof of it. Employers or tax deductors can download this Form 16 online.
What is Form 16?
It is a TDS certificate issued by your employer to certify that they have deducted tax from your salary and submitted it to the respective authorities. It has a full break up of your income and the taxes you have paid. Under Section 203 of the Income Tax Act, this certificate is issued annually. This document comes in handy while filing your income tax return.
Importance of Form 16
Form 16 proves that an employee has paid his/her due taxes on time, his/her earnings are authentic, and it is recorded with the Government of India. Even though the primary use of Form 16 is to act as proof of taxes being paid and help in filing an income tax return, it has some other benefits also.
Benefits of Form 16
- Calculate tax liabilities
While the applicability of TDS is taken care of by the employer, you have to pay your taxes properly. The employer deducts taxes on your income details; thus, there can be discrepancies. In such scenarios, you either pay additional taxes or underpay it. Form 16 aids you to compute your exact tax liabilities so that you can pay your due taxes or file for refunds on time.
- Proof of TDS submission
Employers can only issue this certificate after paying the TDS on behalf of you. Therefore, it acts as a proof that you have paid your due taxes and the amount deducted from your salary hasn’t misused.
It should be noted here that employees are not eligible to download Form 16 online; it can only be done by the deductors.
- Helps in filing IT return
Form 16 is used for a comprehensive breakup of your salary, including various allowance and bonuses earned in a financial year. By having all these details in hand at the time of filing income tax return, it will streamline the process and assists you to do it correctly.
- Vital if you apply for a visa
This document is crucial if you are applying for a visa. Embassies will ask for your Form 16 of the previous two years to evaluate your financial situation and whether you can manage your finances while travelling abroad or not.
- Availing a credit card
Every reputed credit card provider asks for Form 16 of the last two years attached with the credit card application. Similar to the loan application, it allows financial institutions to understand your financial capabilities and whether you can repay your credit card debt or not.
Based on that they decide the credit limit of your card. If you fail to submit this form, it could be one of the reasons why your credit card application can be rejected.
For instance, reputed NBFCs like Bajaj Finserv emphasises on submitting this document to avail a credit card from them. Their Bajaj Finserv RBL Bank SuperCard is a feature-loaded credit card. It offers a 50 days interest-free period on ATM withdrawals, quick loan against a credit card, convert the due into easy EMIs and many more.
Furthermore, the company also brings pre-approved offers to minimise the time taken to avail financing by making the process uncomplicated. These offers are available on several financial products like credit cards, personal loans, business loans, etc. You can check your pre-approved offers by submitting your essential contact details.
Hence, not providing Form 16 or proof of income can be one of the reasons you may have been declined a credit card.
How to download Form 16 online
Employers can download Form 16 online via the TRACES website. You have to log in to the website with a User ID, password, TAN of the employer and verification code and follow the process afterwards.
However, you must know that you cannot avail this form without a valid PAN or if your TDS statement does not have it mentioned.
Issuing a Form 16 is not an optional affair. Your employer is bound to provide this document if he/she deducted TDS from your earnings. Thus, if you have not availed it by the end of May, make sure to do it at the earliest.
