The myth: Startups don’t have to generate Form 16 for salaries where TDS is not deducted.
The fact: Form 16 has to be generated for any amount of salary that is paid.
Call it a myth or just a plain lack of awareness, but most startups are not aware that they have to generate Form 16 for all of their salaries employees, even when there is no TDS deduction because the salary is below the annual taxable limit. This is one of the most common taxation errors that startups make.
What is Form 16
Before we get further into how startups can generate Form 16, let’s first understand what Form 16 is. Form 16 is the document that contains the details of your employee’s income. A company has to generate a separate Form 16 for each individual employee. The primary heads of importance that the Form 16 covers are Taxable Salary, Breakup and Aggregate of 80C Deductions, Tax Deducted at Source and Tax Payable or Refund Due. The Form 16 also has personal details of the employee and employer like the Name, Address, PAN and TAN.
The information that the Form 16 contains like the taxable salary and TDS has to be provided by the employer, while the information like deductions and other income details are provided by the employee.
Form 16 is important because it is a certificate of income earned and income paid. From an employee’s perspective, it is the only document that shows their incomes and earnings. They would require it while filing their taxes or . Hence, it is integral for a company to generate Form 16 for their employees.
Generating Form 16
Ordinarily, a startup would have to use the Income Tax Department’s online facilities and download their Form 16 utility to generate From 16s. This is an extensive, time-consuming process that can take up a lot of energy and manpower. But the easier solution to generating Form 16s is by using the TDS software that lets you do everything on cloud. You don’t to download or install anything.
The TDS software allows you to merge parts A and B of Form 16, import data from Excel, digitally sign the Form 16 PDF files and generate 100s of Form 16s in a matter of minutes.