Before filing Income Tax Returns, you need to possess Form 16 - if you are an employee of an organization, or Form 16A - in case of an income from sources other than salary. Form 16 and Form 16A are certificates of TDS (Tax Deducted at Source) used by individuals earning income while filing income tax returns. Both the forms are issued under Section 203 of the Income Tax Act, 1961. In addition to being important documents for tax compliance, these serve as proofs of TDS.
In case no TDS has not been deducted, then the forms are not required to be issued.
Form 16 is a salary TDS certificate, which is issued to salaried employees every year. Section 203 of the Income Tax Act, 1961, has made it mandatory for employers to issue Form 16 to their employees, reflecting their total TDS on income. It serves as a proof for employees that their tax has been deducted at source.
If the income earned by you is above the exemption limit of Rs. 2,50,000, only then will your employer be required by the Income Tax Act to deduct TDS from your salary and deposit the same with the government. In case you have switched jobs during the year, you will be issued more than one Form 16 (depending on the number of companies you have worked for).
Part A of Form 16 comprises of the basic details of the employer and the employee. It will mention a unique TDS certificate number, employer's PAN & TAN, employee's PAN and period of employment with the employer, among other things. Form 16 will also state the details of the money that is paid to the employee during the financial year and the tax deducted at source.
Part B of Form 16 comprises of the components of your salary as well as the deductions claimed by you. Some of the headings you can expect to see under Part B of Form 16 are Income chargeable under the head ‘Salaries’, Deductions under chapter VI-A (Sections 80C, 80CCC, 80CCCD and 80CCF), Total income, Tax on total income and Tax payable.
Form 16A is TDS certificate on Income Other than Salary. Its function is very similar to that of Form 16, with the main difference being that Form 16A is issued when payments are non-salary. If you work as a freelancer, you will be issued Form 16A from the clients that you provide service (that is if they have made TDS deductions from what they have paid you). Another example is that of bank interest payments - banks will issue Form 16A when TDS is deducted by them on the interest that you have earned on the fixed deposits. An essential point to be noted is that the rate of tax deduction will vary depending on the type of non-salary income.
The below-mentioned details are available in Form 16A:
Name and address of deductor
Name and address of deductee
Unique identification of deductor (includes PAN and TAN numbers)
Unique identification of deductee (includes PAN number)
Total amount due to the deductee
Amount deducted and paid to the IT Department
| Form 16 | Form 16A | |
|---|---|---|
| To whom is it issued? | Salaried Employees | Non-salaried Individuals |
| Where are taxes applicable? | Salary | Income from sources other than salary – bank interest payments, professional fees, rent, etc. |
| How often is it issued? | Annually | Quarterly |
| What does it contain? | Proof of income, PAN and TAN of employer, PAN of employee, details of tax paid on behalf of employee by employer, acknowledgement of amount of tax paid and education cess and surcharges. | TAN & PAN of deductor, PAN of deductee, Amount paid and receipt number of TDS payment. |
| Which law governs it? | Section 203 of the IT Act for TDS from income chargeable under the head ‘Salaries’. | Section 203 of the IT Act for TDS from income other than Salary. |
What is the purpose of Form 16?
Form 16 is a salary TDS certificate, which is issued to salaried employees every year. Section 203 of the Income Tax Act, 1961, has made it mandatory for employers to issue Form 16 to their employees, reflecting their total TDS on income. It serves as a proof for employees that their tax has been deducted at source.
Where do I get Form 16 from?
You can ask your employer for your Form 16. If you have left your job, you can still ask your ex-employer to provide you the form.
What are the components of Form 16?
Form 16 is a salary TDS certificate issued to salaried employees on an annual basis. It comprises of two sections – Part A and Part B.
Part A of Form 16 comprises of the basic details of the employer and the employee. It will mention a unique TDS certificate number, employer's PAN & TAN, employee's PAN and period of employment with the employer, among other things. Form 16 will also state the details of the money that is paid to the employee during the financial year and the tax deducted at source.
Part B of Form 16 comprises of the components of your salary as well as the deductions claimed by you. Some of the headings you can expect to see under Part B of Form 16 are Income chargeable under the head ‘Salaries’, Deductions under chapter VI-A (Sections 80C, 80CCC, 80CCCD and 80CCF), Total income, Tax on total income and Tax payable.
How is Form 16 different from Form 16A?
| Form 16 | Form 16A | |
|---|---|---|
| To whom is it issued? | Salaried Employees | Non-salaried Individuals |
| Where is the TDS applicable? | Salary | Income from sources other than salary – bank interest payments, professional fees, rent, etc. |
| When are they issued? | Annually basis | Quarterly basis |
| What does it contain? | Proof of income, PAN and TAN of employer, PAN of employee, details of tax paid on behalf of employee by employer, acknowledgement of amount of tax paid and education cess and surcharges. | TAN & PAN of deductor, PAN of deductee, Amount paid and receipt number of TDS payment. |
| Which law governs it? | Section 203 of the IT Act for TDS from income chargeable under the head ‘Salaries’. | Section 203 of the IT Act for TDS from income other than Salary. |
What is TDS?
TDS stands for Tax Deducted at Source. According to the Income Tax Act, any entity, be it a person or company, making payments is required to deduct tax at source in case the figure crosses a certain limit. TDS will be deducted as per the rates prescribed by the tax department.
When is Form 16A issued?
Some of the instances when Form 16A will be issued are:
For winnings from lottery,
winnings from horse race,
payments to contractors,
insurance commission,
payments relating to deposits under National Savings Scheme,
payments for repurchase of units by Mutual Fund,
fees for technical or professional services,
income of foreign companies which are referred to under Section 196A(2) and
income from units which are referred to under Section 196B.
What is the purpose of Form 16A?
Form 16A is TDS certificate on Income Other than Salary. Its function is very similar to that of Form 16, with the main difference being that Form 16A is issued when payments are non-salary.
An essential point to be noted is that the rate of tax deduction will vary depending on the type of non-salary income.
What is TAN?
TAN or Tax Deduction and Collection Account Number is a ten-digit alphanumeric number (eg. DEL A 12345 L) that is allotted by the Income Tax Department. All entities that responsible for deducting or collecting taxes are required to obtain TAN. The 10-digit alphanumeric number is required to be quoted on all TDS returns.
What are the features of Form 16?
The following are the features of Form 16:
This form can be submitted as proof of income in case of IT scrutiny.
An employer is not required to issue Form 16 if the employee’s income is below the taxable limit.
It acts as a proof of the salary that employees receive.
It is possible to make corrections to Form 16.
Only employers having TAN are allowed to deduct TDS and issue Form 16.
It will contain information pertaining to the tax paid by employer on behalf of the employees.
If an employer has deducted TDS, it becomes his/her responsibility to issue Form 16 to the respective employee.
What is Form 26AS?
Form 26AS is a consolidated tax statement that contains details of the various taxes deducted from your income by deductors (banks, employers, etc.) All taxpayers can access their forms via the website of the Income Tax Department using their Permanent Account Number (PAN).
