Any income taxpayer in India is mandated to submit his/her Income Tax Return within the stipulated time frame to avoid penalties. Your return is the summary of your income and investments in the relevant Assessment Year to show your tax liability and payment so that your liability is ultimately liquidated. If your tax payment exceeds your liability, you receive refunds into your account directly. The digitalization of the entire cycle of tax management has been able to make the process seamless.Read more
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The two major documents that you need for filing 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 which help you to file 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 with details of deposit of tax with challan number and date.
Part B:It is in the form of the annexure to Part A which primarily is 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.
Forms 16 is downloaded from 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.
It the amount of tax deducted at source either from your salary or other income like interest earned from deposits. In the case of a salaried individual, normally declarations are sought for investments and expenses for relevant tax deductions and accordingly, TDS is deducted from the salary depending on the relevant IT slab rates. This tax is deposited to the Government treasury every month.
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 on the applicable rates and transferred to the Government treasury immediately after the end of the month. Additionally, the deductor is mandated to file returns with details of TDS every quarter, to match monthly deposits. You get Form16 for the TDS 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.
There is a misconception amongst most salaried taxpayers that Form 16 is the only document needed to file ITR. On the contrary, it is only half true as your Form 16 information must tally with the information the IT Department has concerning your PAN. To enable you to do so, you need to download your Form 26AS consisting of information related to your income and TDS deducted and deposited through the entire financial year for which you are filing your ITR.
Thus, Form 26AS can be defined as an annual statement under Rule 31AB of the Income-tax Rules. 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 receive the Form 26AS in your registered mail ID seamlessly. 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.
Taxes Paid and Refunds:You get to see the taxes you have paid during the year and also the refunds received by you.
TDS on Sale of Immovable Property:If you have sold a property during the year, the TDS is deducted by the purchaser.
TDS on Rent of Property:If you receive rent over Rs.50K per month, the lessee will deduct TDS, which should be reflected here.
TCS on sale of Car:If the purchase price exceeds Rs.10L, you are required to pay 1% of the sale price as tax. The seller will deposit this amount to the Government Treasury.
High-Value Transactions:Any high-value transaction in your account in a bank or financial institution is reflected here.
Self Assessment Tax:Any advance tax paid by you during the year.
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 with 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 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 the filing of ITR. Since you are aware of the various reasons for the mismatch, you can proceed methodically for rectification of your Form 26AS, till it tallies completely with your Form 16 and your records of TDS.
Once you have identified the errors, it is for you to get them rectified appropriately. The primary step is to bring the error or mismatch to the notice of your employer or deductor as the case may be. Your deductor can file a TDS correction statement to the Income Tax Department for rectification of the error. You can now also explain the reason for mismatch in the portal in response to the query raised by IT seeking an explanation for the mismatch.
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 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 the processing of 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 obviate the consequences. The form might at any time be rectified by the deductor by submitting a revised TDS return. If you have claimed credit for the excess amount, you become liable for demand notice.
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 it 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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