There are suddenly a bunch of forms and documents that become quite crucial once tax time comes around. Some of the most important ones for salaried people are Form 16 and Form 26AS. Although both are crucial when it comes time to file your income tax return, these forms are used for very different reasons. It is essential for you to know how to differentiate between Form 16 and Form 26AS in order to file a correct and smooth tax return.
This guide will explain what each form is, what it contains, and why you should ensure to have both for your financial records. And by the end, you’ll understand exactly how to apply these supplements strategically.
What is Form 16?
Form 16 is considered your salary and tax certificate. It’s a document prepared and used by your employer which gives the details of the salary paid to you in a financial year and TDS that has been deducted from it. If your employer has cut TDS on your salary, then they are mandated by law to give your Form 16. It is usually released after the close of the fiscal year, which is generally on or before June 15th.
The basic purpose of Form 16 is to offer a comprehensive summary of your income and tax, which has already been paid by your employer on your behalf. This makes it a fundamental piece of paperwork when it comes to preparing and filing your income tax return.
What Does Form 16 Contain?
Form 16 is made up of two parts: Part A and Part B.
Part A of Form 16 includes:
- Name, address, TAN, and PAN of the employer
- Employee’s name, address, and PAN
- A quarterly report of the tax withheld and paid to the government
Part B of Form 16 provides:
- Details of your gross income
- Allowances and concessions (e.g., House Rent Allowance, Leave Travel Allowance, etc.)
- Deductions under Chapter VI-A (like sec 80C, 80D, etc.) which you have declared to your employer
- Your net taxable salary
- The sum of taxes that were withheld from your earnings
In other words, Form 16 is your complete proof of financial love paid by the employer in your name and deposited with the government – of course, after skimming a bit off the top in tax.
What is Form 26AS?
Form 26AS, meanwhile, is your consolidated annual tax statement. It is like a tax passbook of all tax-related transactions with all correspondences linked to your PAN (Permanent Account Number). This form is not limited to the tax withheld by your employer; it includes tax withheld by anyone who made a payment to you.
You can download Form 26AS from the e-filing website of the Income Tax Department. It exists mostly to assist you in cross-checking the amount of tax credits that you might have in your name just before you send your return.
What Does Form 26AS Contain?
Form 26AS is a consolidated summary in which you can see all the tax credits that are reflected in your PAN. The key components are:
- Details of TDS: Details of the TDS deducted by your employer, the banks (in case of interest income), clients (in case of freelancing), or any other source
- TCS Details: Details of Tax Collected at Source by sellers in certain transactions such as buying a car worth more than Rs 10 lakh
- Advance Tax/Self-Assessment Tax: Any advance tax paid by you in the year or self-assessment tax paid before filing the return
- Refunds: Details of any tax refunds you received in the financial year
- High-Value Transactions: Information on listed high-value transactions like heavy investments in mutual funds or purchase of properties
The primary purpose of Form 26AS is to verify whether the tax deducted/collected (as per various sections in the tax laws and the person who has deducted/collected) is reflecting in the tax return as claimed by the person.
Difference Between Form 16 and Form 26AS
We’ve covered these different shapes, but now that we know what each is, let’s compare and contrast these shaping styles in an easy, clear way.
| Feature | Form 16 | Form 26AS |
|---|---|---|
| Purpose | A certificate from your employer that shows your salary and TDS deduction on it | One annual tax statement with all the tax credits attached to your PAN |
| Who Issues It? | Your employer | The Income Tax Department |
| Scope of Information | Confined to salary income from one employer and the TDS made by them | Details of all the TDS/TCS, advance tax, and self-assessment tax paid |
| Information Source | Your employer’s payroll records | Information from all deductors who have filed their TDS returns, banks, and other financial institutions |
| How to Get It? | Directly from your employer | It shall be downloadable at the Income Tax e-filing Website |
| Key Use | To see a detailed summary of your income and deductions that you previously reported to your employer | To check that all the taxes deducted on your behalf have been deposited with the government |
Why Are Both of Them Needed for Taxes?
Each form does not replace the other; they should work in conjunction to help ensure an accurate tax filing. Here’s why you need both:
- Verification and Reconciliation: Reconcile the TDS figures. The most important step before filing your return is to reconcile the TDS figures with actual credits available on Form 26AS. The TDS figure from Form 16 should be the same as mentioned in Form 26AS. If it doesn’t match, your employee may not have deposited the tax correctly, or your employer might have made a mistake in filing their TDS return. If so, you need to contact your employer or HR department to get it fixed.
- Comprehensive Income View: Form 16 reflects only your salary income. If you have other sources of income, such as interest from fixed deposits, freelance earnings, the TDS on that income will reflect in your Form 26AS. This is useful to account for all your sources of income and the tax payable on those.
- Full Tax Credit Claim: The credit of taxes you can claim is reflected in the ‘Tax Credit Statement’ (Form 26AS). You will not get credit for it in case this tax deduction is not reflected in your Form 26AS (even if your employer has already deducted tax, as reflected in Form 16). So, looking up your Form 26AS is a must.
- Evidence of Insurance Certificate: Both forms are used as evidence of payment of tax. Form 16 substantiates your salary structure/TDS calculated by your employer, while Form 26AS shows that the tax deducted has been successfully received by the government.
Tips for Using These Forms
Here’s how you can ensure tax filing is smooth:
- Step 1: Gather Both Documents: Once you have received Form 16 from your employer, login to your account and download your Form 26AS for the relevant assessment year as well.
- Step 2: Review TDS Figures: Compare TDS numbers of Loan Agreement and Agreement. Verify if the aggregate of TDS is in line with the figure given in Part A of your Form 16 and in your Form 26AS.
- Step 3: List Down All Income: Get all the other income on which TDS was deducted from the Form 26AS. Don’t forget to report this income on your tax return.
- Step 4: Report Discrepancies: In case there are discrepancies, you will need to contact the deductor, which could be your employer, bank, etc., and request them to re-file their TDS return in order to make the necessary changes. Absolutely do this long before the deadline.
