I want to know details about income tax and Form 16?

I want to know how we can deduct tax from an employee who is eligible for the same.
Like, an employee is getting 50000/- in hand. Now suppose he is eligible for 2000/- tax per month. Now I know about the house rent rules. Suppose he produced a house rent bill and eligible for 1000/- concession on the same. Then he submitted an LIC paper worth monthly 5000/- premium. My questions are:
1. Should he be given full concession on LIC premium?
2. Does FD at any bank come under any exemption?
3. What are the other regular things that can help an employee to exempt the tax and how they work?
4. Do I only have to collect the documents for tax exemption and keep it? Or I have something to do with that as well?
5. I want a format of Form 16 and being an employer how to fill it up and other details about it.
6. And if an employee wants to file IT return, then is the employee or the employer responsible to do that?

I am completely puzzled about the tax details. Can someone help me out?