Every income taxpayer in India must file their Income Tax Return within the specified time limit to avoid fines and penalties. Your ITR is a summary of your income and investments during the applicable Assessment Year that shows your tax due and payment so that your liability is eventually cleared. If your tax payment exceeds your due, you will get a straight refund in your account. The digitization of the whole tax management cycle has made the procedure smooth.Read more
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The two major documents you need to file your annual returns are Form 16 and Form 26AS. These two documents are complementary and should match in all respects to ensure that your ITR is flawless. Let us see what they mean.
It is an annual certificate issued by your employer stating your income, investments, and the tax deducted and deposited during a particular financial year. It is one of the vital documents that helps in filing your ITR. Form 16 has two components. Part A and Part B.
Part A: The information in this part consists of the following components.
Name and the address of your employer.
TAN and PAN details of your employer.
Your PAN details.
Quarterly summary of tax deducted and deposited by your employer along with details of tax deposit, challan number, and date.
Part B: It is in the form of the annexure to Part A, which is primarily a breakup of the components of consolidated figures in Part A. It thus gives detailed information about your salary, exempted allowances, and your investments and expenses for claims of Income Tax deductions. It is sought under the various sections of the IT Act 1961.
While Form 16 is annual, Form 16 A is a quarterly certificate provided to you by the deductor related to tax Deducted at Source (TDS) applied on income other than salary. If you have deposits in a bank, your banks will recover TDS on your interest income and deposit your tax to the Government Treasury. The details of the tax deducted and deposited with investment details are the information you get from Form 16A.
Form 16 is downloaded from the TRACES (https://www.tdscpc.gov.in/app/login.xhtml) portal by your employer and the deductor, as the case may be, duly authenticated and given to you.
In the case of TDS on deposits, the tax deducted is 10%; if your PAN is recorded else, it is 20%. This TDS is deducted from the applicable rates and transferred to the Government treasury immediately after the end of the month. Additionally, the deductor must file returns with TDS details every quarter to match monthly deposits. You get TDS Form 16 on salary annually and Form 16A from your depositor every quarter.
Form 26AS is a summary of both the forms combined, giving you a consolidated PAN account statement that annually shows all your tax credits.
Most salaried taxpayers believe that Form 16 is the sole paperwork required to file an ITR. On the contrary, it is only partially true because the information on your Form 16 must match the information on your PAN that the IT Department holds. To do so, you must first obtain your Form 26AS, which contains information about your income and TDS deducted and deposited throughout the fiscal year for which you are completing your ITR.
Thus, Form 26AS means an annual statement under Income-tax Rule 31AB. It discloses the tax credit into your account as available with the IT Department against your PAN.
The primary source of your Form 26AS is the e-Filing portal of the Income Tax in India. Log in with your credentials and invoke the "My Account" tab, and select 26AS from the drop-down menu. You will be directed to the TDS Reconciliation Analysis and Correction Enabling System (TRACES) website. Input the relevant AY and the format of the report, and you can view and download your Form 26AS. The facility is also available to all those who use net banking extended by different banks. The process is very simple, and you seamlessly receive Form 26AS in your registered mail ID. However, the source remains the same - TRACES.
As already explained, it is a statement of all your tax credits during an FY / AY. It should also contain the details of deductors, including TAN. Check out the various information you can gather from your Form 26AS.
You get to see the taxes you have paid during the year and also the refunds received by you. This section covers information about tax deductions, such as tax deducted by your employer from your earnings, interest income from your bank, pension, or rent. If you receive monthly rent over Rs.50, 000, the renter is obligated to deduct tax at the source before giving you the rent. These particulars will also appear on your Form 26AS. This part also contains information on the deductors, such as their TAN and the amount deducted and deposited.
If you sell a property during the year, the purchaser deducts the TDS. The buyer must subtract TDS from the price when you sell a flat, office, or plot. This part records the TDS on the sale of your property.
If you receive rent over Rs.50K per month, the lessee will deduct TDS, which should be reflected here.
This section is only applicable to you if you are in the business of selling cars. As a seller, you must collect a 1% tax for each car you sell above 10, 00,000. This tax is levied on all motor vehicles, not only cars. Therefore, if you sell trucks or any other vehicle, you have to get a 1% tax and deposit it with the government.
There are defined levels for high-value transactions, and if the single transaction amount exceeds that level, it is flagged as a high-value transaction. Every high-value transaction you make during the year will reflect here.
Apart from TDS or TCS, this area will reveal information on any tax payments you have made in the form of advance taxes or self-assessment tax. The challan information regarding the tax deposited is also available here.
It is thus a summary of all your financial transactions and taxes thereon in the relevant assessment year against your PAN account. Information is updated every quarter. You are eligible to claim only those credits reflected in your Form 26AS while filing your ITR.
It is your responsibility to check your Form 26AS for inconsistencies. There is every possibility that your TDS amount does not match the tax credits in your PAN account. You have to identify the mismatches and arrange to rectify them before filing your ITR. The common reasons for data mismatch are:
Failure of the deductor to furnish TDS details to the IT Department in time.
Incorrect PAN in the TDS return filed by the deductor.
Incorrect Challan details or error in Challan Information Number (CIN).
Incorrect TAN / PAN of the deductor.
Error in an amount in the TDS return.
Your details are incomplete in the TDS return.
Your e filing of ITR must be flawless for the smooth processing of your returns and to obviate future complications. Your Form 26AS is an important document that allows you to complete your ITR filing seamlessly. If the mismatch persists, you may have to explain the reasons for the discrepancy to the IT Department, who may also impose a penalty on you. So it is always prudent to rectify your Form 26AS before filing ITR. Since you know the various reasons for the mismatch, you can proceed methodically to rectify your Form 26AS until it tallies completely with your Form 16 and your records of TDS.
Once you have spotted the mistakes, it is up to you to have them fixed appropriately. The first step is to bring the error or mismatch to the attention of your employer or deductor. Your deductor can fix the error by filing a TDS correction statement with the Income Tax Department. In response to its request for an explanation for the discrepancy, you may now explain the cause for the mismatch in the portal.
The basis for detecting the mismatch in Form 26AS is your Form 16 and Form 16A. While you receive your Form 16 from your employer, you are given Form 16A by your bank. In either case, you are in a better position to keep track of your TDS deducted. In case TDS has been deducted and you have not received an equivalent tax credit, you have to make sure that the credit is reflected. In the absence of credit in Form 26AS, even if you claim the amount in your ITR, it will be ignored and you will face a demand notice for underpayment of tax. On the other hand, if you are entitled to a refund, it will be reduced to that extent. Thus, your tax credit in Form 26AS becomes the benchmark for processing your ITR.
It may also happen that excess credit has been shown in your account due to some errors on the part of your employer or the deductor. In such a scenario, you should avoid claiming credit for the excess amount to prevent the consequences. The form might be rectified at any time by the deductor by submitting a revised TDS return. You become liable for demand notice if you have claimed credit for the excess amount.
The digital platform on which your Income Tax regime depends precludes the possibility of any mismatch. If there are any, it is incumbent upon you to get them rectified. Ultimately, you have to ensure that your ITR e Filing is flawless and is processed without any hitch. The correctness of Form 16 and Form 26AS also helps you in the process of e Filing of ITR as you can populate data from them, saving you a lot of hassles.
Helpful Resources: Online Income Tax Calculator
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