Seven pitfalls to avoid while generating  Form 16

It’s that time of the year when farmers look forward to cultivate the next set of crops, as the monsoon invades paddy fields.

It’s that time of the year when it rains discounts from every Tom, Dick and Harry store, which lures consumers and increases footfalls!

Yes, it’s that time of the year when most Indian employees await one of the most important documents they need in order to file their annual IT Returns… You guessed it right. It’s the ubiquitous yet unique Form 16.

A True Story

Rakesh Somashekar, the payroll administrator at a mid-sized IT firm in Chennai, is Alt-Tabbing between multiple spreadsheets. In between, he is also perusing through multiple tax-saving investment proofs submitted by his organization’s employees. His tea is already cold; he has not even had a sip since 6pm.

As the clock strikes 8pm, his wife calls him asking whether he’ll be coming home late today too like the past few days. Rakesh knows he’ll be late. It’s already 15 June and he hasn’t yet rolled out Form 16 to the employees. He’s missed the deadline this year too… And he’s worried. He hangs up the phone and gets back to his work.

Suddenly, he gets his Eureka moment! He catches a clerical error in the previous quarter’s tax calculations. In the spreadsheet, a decimal point in the tax deducted amount for few employees was incorrectly placed, which had led to incorrect tax deductions for them. On closer scrutiny, he notices that this error was repeated for all those employees because he had used the same spreadsheet template for calculating TDSes for all of them!

Does this feel like ‘business as usual’ to you too when it comes to preparing Form 16? Is this a common/ similar scenario enacted every year during May-June at your firm too? Are errors like these affecting generation of Form 16 accurately? If so, why so?

Important note
greytHR wanted to understand what could be the issues and concerns that most firms commonly faced while generating Form 16. To get this information, we interviewed many Chartered Accountants (CAs) and HR/Payroll professionals to get their views. This list comprises information provided by them.

We would like to share this information with you. Hope this will help you generate error-free Form 16s for your employees on time.

Most commonly faced issues and concerns

1. Incorrect tax calculations - Most payroll administrators made unintentional clerical or human errors while calculating and filing monthly and quarterly TDS deductions. Most often than not, these clerical and human errors were typos of misplacing or dropping a single digit in the deducted amount. Incorrect calculations were made on spreadsheets based on incorrect formulae. Most of the time, such incorrect calculations were repeated for few, or sometimes, even for all employees, as they reused the same template for all employees!

2. Mismatched PAN cards - Manually filing quarterly returns is time-consuming and tiresome process. Many firms reported that a certain employee’s PAN card details were input for another employee due to fatigue or lack of review mechanisms in place! Such mismatches have led to severe problems for the employees and the firm because if the mismatched PAN card that was input is a valid PAN card number, then even the TRACES website will not throw an error! It’ll, in fact, credit those deductions in the wrongly input PAN cardholder’s account!

3. Manual copy-paste errors - A lot of copy-paste errors occur while generating Form 16 Part B. As payroll execs copy-paste employee data from spreadsheets to the Form 16 format in MS Word for each employee, the chances of incorrectly pasted data in main fields, such as salary, perquisite, exemptions, etc., increase.

4. Errors while merging Part A and B - Payroll execs make a lot of unintentional mistakes when merging Form 16 Part A and Form 16 Part B before distributing Form 16 to the employees. For instance, a CA told us that a payroll executive under him merged Form 16 Part A of one employee with Form 16 Part B of another employee. To make matters worse for him, this was detected only after he had sent out all Form 16s to his client and they, in turn, had distributed the forms among their employees.

5. Errors in Form 12BA - Form 12BA is required for Perquisite validation. Few firms reportedly found quite a lot of human errors when their execs prepared these forms manually.

6. Errors in salary breakup - In Form 16, displaying the salary breakup for each employee is a time-consuming and tedious process when done manually from a spreadsheet. Again, monotonous and mundane tasks cause an increase in human errors, typos and copy-paste errors in the salary breakup section.

7. Formatting errors - When manually processed and created, Form 16s tend to have a lot of formatting errors, such as usage of multiple fonts, misaligned margins and columns, incorrectly positioned digital signatures, etc. Incorrectly positioned digital signatures cause a lot of issues because it covers existing content on the form! Formatting all Form 16s correctly and uniformly is a humongous task by itself, which most payroll execs dread!

So folks, please watch out for these errors while generating Form 16 and make sure you fix them before distribution!

Our trusted solution Better still, just like our 4,500 customers and Rakesh Somashekar’s firm, switch over to greytHR to generate Form 16 in three quick steps:

1. Upload Form 16 Part A
2. Generate Form 16 Part B
3. Digitally sign the Form 16

Once done, simply publish or mass mail Form 16s to your employees with the click of a button!

Generate Form 16s with accuracy, ease and simplicity. Improve your efficiency by using greytHR to generate and distribute Form 16.

Disclaimer: All names in the article have been changed on requests of anonymity.