Form 16 and Form 26AS carry significant value for taxpayers as they furnish proof of the income earned and the Tax deducted at source (TDS) across the fiscal year. Usually provided by the employer, Form 16 is transferred to employees by or before June 15th of the ensuing financial year. Form 26AS contains a summary of tax information that shows all taxes the government holds for a taxpayer.
This article examines the details of Form 16 and Form 26AS, highlighting how they assist with income tax filing. The description clears all doubts about who issues the important documents, what information is included in them, and how they should be used so that the reader can pursue the tax filing process seamlessly and knowledgeably.
Overview of Form 16
Form 16 is issued by employers to employees after they have made TDS deductions from their salary. According to the Income Tax Act of 1961, every employer issuing TDS deductions from an employee’s salary is legally required to provide that employee with a Form 16.
Form 16 constitutes a certificate of proof u/S 203 of the Income Tax Act, 1961, that TDS has been subtracted from Employee’s salary. The employees then utilize it to submit Tax Returns. Form 16 has two divisions: Part A and Part B. Let’s discuss these in detail.
Part A – It consists of Particulars such as:
- The name and contact information for the Employee or Deductee.
- PAN and TAN (Tax deduction account number) of the Employer/Deductor
- Name and address of the Deductor/Employer
- Certificate number
- Assessment Year
- Summary of the amount credited/paid and tax deducted at source quarterly, with regard to the Employee
- PAN of the Deductee/ Employee
- Particulars of the tax deducted and retained in the Central Government Account through Challan/Book Adjustment
- Tenure of Employee with the Employer
Part B – It contains the distribution of the gross salary, any separate income, and different deductions:
- Deductions like Tax on employment, Entertainment Allowance
- Gross Salary paid
- Total Income and Tax on Total Income
- Income chargeable under the category ‘Salaries’
- Education cess @ 3% on Tax on total income
- Net deductions under Chapter VI-A, which comprises different sections such as 80CCD, 80G, 80C, 80TTA, 80CCC, 80E etc.
- Final tax payable
Can You File an ITR in the absence of Form 16?
Form 16 is very important for filing an ITR because it has everything one would need to ascertain their taxable income and the applicable Tax. Without Form 16 it may be hard for salaried employees to prepare and file their ITRs properly and on time, that could set-off complications and penalties. However, an ITR can still be filed without Form 16 so long as the taxpayers can accurately prepare and file all particulars.
Further, financial institutions and banks acknowledge Form 16 as valid proof of income when employees apply for credit cards or loans. So, salaried employees must acquire Form 16 from their employers each year and keep it safe for future reference.
Individuals who do not possess Form 16 may get tax from Form 26AS.
Overview of Form 26AS (Tax Credit)
The employer utilizes Form 16 and Form 16A for TDS deduction. From an employee’s viewpoint, it’s essential to know whether the Tax deducted from their salary is entrusted to the IT department or not. Form 26AS enters the picture here.
Form 26AS comprises a consolidated tax credit statement that needs to be recorded under Section 203AA of the Income Tax Act, 1961. It contains the following particulars:
- Tax gathered by collectors in lieu of Tax Payer
- Refund paid by Income Tax Department to the taxpayer
- Tax subtracted by deductors on the side of the payer
- Advance/Self-Assessment tax handed over by taxpayer
- AIR (Annual Information Report) Transactions
Main Elements of Form 26AS:
- TCS details: This contains information related to the TDS collected This is all over merchants pay this in the transaction of sale cars/goods or scrap.
- High-Value Exchanges Details: Usually, on Form 26AS few big transactions of a taxpayer may be visible to you. This could be anything from investing the cash into mutual fund to buy property or cash deposits.
- TDS Details: Form 26AS contains particulars of Tax deducted at the source by financial institutions, banks, employers, or any other deductors, together with the amount of TDS and the corresponding TAN.
- Self-Assessment Tax Payments and Advance Tax: Form 26AS shows any self-assessment tax payments or advance tax made by the taxpayer in the financial year.
It can be generated from the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal.
Benefits of Form 26AS
- It aids you in cross-verifying the deductions performed under Form 16 and Form 16A, thereby discovering discrepancies (if any).
- It assists you in ascertaining whether the tax subtracted from your income has been delivered to the government.
Form 26AS should correspond with Part A of Form 16, which includes particulars of tax deducted. Supposing you are referring to Part B of Form 16, which includes details of total salary disbursed during the financial year, it may be that the amount of wages in Form 16 is more significant than in 26AS as your employer might not have listed entries for those months in which nil TDS was deducted. So, ameliorative action may not be needed unless the distinction is due to a mistake. However, if the salary (26AS) is more than the form 16, request your employer to correct this.
Difference Between Form 16 and Form 26AS
1. Content
Form 16 is the pay slip details of TDS that the hirer has deducted and the Employee’s net salary income, while Form 26AS will have the details of tax credit/ credits owed, like TCS, self-assessment Tax, TDS, Advance Tax, and reimbursements.
2. Issuer
An issuer gives out Form 16, whereas Form 26AS is a statement prepared by the income tax department that the taxpayer can access online.
3. Use and Significance
Form 16 is important for the employee as it serves as proof of TDS on their salary income and aids in filing income tax returns. It is also required to utilize tax credits while computing the final tax liability.
On the contrary, Form 26AS performs a key role in allowing taxpayers to reconcile the TDS and different tax credits available to them. Taxpayers can utilize Form 26AS to check the accuracy of tax credits displayed in their tax returns and ensure that they are asserting the proper amount of credit against their tax liability.
Form 16 comprises the TDS certificate circulated by your employer to you. This form presents details regarding your income received and TDS deducted by your hirer. Form 16 is hirer-wise, which implies that if you have worked for several employers during the financial years and all the hirers have deducted your TDS, then you will have several Form 16s.
In plain terms, Form 16 is the TDS form circulated by the employer to its employees.
Form 26AS comprises the total tax statement, which the individual can view on the income tax website using his login ID (his PAN) and password. It apprises an individual of the particulars of TCS/TDS from all sources. In plain terms, Form 26AS is the sole form that will inform an individual of his entire TDS/TCS details.
Thus, it may be written that the employer passes on Form 16 to an Employee and Form 26AS can be downloaded by the individual him/her self from Income Tax Department’s website as well.
Final Thoughts
Form 16 and Form 26AS are both important in the entire income tax process for filing the income but they have different purposes of the work and contain separate data. Taxpayers need to understand the similarities and differences between these two forms so that they can comply with legislation on their taxes and be able to manage them efficiently. The knowledge in Form 16 and Form 26AS will be helpful for the taxpayers to complete their tax returns and reduce the error of calculation on their tax liabilities.
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