The Difference Between Form 16 And 16A


(Last Updated On: August 2, 2019)

 

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. Today we are going to discuss about two important TDS certificates which can be of great help while filing your tax return and also distinguish between the both so that you can take a well-informed step forward.


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.

 


Features of Form 16

The following are the salient features of Form 16:

  • Section 203 of Income Tax Act 1961 makes it mandatory for employers to issue Form 16 which will reflect the total TDS levy on the income of their employees.
  • It stands out as a proof for employees which can help them during IT scrutiny in the form of tax deducted at source from their employee.
  • Form 16 is not required to be issued by an employer if the income of the employee falls below the minimum taxable limit.
  • Corrections can be made to Form 16 if required.
  • Employers having TAN can issue Form 16 after deducting TDS.
  • An employer who has deducted TDS is liable to issue Form 16 to his employees.
  • Employees can ask for Form 16 even from their previous employers even after changing the work organisation.

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.


Components Of Form 16A

Form 16A comprises of the following details:

  • Name and address of the party which deducts a percentage of income earned as TDS while making the payment.
  • Name and address of the person receiving the payment.
  • Unique Identification of Deductor in the form of his PAN and TAN numbers.
  • Unique Identification of Deductee in the form of his PAN number.
  • Amount of payment made to the deductee.
  • Amount deducted and paid to the Income Tax Department as TDS which is calculated as a percentage on the income of the deductee.

 

Types Of Payment On Which TDS Is Levied Under Form 16A

Income Tax Act 1961 in its Chapter XVII has mentioned the statutory provisions concerning TDS. This consists of complete information pertaining to the relevant TDS provisions, rates as well as special scenarios where no tax is deducted. Let us now take a look at the various types of income which are subjected to TDS levy alongside their respective sections:

  • Section 193 for interest earned on securities.
  • Section 194 for income arising out of dividends.
  • Income Tax Section 194A for interest earned on bank and fixed deposits. However, no TDS is charged on interest arising out of savings bank holdings if the amount for a particular fiscal is below 10000 INR.
  • Section 194B for prizes won through crossword puzzles or lottery.
  • Section 194BB for prizes won through horse race.
  • Income Tax Section 194C for payments made to contractors and sub-contractors.
  • Section 194D for payments made for insurance commission.
  • Section 194E for payments made to sports associations or non-resident sportsmen.
  • The Section 194EE for payments made to be deposited under the National Savings Scheme.
  • Section 194F for payments made on repurchase of units by a Mutual Fund or Unit Trust of India.
  • Section 194G for income arising out of commission on the sale of lottery tickets.
  • The Section 194H for income arising out of normal commission or brokerage.
  • The Section 194I for income arising out of rent.
  • Section 194J for fees of professional or technical services.
  • Section 194LA for payment of compensation on acquiring specific kinds of immovable property.
  • Income Tax Section 195 for payment made to a non-resident (other than a company) or a foreign company in terms of interest (apart from interest on securities) or any other non-salary amount which is subject to Income Tax.
  • Section 196B for income arising out of units mentioned u/s 115AB which is payable to an offshore fund.
  • Section 196C for income from shares or foreign currency bond listed u/s 115AC of an Indian company.
  • The Section 196D for income earned by institutional investors from securities which have been mentioned u/s 115AD. However, no tax is deducted on the payment made to a foreign institutional investor if capital gain arises out of transfer of securities.

Online Verification of Form 16A

The Tax Information Network of the Income Tax department has made it possible for an assessee to verify the particulars specified in Form 16A over the online portal. This service became effective from 2011-12 FY onwards and have been helping us ever since. The Income Tax department maintains a TDS Reconciliation and Analysis and Correction Enablement System (TRACES) which helps in online verification of Form 16A by visiting this link: http://contents.tdscpc.gov.in/

An assessee who wishes to validate the details of TDS deducted can do the same by accessing Form 26AS from the link mentioned above. However, he will have to type in required credentials in the form of PAN number of deductee, TAN number of deductor, financial year, certificate number and amount deducted. In the issue of any discrepancy, the deductee should immediately contact the deductor.


 

Some of the most common reasons of mismatch are as follows:

  • Quoting of incorrect PAN number.
  • Non-filing of TDS return by deductor.
  • Excluding proper details of TDS payment in return.
  • Quoting of incorrect TAN or PAN number of the deductor.
  • Mentioning wrong amount.
  • Mentioning wrong assessment year.
  • Specifying incorrect challan identification number.

Different Between Form 16 & 16A

Points Of Difference Form 16 Form 16A
Issued to Salaried employees Non-salaried individuals
Timing of issuance Annually Quarterly
Applicability of TDS Salary Income from bank, interest payments, rent, professional fees etc.
Main Contents PAN of employee, PAN & TAN of employer, proof of income, details of tax paid by employer on behalf of employee, education cess and surcharges, acknowledgement of the amount of tax paid. PAN of deductee, PAN and TAN of the deductor, amount paid and certificate number of TDS payment.
Governing Law Section 203 of Income Tax Act 1961 for TDS from Income Chargeable Under The Head “Salaries.” Section 203 of Income Tax Act 1961 for TDS from Income Other Than Salary
Basis Applicable only when an assessee has income exceeding 250000 INR in a particular FY. Applicable when income crosses 30000 INR in a particular FY.

 


Now that you have understood about both these two Forms, you can easily proceed with your tax return in a seamless manner. To file your income tax return in the easiest way contact us now!!

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.