Call it a myth or just lack of awareness, but most startups are not aware that they have to generate Form 16 for all of their salaried 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.
Before we get further into how startups can generate Form 16, let’s first understand what Form 16 is. It 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 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 and would require it while filing taxes. Hence, it is integral for a company to generate Form 16 for their employees.
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. An easier solution is using the ClearTDS software that lets you do everything on cloud. You don’t have to download or install anything.
The ClearTDS 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 hundreds of Form 16s in a matter of minutes.