What is TDS?
TDS refers to the deduction of tax at the source when payment of a specified nature is made. As per the Income Tax Act, 1961, any person liable for making such a payment is required to deduct TDS if the payment exceeds a certain threshold limit. The person making deducting TDS is called the deductor and the person who receives payment after the tax deduction is called a deductee.
Under the Income Tax Act, Form 16, 16A, and 16B refer to TDS certificates issued by the deductor to the deductee, which certify that tax has been deducted. TDS certificate is one of the most required documents while filing ITR. Let us have a look at the details of these certificates.
FORM 16
Form 16 is also called a salary certificate and is issued by an employer to the employee. If the employee’s salary is above INR 2,50,000 in a financial year, the employer is required to deduct TDS on salary. In Form 16, the employer certifies the details of the salary earned by the employee during the year and the amount of TDS deducted. TDS is computed on the basis of the income tax slab rates applicable for that financial year.
The due date for furnishing Form 16 is 15th June of the year for which it is being issued. For example, for the FY 2019-20, the due date was 15th June 2020. However, the date was extended to 15 August 2020.
Components of Form 16
Form 16 has two parts-
Part A
It comprises the information of the employer and the employee like-
- Name and address of the employer
- Name and address of the employee
- Permanent Account Number (PAN) or Aadhaar number of the employer and employee
- Tax Deduction Account Number (TAN) of the deductor
- Assessment year
- Period of employment
- Details of TDS deducted and deposited with the government.
Part A is generated and downloaded through the TRACES portal.
Part B
Some of the components of Part B are-
- Detailed breakup of salary paid
- Any other income reported to the employer other than salary
- Allowance to the extent exempt under section 10
- Deductions allowed under Chapter VI-A of the Income Tax Act
- Relief under section 89
- Tax payable
If a person has worked for more than one employer during a financial year, each of the employers will issue Form 16 for the period during which the person was employed.
FORM 16A
Form 16A applies to TDS on income other than salary, like interest income from fixed deposits, insurance commission, rent receipts, securities, etc. The concerned financial institutions, tenants, and other concerned authorities are required to deduct tax at the source and issue Form 16A. As per the Income Tax Act, payments exceeding INR 30,000 are liable for deduction under TDS, unless exempted otherwise. Form 16A is issued quarterly.
Components-
Form 16A is issued under Section 203 of the Income Tax Act, 1961 and contains the following-
- Name and address of deductor and deductee
- PAN or Aadhaar number of the deductor and the deductee
- TAN of the deductor
- Receipt number of TDS payment
- Details of income earned
- TDS deducted and deposited on such income.
TDS deductions that are given in Form 16 and Form 16A can be cross-checked using Form 26AS. In case an individual misplaces their Form16/16A, they can approach the deductor for a duplicate copy.
Form 16B
Form 16B is the TDS certificate issued against the income earned on the sale or transfer of immovable property. Under Section 194-IA of the Income Tax Act, immovable property refers to a building, a part of a building, and land (other than agricultural land) whose value is INR 50 lakhs or more.
The buyer is supposed to deduct the TDS at the rate of 1% against the PAN of the seller and deposit the tax within 30 days from month end. However, if the seller doesn’t provide PAN, TDS at the rate of 20% is to be deducted. TDS is supposed to be reported in return-cum-challan Form 26QB within 30 days from the end of the month in which such payment is made. The buyer has to issue Form 16B to the payee within 15 days calculated from the due date of furnishing Form 26QB. Property buyers do not require a TAN and can only furnish PAN.
Components-
- Name and address of the deductor (transferee/payer/buyer)
- Name and address of the deductee (transferor/payee/seller)
- PAN or Aadhaar number of the deductor and the deductee
- Financial Year of the deduction
- Acknowledgment Number of Form 26QB
- Details of tax deposited
Form 16B can be downloaded from TRACES.
It is evident that all the above-discussed forms are very important for understanding income details, rate, and amount of TDS deducted. It is to be noted that many people confuse part A and part B of Form 16 with Form 16A/16B. It is important for taxpayers to remember the above differences for a smooth, error-free tax filing.
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