Form 16 is the document that has details of your income and tax saving investments. Last week, the Central Board of Direct Taxes (CBDT) changed the format of Form 16. Majority of the taxpayers use Form 16 to populate the income tax return (ITR) form. “Now, your employer must report all the allowances on which you have claimed exemption. If you have claimed exemption on HRA (house rent allowance), the exempt portion has to be reported separately. You also have to report income in the Form 16 from previous employer, which is not a big change," said Archit Gupta, founder, ClearTax.
Change in TDS
They have changed the tax deducted at source (TDS) too. This change is for the employer. Employers deduct TDS from the employee, which they deposit with the government and then file a TDS return. “Called 24Q, the TDS form has changed in a big way. Earlier employers had the liberty to show deduction head-wise. For instance, under 80C you could include public provident fund and insurance together. But now all employers when they file TDS return have to provide all the exemption they allow and report section-wise and item wise what deduction has been claimed under chapter 6A," said Gupta.
What does it mean?
With the detailed Form 16, there will be more information available for the IT department. Now they will know exactly what you’ve claimed. “If you look at the revised 24Q and ITR, the forms have been aligned with it. So they look very similar. Now the department can corroborate what you have submitted in ITR and what your employer has submitted. It helps both in filing tax returns. It is only a format change," he added. The employer any way has all the information of the tax-saving investments you do. The change in Form 16 along with the change in the ITR form aligns all three documents — Form 16, ITR and TDS details.