A Comprehensive Guide to TDS on Non-Salary Income TAXCONCEPT

Form 16A is a certificate of TDS on Income other than Salary. When TDS is deducted from the payments like a commission, contract, professional fees, rent, interest, etc., Form 16A is issued.

It is issued by the deductor to the deductee. Deductor (Payer) is a person who makes a payment and deducts TDS. And Deductee (Payee) is a person whose TDS is deducted. Deductor is responsible to issue Form 16A to the deductee within 15 days from the date of filing the TDS Return.

Form 16A is different from Form 16. Form 16A is for TDS on income other than salary, unlike the latter which is for TDS on salary.

Details in Form 16A

  • Name, address, PAN & TAN of the Deductor.
  • Name, Address & PAN of the Deductee.
  • Nature of the Payment, Amount Paid, and the Date of Payment.
  • TDS challan details.

It is the deductor’s responsibility to provide the Form 16A to deductee as a proof of tax deduction. If you have not received the Form, you can check your Form 26AS for TDS credit. The deductor can download Form 16A from his account on TRACES.

Which Types of Payments Under Form 16A Attract TDS?

Section 206C of ITA mentions non-salary earnings which attract TDS.  It must be noted that each such income is subject to a different rate.

Typically, the following are included under the purview of TDS – 

  • Dividends
  • Rent
  • Interest accrued on bank accounts
  • Winnings from a lottery or crossword puzzles 
  • Winnings from a horse race
  • Payouts towards a contractor
  • Insurance commission 
  • Payouts for National Savings Scheme
  • Payouts to non-residing sportsmen or sports association
  • Payments for repurchasing  mutual fund units 
  • Compensation, commission or brokerage
  • Income from the Indian company’s shares 
  • Income from foreign currency bonds
  • Technical and professional service fee
  • Earnings of foreign companies mentioned under Section 196a(2)
  • Revenues generated from units mentioned under Section 196b

It must be noted that TDS is not applicable on the interest accrued on the savings account if the entire sum is less than Rs.10000. Nonetheless, if the same exceeds this limit, the account holder must pay TDS on it.

How to Fill Form 16A?

The following points must be followed when filling out TDS Certificate Form 16A-

  1. Fill in the Deductor’s name and address, making sure to include their PIN number (Postal Index Number) as well.
  2. Fill in the Deductor’s TAN (this is an alphanumeric number with the first four digits in the alphabet and five digits and 1 in the alphabet).
  3. You will also need to enter the Deductor’s PAN (an alphanumeric number with the first four digits in the alphabet, five digits, and one in the alphabet).
  4. Enter the data for four acknowledgement numbers.
  5. The Form of remuneration is next, whether contractual, professional or otherwise.
  6. Enter the corresponding codes for all payments listed.
  7. The name of the deductee whose TDS was deducted.
  8. Mention the PAN number of the deductee whose TDS is deducted in the column PAN no. of the deductee.
  9. In the Form, enter the period, which will be the fiscal year
  10. After you’ve completed all of these fields, you’ll need to enter the TDS deduction information.
  11. The TDS amount is stated in words.

How to Download Form 16A?

Once the TDS return for non-salary payments is filed through Form 26Q, individuals should proceed to download Form 16A.

By following these steps, a deductor can download Form no 16A –

Step 1 – Visit Income Tax’s official website.

Step 2 – Login to TRACES.

Step 3 – Navigate to the ‘Downloads’ tab.

Step 4 – Select ‘Form 16A’.

Step 5 – Provide the required details.

Step 6 – Click on ‘Go’. Once these steps are complete, individuals can download the said form and complete the formalities accordingly.

How to Verify Form 16A Online?

Taxpayers can verify income tax 16A with the help of the Income Tax Department’s TDS Reconciliation Analysis and Correction Enablement System (TRACES).  Individuals can find out details of the deduction made by their employer by accessing Form 26AS and entering the employer’s TAN and their PAN, the certificate number and financial year.

Generally, it is advised that in case they find any discrepancy in details, they should get in touch with their employer first and ask them to make the required changes. 

The following are among the significant reasons for any discrepancy in the form details –

  • Failing to file the TDS return
  • Providing the wrong PAN or TAN details
  • Leaving out details of TDS payment in TDS Return
  • Quoting the wrong amount
  • Quoting incorrect Challan Identification Number

Significance of Form 16A

Form no 16A is issued by the employer or deductor in the current financial year. It is mostly required in a situation where the individual has an additional source of income other than his/her salary.

Financial institutions use this certificate to complete the verification process before extending financial products, including secured and unsecured loans.

These pointers below highlight the importance of Form 16A –

  • The information present in this certificate proves useful while filing taxes.
  • Such information is needed to file ITR as well. 
  • It helps to track the amount of TDS paid on other earnings.
  • It serves as authorised proof of income.
  • The certificate helps to support loan applications and improve eligibility.

Difference Between Form 16, Form 16A and Form 16B

The table below highlights the fundamental differences between Form 16, Form A and Form B– 

Parameters  Form 16 Form 16A Form 16B 
Issuer  Form 16 is issued by the Employer  Financial institutions, tenants, and other concerned entities issue Form 16A. Form 16B is issued by a property buyer to its seller.
Receiver  Salaried employees  Non-salaried employees Property seller 
Purpose  It is issued when Tax is deducted at source from salary. It is issued when Tax is deducted at source on income generated from non-salary sources like rent,  returns on investment, interest on F.D., etc. It is issued when Tax is deducted from income through the sale of property or any immovable assets. 
Components  Proof of income, employer’s PAN, employer’s TAN, employee’s PAN, tax amount paid on behalf of the employee by the employer, payment acknowledgement, surcharges and education cess. Deductor’s bank and TAN, deductee’s PAN, amount of Tax paid, TDS payment’s receipt number.  Seller’s PAN, assessment year, an acknowledgement number of Form 26QB, the breakup of salary paid, deductions under ITA, Relief under section 89. 
ITA Section Section 203 of the Income Tax Act dealing with Tax Deducted at Source on chargeable earnings.  Section 203 of the Income Tax Act dealing with Tax Deducted at Source on non-salary earnings.  Section 194 of the Income Tax Act dealing with sale of property.

Similarities Between Form 16A and Form 26AS

The most noteworthy similarity between Form 16A and Form 26AS is the fact that they both contain details about the deducted and deposited tax amount. Both forms provide useful information related to the tax credit.   

Sometimes TDS in Form no 16A proves inadequate to cover all the taxable non-salaried income. As a result, the burden of outstanding tax increases. Consequently, there will be an increase in payable taxes in tax returns in addition to what is declared in Form 16A. 

Source link

Leave a Comment