Form 16: New format for salary TDS certificate makes it difficult to fudge income, tax breaks
The CBDT has notified a new format for Form 16 – the salary TDS certificate – requiring a detailed break up of tax exempt allowances paid to employee and also of all tax breaks claimed by him/her. The earlier format allowed companies to give consolidated figures or break-up in different formats for both these thereby leaving some ambiguity regarding their individual composition.
Concurrent changes have been made in the format of the TDS return (details of TDS from employees’ salaries) filed by companies with the tax department to allow the tax man to cross check an employee’s ITR, Form 16 and the company’s TDS return easily.
Last year the tax man had detected several cases of false claims of large income tax refunds made by some employees which is likely to be another reason for this streamlining exercise which is aimed at removing all space for such manoeuvres in future.
The new format will allow the tax department to view a detailed break up of the income and tax breaks claimed by a salaried person at the first instance itself. Consequently, any discrepancy between the income and deductions shown in Form 16 and the ITR filed by the person can be immediately spotted. This new format is likely to help the department digitise cross checking of figures too because it takes away the leeway that companies earlier had in providing the break up of income and deductions and fixes the format for providing these.
The new format for Form 16 was notified by the Central Board of Direct Taxes (CBDT) via a notification dated April 12, 2019. The format specified in the notification comes into effect from May 12, 2019 which is well before the last date for issue of Form 16 or the TDS certificate for salary by employers. Therefore, those issuing Form 16 after this date will have to do so in the new format.
As per the changes notified, Form-16 issued by an employer will have to specify the nature of tax-exempt allowances paid to the employee. Abhishek Soni, CEO, Tax2filing.in, a tax-filing website says, "The previous format of Form-16 was not providing the specific list of tax-exempt allowances on which the salaried person was not required to pay any tax. Now as per the revised format, the employer will have to specify the nature as well as amount of allowances which are exempt from tax. Similar details have also been asked for in this year's ITR-1." The revised format provides a list of allowances such as Travel concession or assistance under section 10(5), house rent allowance under section 10(13A) and so on that are exempt under the Income Tax Act.
New changes in Form-16
Previously, there was no specified format to report them
