Property Title Verification In India – The Process, Methods & Other Aspects
Property

Property Title Verification In India – The Process, Methods & Other Aspects

Title is a legal term; It means right of ownership of property. The title of the property is the prime concern of everyone at the time of property purchase. Every property has a title. Title is the proof of the right of ownership or the basis of the right of ownership. Title can be created by act of parties or by operation of law.

The title to the immovable property is ascertained by reading the relevant "documents" and "deeds" relating to such property. The word "document" has a very broad import. Under common law 'document' means any substance expressed or described by means of letters, figures or marks for the purpose of recording that matter. Documents relating to property or commercial transactions are generally called instruments or deeds.

Land is a subject under the powers of the state governments under the Constitution of India and hence, property laws in India may differ from state to state. Apart from local laws, several laws framed by the central government also govern the acquisition and ownership of property (including interest in property) by way of purchase/sale, transfer, mortgage, inheritance or gift.

Transfer of property other than agricultural land, registration of deeds and documents come under the Concurrent List. When a person acquires or owns immovable property, the law also entitles him to use, lease, sell, rent or transfer/gift the land. The owner also has the right to mortgage his immovable property as security for the loan.

Here we'll tackle title checks required for a variety of purposes, including sale, lease, sublease and mortgage. For the purpose of brevity, reference to sale shall also include the purposes of lease, sublease, license and mortgage where applicable.

Importance of title verification

1. A title proves ownership. Barring a valid legal dispute, a land title serves as an official record for the ownership of the land. Without the appropriate title, the legal system would not recognize an unfiltered deed or informal contract.

2. All owners can hold their own duplicate title: Each owner of a land title can hold a legally valid copy of the title. The Register of Works will make a note of each owner's copy in the recordkeeping system to confirm the validity of the copy issued by each county. In the case of trust and company-based ownership, an accredited administrator may retain a copy of the title on behalf of the trust or company.

3. Prospective land owners often conduct title searches to uncover potential issues: During a title search, an investigator will look at years of land documents to identify potential issues with land ownership. A title search can prevent new owners from accepting liability for past issues. For example, a property owner cannot sell or transfer ownership rights to a property with unresolved tax issues. An outstanding lien can make any ownership transaction invalid.

Title searches reveal information about property taxes, property deeds contracts, CC&Rs (contracts, terms and restrictions), deed document issues and unresolved ownership claims, and more. If the previous property owner granted the easement or rights to use the property to a company or individual, the search will also reveal these recorded contracts.

While buyers and lenders commonly use title searches during the buy/sell process, many other parties can benefit from a title search. Home builders, businesses and government officials can use title searches for risk management and investment protection purposes.

4. Title Insurance Offsets the Risk Associated with Title Transfer: To mitigate the effects of issues not discovered during the title search, many land buyers invest in title insurance as part of the closing costs of the transaction. Owner's title insurance often provides coverage for damages up to the full value of the title in case an issuer jeopardizes a future claim of ownership. Owner's insurance policies will also cover dispute resolution legal costs, including damages paid to another party to the extent of the policy. Lender's title insurance protects the lender's agreement with the borrower. In the event of a land dispute, the policy will cover the lender's loss and legal expenses.

It is clear that title verification is a necessary activity before buying a property.

Property Title Verification Process & Method

The search for property title or legal description is done by the attorney or a title company in most real estate transactions. The Attorney/Title Company must first look at the past records of the property. A property can have a "Chain of Titles". The attorney has to see whether there is any encumbrance on the property.

Sometimes a legal succession certificate is also required to determine the title of the property if there is more than one person as the owner of the property. It is necessary to define the relationship of owners. But this is generally done when the property owner is a deceased person and that person has more than one legal representative. In such a situation, it is necessary to show the relationship between the deceased and his legal representative. It will also have to be checked that no objection has been raised on the sale of the said property.

Mother Deed is necessary to trace the origin of the property. It is a document that helps in further sale of property, thereby establishing new ownership. In the absence of the original deed, certified copies should be obtained from the registered authorities. Mother Deed covers change in ownership of property, whether through sale, partition, gift or inheritance. It is very important that the mother deed records the references to past ownership in a sequence and must be continuous and unbroken. In case of missing sequence, one should mention the text (Preamble) in records, revenue records or other documents from the registration offices. The sequence must be updated to the current owner.

Property title verification is necessary to prevent legal disputes after the sale of property. This is usually done with the help of the buyer's attorney. The attorney will determine by going through the past records of the property. Hence title verification assumes a major importance in the sale of property.

How To File Mutual Divorce? Mutual Divorce Process
Divorce/Dowry

How To File Mutual Divorce? Mutual Divorce Process

The Meaning And The Explanation Of Mutual Consent Divorce

A Mutual Consent Divorce is when both the husband and wife want to terminate the marriage. It is a decision taken by mutual consent, and hence, the mutual divorce process is a lot smoother than divorce by other means. As per the Hindu Marriage Act, 1955, both spouses have the right to file for the dissolution of their marriage by a decree of divorce on more than one ground specifically enumerated in Section 13. Section 28 of the Special Marriage Act, 1954 and Section 10A of the Divorce Act, 1869, also provides for divorce by mutual consent.

What Are The Conditions To file For A Mutual Divorce

As per Section 13B of the Hindu Marriage Act, 1955, the following conditions must be met to file for a mutual divorce.

(i) Both spouses must live separately for at least one year.

(ii) Both spouses feel that they cannot live together.

(iii) Both the husband and wife mutually agree that their marriage has collapsed

(iv) Both parties agree to comply and file jointly for a mutual divorce without any undue influence

 

The Documents Required for initiation of Mutual Divorce Process:

Marriage Certificate
Address Proof – Husband and Wife.
Four Photographs of Marriage.
Income tax Statement of last 3 years.
Details of profession and Income (Salary slips, appointment letter)
Details of Property and Asset owned
Information about family (husband and wife)
Evidence of Staying separately for an year

 

Step 1: Filing a Divorce Petition

A mutual divorce process is commenced with the filing of a divorce petition, which may be filed at any of the following places;

1.    Court where the couple last lived

2.    Court where the couple’s marriage was solemnized

3.    The court in the area where the wife currently resides

The divorce petition must be filed jointly by the concerned parties, and the notice is served to the family court by both parties. The grounds for divorce is that the spouses feel they cannot live with each other anymore, and hence, have agreed mutually to dissolve their marriage. Another common ground used to get a mutual divorce is that due to unavoidable differences, the couple has been living separately for over a year. The joint petition must be signed by both parties involved.
 

Step 2: Court hearing and inspection

After this, both the parties appear in the family court along with their lawyers. The court after going over the petition and all the supporting documents presented as proof before the court. It can also try to bring reconciliation, and if this is not possible, the mutual divorce process continues.
 

Step 3: Record Statement on Oath

the court passes an order, after duly scrutinizing their petition, to record the party’s statements on oath.
 

Step 4: First Motion


After recording their statements, the first motion is passed by the honourable court. Following this, the couple has to wait for 6 months before filing the second motion. However, the second motion must be submitted at least before 18 months after passing the first motion.
 

Step 5: Second Motion and Final Hearing


Once they decide to file the second motion, they can go ahead with the final hearing before the court. The final hearing includes both parties stating their case, and the court recording their statements on oath in the family court. Also, recently, the SC stated in their finding that the 6-months interim period can be avoided if the court wishes it to be. Courts do so if they feel both parties are sure about the divorce, and also if there are no issues related to alimony, child custody, or property.

 

Step 6: Divorce Decree


Once the couple state that they do not have any differences in matters concerning alimony, child custody, or sharing of property, the mutual divorce process reaches the final stage. Therefore, the couple must reach an agreement for the court to take a final decision. With the court’s satisfaction, it passes a decree of divorce, which declares that the marriage is dissolved, and this makes the divorce final.

 

Duration In Mutual Divorce:

Under Section 13B, when a couple files for divorce with mutual consent, they first have to establish a 12-month separation period, which is then followed by a "cooling off" period of six months. However, the Supreme Court had in 2020 ruled that on case to case basis, this period can be waived. 

How is alimony calculated?

  1. There is no fixed formula or hard and fast rule for the calculation of alimony that the husband needs to provide to his wife. The alimony can be provided as a periodical or monthly payment, or as a one-time payment in the form of a lump-sum amount.

If the alimony is being paid on a monthly basis, the Supreme Court of India has set 25% of the husband’s net monthly salary as the benchmark amount that should be granted to the wife. There is no such benchmark for one-time settlement, but usually, the amount ranges between 1/5th to 1/3rd of the husband’s net worth.

Who is eligible to get alimony?

Under Section 25 of the Hindu Marriage Act, permanent alimony is provided by the court to the wife or even to the husband for her or his support and maintenance. In case the wife is a working woman, but there is a considerable difference between her and her husband’s net earnings, she will still be awarded alimony to help her maintain the same standard of living as her husband.

If the wife is not earning, the court will consider her age, educational qualification and ability to earn to decide the amount of alimony. If the husband is disabled and is unable to earn and the wife is earning, then the court grants alimony to the husband.

Know Various Aspects Related To The Term Sheet
Company

Know Various Aspects Related To The Term Sheet

1. What is a Term Sheet?

A term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment. The term sheet serves as a template and basis for more detailed, legally binding documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is drawn up.

2. Term Sheet in the Indian Context 

A term sheet may likewise be referred as a letter of intent, an MOU i.e. memorandum of understanding. The first round of speculation from a financial investor is known as a term sheet. Every round of investment has its own terms & conditions and these terms define a business seeking outside capital funding. The label isn't imperative, and regarding their structure and drafting they set out the key business and legitimate terms in regard to a proposed transaction.

You may also read Partnership Firms - The Principle Of Together We Rise, Together We Sink.

3. Is the Term Sheet legally binding in India?

One of the fundamental aspects in every corporate transaction is ascertaining whether the term sheet is intended to be binding or non-binding. Below we discuss the various facets of binding nature of term sheets, from a drafting perspective as well as enforceability perspective.
a.    Drafting Perspective  
i)    Non-binding Term Sheet: While this is the most common position in term sheets, calling this document 'non-binding' term sheet is a misnomer as actually it is a partially binding term sheet. There indeed is express language to indicate that the term sheet would not be binding between parties, as there would be detailed definitive documents in the future. At the same time, typically an exception would be created for clauses like Exclusivity, Confidentiality, Term and Termination, Governing Law and Dispute Resolution, and the like, which would remain binding between the parties.
ii)    Binding Term Sheet: As is self-explanatory, a binding term sheet implies all clauses and provisions therein would be binding between the parties. From an enforceability perspective, it has more teeth. Therefore, any definitive documents in the future should clearly have provisions that override this document.
iii)    Unilaterally Binding Term Sheet: This is an interesting practice that we sometimes observe, where the term sheet is drafted as a hybrid of the above two models. In other words, for one party it would be non-binding (with the exception of clauses cited above), while for the other party all obligations and commitments would be binding. This is normally done to a party that is perceived to be one that could significantly try to alter principles agreed in the term sheet during negotiations of definitive documents, or for start-ups where at term sheet stage the investor/acquirer does not have sufficient visibility of the facts.

4. What does a Term Sheet include?

Company valuations, investment amounts, the percentage of stakes, and anti-dilutive provisions should be spelled out clearly.
Voting rights. Startups seeking funding are usually at the mercy of VCs who want to maximize their investment return. This can result in the investor asking for and obtaining a disproportionate influence on the company's direction.
Liquidation preference. The term sheet should state how the proceeds of a sale will be distributed between the entrepreneur and the investors.
Investor commitment. The term sheet should state how long the investor is required to remain vested.

You may also like to read Know the various facts about Share Purchase Agreement.

5. What is the purpose of a Term Sheet?

All term sheets contain information on the assets, initial purchase price including any contingencies that may affect the price, a timeframe for a response, and other salient information.
Term sheets are most often associated with startups. Entrepreneurs find this document crucial for investors, often venture capitalists (VC), who may offer capital to fund startups. 

6. Who prepares the Term Sheet?

A term sheet may be prepared by either party – the investor or the founder. Usually, if a venture capital firm is investing, the VC offers a term sheet.

7. Is a Term Sheet legally binding?

Generally, term sheets are non- binding in nature, but they can become legally binding if executed on a stamp paper. The provision for its nature being non-binding can be inserted in the term sheet itself. Parties should be careful while drafting these documents at the negotiation stage.

8. Why are the terms important if they are non-binding?

While terms in a term sheet may be non-binding, they still represent the conditions of an agreement that both parties have agreed in-principle, like a handshake deal. If the due-diligence progresses well, these are the terms according to which a binding stock purchase agreement will be prepared.

9. How do you negotiate a term sheet?

Following are the ways to negotiate a term sheet: 
Get more than one VC interested
Understand common market terms
Watch out for red flags
Understanding valuation and dilution is critical
Consult with experts for advice

10. Are term sheets enforceable?

Generally, term sheets are non- binding in nature, but they can become legally binding if executed on a stamp paper. The provision for its nature being non-binding can be inserted in the term sheet itself. Parties should be careful while drafting these documents at the negotiation stage.

11. What is a term sheet in M & A?

A term sheet is a mostly non-binding document signed by the target and the prospective buyer that describes the major terms of the proposed acquisition. While most term sheets are non-binding, they often contain binding provisions regarding non-solicitation, exclusivity and confidentiality.

Also read Profession Is The Link Between An Individual And The Larger Society

Know About The Mutual Fund Calculator
Company

Know About The Mutual Fund Calculator

The Definition Of A Mutual Fund

A mutual fund is defined aa a professionally managed investment fund that combines money from various investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe ('investment company with variable capital') and open-ended investment company (OEIC) in the UK.

The Meaning Of Mutual Fund Calculator

Well, a mutual fund calculator is an online tool that helps investors calculate their returns and the future value of an investment based on a certain investment strategy. Since mutual fund investors should ideally take a goal-oriented approach for their investments, a mutual fund calculator in India can help them understand how far they’ll achieve their goals based on the planned amount of investment, time horizon, and rate of return.

Also read about The Income Tax Calculator - The Tool That Helps You Calculate Your Tax.  

The ET Money mutual fund returns calculator makes things easier for you because it requires just three inputs: your investment amount (monthly SIP or lumpsum), time horizon, and a rate of return based on your investment strategy.

The Means & Methods To Use ET Money Mutual Fund Returns Calculator?

The ET Money mutual fund calculator is a two-step process that makes mutual fund return calculation a breeze. When you use a mutual fund calculator online, you’re faced with a range of questions. For new investors trying to use any other Mutual Fund returns calculator in India, this can be quite overwhelming. This is why the ET Money calculator has a streamlined design that helps investors with mutual fund return calculation in two easy steps.

Step 1: Choose between a lump sum or SIP calculation from the top-right corner.

Step 2: Enter the amount you wish to invest (or the monthly contribution if you chose SIP), the number of years you intend to hold the investment for (or continue SIP contributions), and the investment strategy.

Choosing the investment strategy on the calculator eliminates the need to estimate a rate of return because the algorithm does it based on the strategy’s risk profile. For instance, aggressive strategies typically deliver higher returns than conservative strategies because they come with greater risk. If you prefer, you also have the option to enter a custom rate by selecting Custom from the drop-down menu.

You’ll now see your investment’s growth in the form of a bar chart over several time frames. On the right, you’ll get an overview of the total investment, total gains, and the future value of your investment.

As you keep changing any variable in the MF return calculator, the chart at the bottom and the overview will change automatically. You’ll also see some of the best mutual funds at the right of the calculator based on your investment strategy. If you happen to be interested in any of those funds, use the “Invest Now” button, and invest in Mutual Funds using the SIP or lump sum investment route in minutes.

The Formula For Mutual Fund Calculation

To calculate mutual fund returns manually, you need to know the mutual fund return calculation formula. It’s always much easier (and faster) to use the ET Money mutual fund returns calculator. This is particularly true when you’re trying to compare returns from your mutual fund investment generated using either a lump sum or SIP strategy.

Even if you choose to use the Mutual Fund return calculator online, it’s helpful to know the formula that was used to calculate the returns on mutual funds that you can receive from your investments. Following are the mutual fund calculation formulas. You shall notice that the formulae for both modes of investment are different. Wonder why? Here is the answer:

Lumpsum investment

SIP Investment

M = P (1 + r/100)n

M = A [ (1 + i)n – 1] x (1 + i)/i

Where:
M = Maturity amount
P = Principal amount
r = Estimated rate of return
n = Holding period (in years)

Where:
M = Maturity amount
A = SIP contribution per period
i = Rate of return
n = Holding period (in months)

Note: For daily/weekly SIPs, adjust i and n accordingly.

 

Know two things about both formulae.

First, the formula used in the lump sum formula is CAGR (compound annual growth rate) while the one used in the SIP formula is XIRR (Extended Internal Rate of Return). The reason is that CAGR works only for calculating returns on a point-to-point basis. When there are multiple cash flows (like in the case of SIP), you need to use XIRR because the returns for each cash flow will differ. XIRR helps you calculate a single return percent for all cash flows and is, therefore, relevant to SIPs. If you are keen to learn more about this, click on XIRR and CAGR to know more.

You may also like reading Income Tax Verification: The checking of your filed taxes.

It’s also worth noting that the based on the scheme you choose and whether you choose a direct or regular plan. The fund house will deduct their commission from your returns when you invest through the regular mode (i.e., through a broker, advisor, or distributor). Since a direct plan doesn’t involve an intermediary, you don’t pay any commission, which reduces the expense ratio and translates to relatively higher returns. Preferably, you’d want to go with a direct plan when choosing mutual fund schemes in India because you’ll end up with relatively higher returns.

For instance, let’s assume that the difference in the expense ratio between the direct and regular plan of a scheme is 0.75%. Following are the returns and the investment value calculated using the ET Money mutual fund calculator for direct vs regular plans:


Direct

Regular

Inputs

Investment = ₹6 lakh
Holding period = 10 years

Investment = ₹6 lakh
Holding Period = 10 years

Expected return before expense ratio (p.a.) [A]

13%

13%

Expense ratio [B]

1%

1.75%

Expected return after expense ratio (p.a.) [A - B]

12%

11.25%

Total returns (based on expected returns after expense ratio)

₹12.64 lakh

₹11.42 lakh

Maturity value

₹18.64 lakh

₹17.42 lakh

 

 

Note that by simply choosing to invest in a direct plan (i.e., without taking any additional risk), you’re able to increase your returns substantially. You can invest in a direct plan online with just a couple of steps through the ET Money website.

Mutual Fund Calculator : How Will It Help You?

India’s mutual fund industry grew over 2x between 2016-2021. The country is taking a liking to how they can gain exposure to a diverse portfolio created by an expert. Mutual funds help investors streamline their investment efforts and even facilitate consistency and discipline through SIP.

Mutual funds explicitly caution the investors, “Past performance doesn’t guarantee future returns.” Investors should, therefore, focus on how the fund may perform in the future. This is where a mutual fund calculator can come in handy.

A mutual fund calculator helps you assess the impact of a given variable (i.e., the investment amount, period of investment, and the rate of return) on your total gains and the investment value. For instance, consider that you’re investing with a goal to purchase a home. You input the data and notice your investment value falls a little short of the value of the home you aim to purchase. You change either of the three variables based on your preference to see how you can adjust your investment strategy to achieve your target.

Think of a mutual fund calculator as your music system. The investment amount, rate of return, and period of investment are like the bass and treble knobs. You use them to optimize the music system’s output. Similarly, a mutual fund calculator allows adjusting the three variables that go into it, which can help you understand what combination of investment, rate of return, and holding period can help you achieve your targets.

You can also calculate mutual fund returns for both SIP and lump sum modes to see how they compare using the mutual fund returns calculator. For instance, investing ₹5 lakh as a lump sum or investing the same amount over three years can generate different returns. Manually calculating them can consume a lot of time, while mutual fund return calculation with a calculator typically takes less than 30 seconds.

Also read Form 16 – Here Is About Tax Deducted At Source

 

 

The Income Tax Calculator -  The Tool That Helps You Calculate Your Tax
Tax

The Income Tax Calculator - The Tool That Helps You Calculate Your Tax

About Income Tax 

Income tax is defined as a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Taxation rates may vary by type or characteristics of the taxpayer and the type of income

You may also like to read about GST.

What is Income Tax Calculator?

The Income tax calculator is an easy-to-use online tool that helps you estimate your taxes based on your income after the Union Budget is presented. We have updated our tool in line with the income tax changes proposed in the Union Budget 2022-23.(Read the highlights here)

How to use the Income tax calculator for FY 2022-23 (AY 2023-24)?

Below are the steps to use the tax calculator:

1. Choose the financial year for which you want your taxes to be calculated.

2. Select your age accordingly. Tax liability in India differs based on the age groups.

3. Click on 'Go to Next Step'

4. Enter your taxable salary i.e. salary after deducting various exemptions such as HRA, LTA, standard deduction, and so on. (if you want to know your tax liability under the old tax slabs)

Or else, just enter your salary i.e salary without availing exemptions such as HRA, LTA, standard deduction, professional tax and so on. (if you want to know your tax liability under the new tax slabs)

5. Along with taxable salary, you must enter other details such as interest income, rental income, interest paid on home loan for rented, and interest paid on loan for self occupied property.

6. For Income from Digital Assets, enter the net income ( Sale consideration less Cost of Acquisition), such income is taxed at 30% Plus applicable surcharge and cess.

7. Click on 'Go to Next Step' again.

8. In case, you want to calculate your taxes under the old tax slabs,you will have to enter your tax saving investments under section 80C, 80D, 80G, 80E and 80TTA.

9. Click on 'Calculate' to get your tax liability. You will also be able to see a comparison of your pre-budget and post-budget tax liability (old tax slabs and new tax slabs).

Note: Whichever field is not applicable, you can enter "0".

What are the exemptions/ deductions that are disallowed under the new tax regime?

Individual or HUF opting for taxation under the newly inserted section 115BAC of the Act shall not be entitled to the following exemptions/deductions:

(i) Leave travel concession as contained in clause (5) of section 10;

(ii) House rent allowance as contained in clause (13A) of section 10;

(iii) Some of the allowance as contained in clause (14) of section 10;

(iv) Allowances to MPs/MLAs as contained in clause (17) of section 10;

(v) Allowance for the income of minor as contained in clause (32) of section 10;

(vi) Exemption for SEZ unit contained in section 10AA;

(vii) Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;

You can also read about Form 16.

(viii) Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23. (Loss under the head income from house property for the rented house shall not be allowed to be set off under any other head and would be allowed tobe carried forward as per extant law);

(ix) Additional deprecation under clause (iia) of sub-section (1) of section 32;

(x) Deductions under section 32AD, 33AB, 33ABA;

(xi) Various deduction for donation for or expenditure on scientific research contained in sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35;

(xii) Deduction under section 35AD or section 35CCC;

(xiii) Deduction from family pension under clause (iia) of section 57;

(xiv) Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, deduction under sub-section (2) of section 80CCD (employer contribution on account of the employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed.

Following allowances shall be allowed as notified under section 10(14) of the Act to the Individual or HUF exercising option under the proposed section:

a) Transport Allowance granted to a divyang employee to meet the expenditure for the purpose of commuting between place of residence and place of duty

b) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;

c) Any Allowance granted to meet the cost of travel on tour or on transfer;

d) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.

You can even get your tax computation on your mail.

You can also read about Income Tax Verification.

Form 16 – Here Is About Tax Deducted At Source
Tax

Form 16 – Here Is About Tax Deducted At Source

Income tax law is an elaborate measure covering various aspects of tax that is procured from the people who are earning beyond a certain level. Income Tax can also be defined as price which tax payers have to pay to the government. The government in turn uses these funds for the development of the social infrastructure. 

Read about The Income Tax Calculator.

An important part of Income Tax is TDS or Tax Deducted at Source, which is seen as form 16

About Form 16: 

Form 16 is essentially a certificate issued by employers to their employees. It provides a validation that TDS has been deducted and deposited with the government authorities on behalf of the employee. It gives a detailed summary of the salary paid to the employee and the TDS amount deducted on the same.

What is Form 16?- Basics

Form 16 contains the information needed to prepare and file your income tax return. It shows the breakup of salary income and the TDS amount deducted by the employer. It has two components – Part A and Part B (discussed in detail below).

Employers must issue it every year on or before 15th June of the following year, immediately after the financial year in which the tax is deducted. If you lose your Form 16, you can request a duplicate from your employer.

Part A of Form 16

Part A of Form 16 provides details of TDS deducted and deposited quarterly details of PAN and TAN of the employer and other information.

An employer can generate and download this part of Form 16 through the TRACES (https://www.tdscpc.gov.in/app/login.xhtml) portal. Before issuing the certificate, the employer should authenticate its contents.

It is important to note that if you change your job in one financial year, each employer will issue a separate Part A of Form 16 for the period of employment. Some of the components of Part A are:

Name and addre

TAN and PAN of emplss of the employeroyer

PAN of the employee

Summary of tax deducted and deposited quarterly, which is certified by the employer

Part B of Form 16

Part B of Form 16 is an Annexure to Part A. Part B is to be prepared by the employer for its employees and contains details of the breakup of salary and deductions approved under Chapter VI-A.

Deductions allowed under the Income Tax Act (under chapter VIA):

The list of deductions mentioned are as below:

Deduction for life insurance premium paid, contribution to PPF etc., under Section 80C

Deduction for contribution to pension funds under Section 80CCC

Deduction for employee’s contribution to a pension scheme under Section 80CCD(1)

Deduction for taxpayer’s self contribution to a notified pension scheme under Section 80CCD(1B)

Deduction for employer’s contribution to a pension scheme under Section 80CCD(2)

Deduction for health insurance premium paid under Section 80D

Deduction for interest paid on loan taken for higher education under Section 80E

Deduction for donations made under Section 80G

Deduction for interest income on savings account under Section 80TTA

You may also read about Income Tax Verification.

Relief under Section 89

Details required from Form 16 while filing your return

With reference to the image below, here is where you can locate certain information for filing your income tax return for FY 2020-21 (AY 2021-22).

Allowances exempt under Section 10

Break up of deductions under Section 16

Taxable salary

Income (or admissible loss) from house property reported by an employee and offered for TDS

Income under the head ‘Other Sources’ offered for TDS

Break up of Section 80C deductions

The aggregate of Section 80C deductions (gross and deductible amount)

Tax payable or refund due

What is the eligibility criteria for Form 16?

According to the regulations issued by the Finance Ministry of the Indian Government, every salaried individual whose income falls under the taxable bracket is eligible for Form 16.

If an employee’s income does not fall within the tax brackets set, they will not need to have Tax Deducted at Source (TDS). Hence, in these cases, the company is not obligated to provide Form 16 to the employee.

However, these days, as a good work practice, many organisations issue this certificate to the employee as it contains a consolidated picture of the individual’s earnings and has other additional uses.

Points to be noted while checking Form 16

Once an individual receives Form 16 from the employer, it is their responsibility to ensure that all the details are correct.

One should verify the details mentioned in Form 16, for example, details of the amount of income, TDS deducted, etc.

If any of the detail is mentioned incorrectly, one should immediately reach out to the organisation’s HR/Payroll/Finance department and get the same corrected.

The employer would then correct their end by filing a revised TDS return to credit the TDS amount against the correct PAN. Once the revised TDS return is processed, the employer will issue an updated Form 16 to their employee.