What is the Use of Form 16 and Form 16A?

Last Updated at: Jul 06, 2021
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form 16

When individuals, companies, organizations, associations, and trusts earn an income per month, a 10% tax is deducted at the source. It is called TDS. The two forms in India that are proof of TDS and tax compliance are called Form 16 and Form 16A. This post explains which form is applicable to which category of earning entity.

Form 16 and 16A are certificates of tax deduction at source that the employers issue to its employees as proof of the tax deducted at source (TDS). The Income Tax(IT) Act, 1961, and IT Rules (1962) govern the payment of income tax by all income earning individuals, companies, organizations, associations and trusts as the case may be. Section 203 mandates that the employer shall deduct tax at source and issue Form 16 and Form 16A to the deductees as a proof of the same.

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Form 16A

Like Form 16 is for salaries, Form 16A is a certificate of TDS by an employer which shows the amount of tax deducted at source, nature of payment, and the tax deposited with IT department on income other than salaries. The IT Act stipulates that TDS to be deducted at source on all payments than Rs. 30,000 unless otherwise exempted. Also TDS is deducted on salaries as per existing Income Tax rate slabs.

TDS on all other income such as interest and house rent as applicable. Form 16A shows TDS deductions made and deposited on all other income except salary. The basic difference between Form 16 and Form 16A is that the former reflects deductions made from salary and the later shows deductions on income other than salary. Form 16 is usually issued annually while the latter is issued quarterly. The Form 16 A certificate is issued by employers and carries the following: 1. Name, TAN and PAN of the employer who deducts tax 2. Amount paid, nature and date of payment 3. Receipt No of TDS payment

Form 16

Form 16 is the document or certificate or that Employers in India issue to their salaried employees as proof of TDS. The salaried personnel can then submit the forms while filing Income Tax Returns in India. Features of Form 16: Employees working for any employer have to pay tax on their incomes. Form 16, therefore, is an important document that helps in the process of filing tax returns:

1. Employee can submit this as proof of income in case of IT scrutiny

2. If the employee’s income is below taxable limit, employer may not issue Form

3. Definitive TDS certificate issued to salaried employees

4. It is also proof of the salary employees receive

5. Contains details of tax paid by Employer on behalf of the Employee

6. If the employer deducts TDS, the responsibility to issue it to the employees lies with him Corrections can be made on Form 16

7. Only those employers with TAN (Tax Deduction Account Number) can deduct TDS, and issue a Form 16 The Form 16 usually carries details like names and permanent account numbers of the deductor and the deductees, TAN of the employer, acknowledgement about how much tax is paid, detailed breakoff salary like gross and net incomes, Education Cess and surcharges, balance tax refundable to employees or payable by them, tax payment particulars like challan number or cheque/DD number etc.

Form 16 is not only a proof of TDS but a document of importance for tax compliance. It is the only document that an employee has to show that he or she has paid tax and can be shown as proof during IT scrutiny. Banks and other lenders also accept it as a valid income proof and treat it as a proof of income at par with salary slip.

To explain it in a gist, Form 16 and 16A are certificates of tax deduction that employer issues to its employees as proof of the tax deducted at source. While the former is for salaried employees as proof of TDS, the latter is for income other than salaries.