Each employer on annual basis issues Form 16, which is an important document when it comes to Income Tax Return (ITR) filing. The employee may also switch his/her job during the financial year which further leads to him/her having two employers during the year.

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Form 16, in this case, will be received from both employers.

As per the income tax rule, taxable income is computed considering all sources of income.

So, in case an employee has more than one Form 16, he/she should consolidate all the incomes and thereafter compute the tax liability according to applicable slab rate, suggests Kapil Rana, founder & chairman, HostBooks Limited.

"After computation of taxable income under the head "income from salaries," one must include income from any other sources if any arising during the year. Thereafter, deductions under Chapter VI-A from such gross total income shall be provided. It is possible that all the employers have allowed a certain specific deduction in Form 16 but it can be availed only once during the year," further explains Naveen Wadhwa, DGM, Taxmann.

Now, the tax should be computed on total income computed after providing for deductions.

Also read:

Filing ITR? Here's a list of documents required

Thereafter, TDS deducted by all the employers during the year and any other amount of TDS as reflecting in form 26AS should be reduced from the total tax to compute the tax payable if any during the year.

In order to compute the income under the head salaries, an employee is required to do the following (Compiled by Rana of HostBooks Limited):

Compute the total of salary as per section 17(1), perquisites as per section 17(2), profits in lieu of salary from all Form 16. This is known as “Gross Salary”

Compute the total of exempt allowance and perquisites for e.g. house rent allowance, conveyance allowance, transport allowance, leave travel allowance etc. from all Form 16. It may be possible that the employee has not submitted any proof i.e. rent receipts to the employer for claiming HRA. In that case, the employee can claim exemption of HRA while filing ITR.

Deduct the total of exempt allowance and perquisites from "Gross Salary" as computed in Step (i). After deducting, one will arrive at “Net Salary”

Compute the total of deduction under section 16 i.e. Standard Deduction u/s 16(ia), entertainment allowance u/s 16(ii) and Professional Tax u/s 16(iii) from all Form 16.

Deduct the total of deduction under section 16 from net salary as computed in Step (iii).

In order to compute the tax liability, the employee is required to follow the steps as follows:

Compute Gross Total Income i.e. Income under the head salaries as computed above, Income under the head house property, Income under the head capital gains, Income under the head other sources.

Consolidate Deductions under Chapter VI-A from all Form 16.

Taxable Income = Gross Total Income (-) Deductions under Chapter VI-A

Compute Tax Liability on Taxable Income according to the applicable slab rate.

In order to arrive at Net Tax liability, deduct the tax deducted by all the Employer’s from Tax liability as computed in Step (iv) and Advance Tax, if any paid by Employee. Net Tax Liability = Gross tax liability (-) TDS (-) Advance Tax

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(Edited by : Jomy)

First Published:Dec 8, 2020 6:02 PM IST