Salaried taxpayers should not use these forms blindly to file their income-tax returns.
Companies have started issuing Form 16 to employees.
Salaried taxpayers should not use these forms blindly to file their income-tax returns (ITRs).
They should instead verify the details, reconcile them with other tax statements, and correct errors before filing.
Key Points
- Taxpayers should verify Form 16 details instead of relying solely on employer-issued tax certificates.
- Salary, TDS, exemptions and deductions must be reconciled with payslips and supporting documents.
- Form 26AS and AIS should be checked to ensure all income and tax credits are captured.
- Employees with multiple employers must aggregate income carefully and avoid claiming deductions twice.
- Any discrepancies should be corrected promptly through revised payroll records or updated Form 16.
What do they contain?
Form 16 is a tax deducted at source (TDS) certificate that an employer issues to a salaried employee.
"It contains details of salary paid and tax deducted during the financial year," says Sonu Iyer, partner and national leader, people advisory services-tax, EY India.
Form 16A is a TDS certificate issued for non-salary income such as interest, professional fees, rent, commission, or contractual payments.
"It is issued by the payer to the recipient quarterly after depositing TDS with the government and filing TDS returns," says Iyer.
"Form 16 and Form 16A together show what tax has been deducted, but do not necessarily provide the complete picture on taxable income," adds Amit Baid, head of tax, BTG Advaya.
Verify key details
First, verify personal details in Form 16 and Form 16A.
Next, check the employer or deductor details.
Also, reconcile the salary and TDS shown in Part A of Form 16, and the salary details in Part B, with payslips.
"Confirm that regular salary components, bonus, arrears, employee stock ownership plan and other perquisites have been correctly captured," says Baid.
Taxpayers in the old tax regime should review exemptions and deductions.
"Eligible deductions that were omitted from these certificates may be claimed separately," says Suresh Surana, a Mumbai-based chartered accountant.
Verify that the employer has applied the correct tax regime.
Do not assume that Form 16 is always correct.
"The particulars require cross-verification," says Chandni Anandan, tax expert, ClearTax.
Reconcile with AIS and Form 26AS
Form 26AS is an annual tax credit statement that shows tax deducted and collected against a taxpayer's PAN.
"The Annual Information Statement (AIS) captures additional income like interest and dividends that may not appear in Form 16," says Deepashree Shetty, partner, global mobility services, tax and regulatory advisory, BDO India.
Iyer informs that the tax department's system compares income and TDS reported in the return with data available in Form 26AS and the AIS.
Check whether the income and TDS in Form 16 and Form 16A match the figures in Form 26AS and the AIS.
Akhil Chandna, partner and global people solutions leader, Grant Thornton Bharat, suggests that taxpayers should identify income that appears in the AIS but not in Form 16 or Form 16A and evaluate its taxability.
"All income reported in the AIS should be considered while filing the return," says Chandna.
Reconciliation offers several benefits.
"It helps to verify that all income has been correctly captured and the corresponding TDS has been deposited and reflected against the taxpayer's PAN," says Surana.
It also ensures that the income reported in the tax return is complete.
If an AIS entry is incorrect, submit feedback on the income-tax portal.
Handle multiple Form 16s carefully
Taxpayers who worked for two or more employers in a financial year should obtain Form 16 from each of them and report the aggregated figure in their return.
Ideally, employees should submit salary details from their previous employer to the current employer.
"Failure to do so results in a TDS shortfall, leading to an advance tax liability and interest on late payment," says Anandan.
"Taxpayers should not claim the basic exemption or standard deduction twice," says Shetty.
Surana suggests that taxpayers should reconcile income in all Form 16s with Form 26AS, the AIS, the Taxpayer Information Summary (TIS), and their own financial records.
Correct errors early
If a taxpayer identifies a discrepancy in Form 16, they should request the employer for a correction of payroll records or the underlying TDS return.
"Ask for a revised Form 16 if required," says Chandna.
Points to remember
- Retain Form 16 and Form 16A for at least six years
- Recheck employer's calculations: Responsibility for accurate return rests with taxpayer
- Do not rely only on TDS alone to determine final tax liability if there are multiple income streams
- Report all taxable income, like foreign income, even if it does not appear in Form 16 or Form 16A
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Feature Presentation: Ashish Narsale/Rediff
