Every assessee having taxable income, is under obligation of disclosing his income sources to the Income Tax Authority of India. This is done by filing an income tax return. One of the biggest factors which has to be considered in this regard is TDS or tax deducted at source. According to the Income Tax Act, any person or company making payment should asper the provisions deduct TDS and deposit the same with the central government.
While the person or organisation making the payment is known as deductor, the person or organisation receiving the payment is known as deductee. TDS should be deducted irrespective of the payment mode and is linked to the PAN of both the parties.
Form 16
This is the TDS certificate which is issued by the employer to all salaried individuals on a yearly basis. If your income from salary for a particular financial year exceeds the basic exemption limit of 250000 INR, then the tax shall be deducted by your employer from your salary and deposited with the exchequer of the government. If you have other sources of income apart from salary, then all those heads shall be considered by your employer before he levies TDS on your total income.
Thus, no TDS shall be deducted from your income by your employer if it falls below the minimum exemption limit. You will not be issued Form 16 in such a case. It is also possible to have multiple Form 16s if you had worked under more than one employer in a particular financial fiscal. Form 16 is thus a certificate containing details about the salary you have earned in a particular year as well as TDS which has been deducted on the same.
Components Of Form 16
Part A of Form 16 comprises of the following information:
- Basic details of the employee and the employer.
- Unique TDS certificate number.
- TAN & PAN of employer and PAN of the employee along with the particular employer.
- Complete details of salary which is credited to the employee’s account in a financial or fiscal year along with tax deducted at source.
Part B of Form 16 comprises of the following:
- Salary components as well as deductions claimed by the employee like Income from Salaries. Deductions under Chapter VI-A, Total Income, Tax on Total Income and Tax payable.
Form 16A
This is a TDS certificate endorsing the tax deducted from individuals having income generated out of non-salary sources. Thus, while Form 16 strictly pertains to salary income, Form 16A deals with TDS arising out of
- Income from House Property,
- Profits and Gains from Business and Profession
- Capital Gains and
- Other Sources.
Form 16A is thus issued in the case of TDS deducted on insurance commission, TDS deducted on fixed deposit interest, TDS deducted on rent receipts etc.
The dual concepts of Tax collected at source (TCS) and Tax deducted at source (TDS) specifically target collection of revenue at the very source of income generation. This can both render a wider base for tax collection and also serve as a convenient means of paying tax on income earned. Income providers are liable to deduct taxes at specified rates before crediting the payments to the account holders. Such deducted sums are correspondingly deposited with the exchequer of Central Government as TDS. Individual assesses receiving this income is credited with the tax which is initially paid by the deductor.
Form 16A clearly indicates both the amount of tax which has been deducted and TDS payments which has been deposited with the IT department of India along with the nature of payments. Some examples of non-salary incomes are rents, professional fees, bank interest payments etc. Income Tax Act 1961 has made it mandatory to deduct TDS on all non-salary payments of an assessee if his annual taxable income exceeds Rs.30000 during the financial year, unless he is specifically exempted.
Difference Between Form 16 and Form 16A
CRITERIA | FORM 16 | FORM 16A |
EXPLANATION | It is a certificate under Section 203 Income Tax for tax deducted at source from income chargeable under the head of ‘salaries’. | other than salary. |
ELIGIBILITY | Anyone who earns a steady and regular income in the form of salary. | self-employed or a professional |
APPLICABLE TOWARDS | Interest on securities, dividends, interest other than interest on securities, etc. | Issued against rent, commission, professional charges, building, plant, machine hired, commission agents, etc. |
COMPRISES OF | Proof of income, details of tax paid by employer on behalf of employee, PAN and TAN of employer, PAN of employee, acknowledgement of amount of tax paid, education cess and surcharges. | Name, TAN, PAN of employer; Name and PAN of all employees. Amount paid and nature of payment, receipt number of TDS payment. |
ONLINE VERIFICATION | Can be verified online | Can be verified online |
FAQs
Who issues Form 16 and Form 16A?
- Form 16 is issued by employers to their employees.
- Form 16A is issued by tax deductors such as banks, financial institutions, contractors, or any other party making a payment subject to TDS.
When are Form 16 and Form 16A issued?
- Form 16 is issued annually by the employer after the end of the financial year (typically by May).
- Form 16A is issued quarterly by the deductor whenever TDS is deducted on non-salary payments.