Form 16A
Form 16A is a certificate given for endorsing the amount of Tax Deducted at Source for individuals who are generating non-salary incomes. The concept of Tax Deducting at Source and Tax collection at Source is designed specifically for targeting the revenue collection at the very source where the income is generated. The income providers are conferred with the responsibility of deducting taxes at specified rates before the payments are made. After that, tax collected deposited with the Central Government as TDS. The tax paid by the deductor is credited to the individuals who receive the income.
Components of Form 16 A
Form 16 A issued under the Income Tax Act as per Section 203. Below are the details mentioned which needs to be furnished when one is filing the Income Tax Return:
- Name of Deductor – This contains the name and address of the Party that makes the payment and is deducted as a percentage of the income earned as TDS.
- Name of Deductee – This section includes the name and address of the person who received the payment.
- Unique Identification of the Deductor – It includes PAN and TAN details of the Deductor and is unique for each one.
- Unique Identification of Deductee – The PAN number to indicate that tax is paid on behalf of the Deductee.
- Total Amount Due to the Deductee – It is the amount of payment received.
- Amount deducted and the amount paid to the Income Tax Department – This is calculated based on the income of the deductee.
Difference between Form 16 and Form 16 A
| Form16 | Form 16A |
Form 16 used at the time when the salary of salaried employees exceeds Rs 250,000. It is applicable as per the Income Tax slab. The tax deduction details of the same will be available in Form 16.
| Form 16 A certifies the TDS amount for non-salaried individuals.
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Form 16 used at the time when the salary of salaried employees exceeds Rs 250,000. It is applicable as per the Income Tax slab. The tax deduction details of the same will be available in Form 16.
| For Non- salaried individuals, the payer of the income will deduct TDS. The rate applied to the same is 10%. The details are reflected here.
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The taxable amount starts for salaried income above Rs. 250000.
| The taxable amount here starts with Rs 300,000
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For Form 16, the TDS certificate issued annually.
| In form 16A, the TDS certificate issued quarterly.
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Note: In the case of the non-salary income is added to the salaried income, in that case, the tax bracket might go high and a higher rate of deduction is applied. So, it is always better to keep these two types of earnings separately in Form 16 and Form 16 A.
There is a possibility that TDS in Form 16A is not enough to cover all the applicable tax from non-salaried income.
In such a situation, the additional tax would be due to the taxpayer. In such cases, there will be an additional tax payable in the tax return on top of what is mentioned in Form 16A.
Online Verification of Form 16 A
The Income Tax Department with the help of Tax Information Network extended the facility to do verification of the particulars of Form 16A available online. It came into the effect from the financial year 2011-12.
There is a website known as TRACES (TDS reconciliation and analysis and Correction Enablement System) which is managed by the Income Tax Department and this allows online verification of Form 16A in the following link:
http://contents.tdscpc.gov.in/
An individual who is looking for online verification of the details of deduction by the deductor can do this, by downloading Form 26AS from the above-mentioned link. To access Form 26AS, one needs to provide TAN details, PAN details of the receiver of the payment, the total amount deducted and the TDS certificate number.
Tax Deductor is the source of income, like a bank or an entity generating the income who has the responsibility of providing Form 16A to individuals who are receiving those incomes.
In case of any discrepancy, the receiver is advised to contact the deductor. Possible reasons for mismatch could be:
- Non-filing of TDS Return by the Deductor
- Quoting of wrong PAN number
- Quoting of wrong PAN or TIN of the Deductor
- Excluding the details of Payment of TDS in the TDS Return
- Mentioning wrong Assessment Year
- Mentioning wrong Assessment Year
- Mentioning wrong Assessment Year
- Mentioning wrong Challan Identification Number
Form 26AS indicates that the tax deducted at source by the deductor is deposited in favor of the Government of India’s Income Tax Department.
Payments are subjected to TDS under Form 16A
According to Chapter XVII of the Income Tax Act, 1961, it is a must to mention details about the statutory provision for tax deduction at source. Information given is related to rates, relevant provisions of TDS, and the exceptions where no tax deduction takes place.
The following types of incomes have the provisions of TDS (as applicable based on the total non-salary earning and excluding exemptions if any):
- Dividends (Section 194)
- Interest earned on securities (Section 193)
- Interest earned other than interest on securities (Section 194A) -- Interests earned on Bank deposits come in this category.
- Payment made concerning the deposits under the National Saving scheme, etc. according to section 194EE.
- Payment made regarding repurchase of units by the Unit Trust of India or a Mutual Fund according to Section 194F.
- Prizes from winning lottery or crossword puzzles according to Section 194B.
- Prizes from winning horse race (Section 194BB)
- Insurance Commission Payment (Section 194D)
- Payments to contractors and sub-contractors (Section 194C)
- Payments to non-resident sportsmen or sports associations (Section 194E)
- Commission or brokerage, etc. according to Section 194H
- Payment of rent as per Section 194-I
- Technical or professional services fee (Section 194J)
- Payment of Compensation on acquisition of specific types of immovable property (Section 194LA).
- There are some other scenarios also, for example, payment made to a foreign company or a non-resident (not being a company), of any interest (not being interest on securities) or any other amount subject to Income-tax (non-salary) (Section 195).
- Income payable "net of tax" i.e. under an agreement or arrangement the income-tax is borne by the person by whom the income is payable to the receiver. This amount of income-tax would be added to the income of the receiver of income and the income-tax would be deducted on that amount also (Section 195A)
- Income earned from shares of an Indian company or Foreign currency bonds referred to in Section 115 AC. (Section 196C).
- Income in respect of units, as referred in Section 115AB, payable to an Offshore Fund (Section 196B)
- Income of Foreign Institutional Investors from securities referred to in Section 115AD. However, if capital gain arises from the transfer of securities referred to in Section 115AD, no tax is deductible on payment to a Foreign Institutional Investor (Section 196D).
- Section 206C prescribes a collection of tax at source on specified items.
Rate of TDS different for non-salaried incomes certified under Form 16A
List of different income categories and the rate applicable for those categories are as follows:
Professional and Technical Services, royalty and non- compete fees: It includes the following: - Audit fees
- Bills for Technical services
- Bill for Professional services of CS, CA and CWA
This is covered by Section 194J of the Income Tax Act. TDS deduction is at a rate of 10%. The income cut-off is Rs.30000 beyond which tax will be deducted for the assessee.
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Rent: It is covered under Section 194 I of the Income Tax Act where it covers different types of rent like: - Rent of building, land or furniture: It includes rent for offices or rent for guest houses and warehouses. The cut-off amount for this is Rs 180,000 per annum beyond which the TDS deduction rate is 10%.
- Rent for Plants and Machinery – like rent for generator, machinery has a cut off Rs.180,000 and a TDS rate of 2%.
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Commission or brokerage income from sales agent: This is covered under Section 194H of the Income Tax Act. TDS is applicable at the rate of 5% with a cut-off amount of Rs.15000 per annum.
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Interest paid by others on loans: This includes interest income from loans that were lent to friends, relatives or related companies. This is covered under Section 194A also and the TDS rate is calculated at 10% with a cut off amount specified at Rs.5000. Loans from banks and financial institutions are not considered in this category.
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Payments to Directors which are not part of
salary like sitting fees and so on – This is covered under Section 194 J (1)
(b) (a). On any income from these sources, TDS is levied at the rate of 10%. |
Payments to Contractors – All services like payment to maintenance agency, security staff, cab service, courier, advertisement agency, contract blue collared employees, etc. are covered in this section under Income Tax Act Section 194C. The Rate is 1% for individuals and HUF (Hindu Undivided Family) and 2% for all other cases. The cut off is Rs.30,000 per annum and if the payment from Deductor exceeds Rs.100,000 annually, then TDS will be cut in the specified rates above. For example: - Single contractor by Deductor up to Rs.30,000 per annum – No TDS
- Two contracts by Deductor up to Rs.30,000 in a year – No TDS
- Single contract for individual or HUF for Rs.40,000 per annum – TDS to be deducted at the applicable.
- Four contracts by Deductor for Rs.30,000 each – Yes, TDS will be deducted for Rs.120,000.
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Withdrawal of Provident Fund before 5 Years – In case of withdrawal of PF before 5 years of service, PF Department deducts 10% TDS. The cut-off is Rs.50,000 and this is covered under Section 192A.
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Commission payable on Lottery Sale – This is covered under section 194G and 5% TDS is deducted beyond the cut off Rs.15,000.
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Compensation payable on Compulsory Acquisition of Immovable Property – Agricultural land is excluded from this specific clause. This is covered under Section 194LA. The cut-off amount is Rs.250,000 per annum and the current rate of TDS is 10%. If the recipient of income cannot furnish PAN card to the Deductor, in that case the rate of deduction at source is 20%.
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Payments concerning Deposits under the National Savings Scheme, 1987 – The interest accrued under this scheme is required to be tax deducted at source at a rate of 20%. This is dealt under Section 194EE of the Income Tax Act. There are certain exceptions to this payment, like: - If the amount payable for the financial year does not exceed Rs. 2500
- If the payments are made to the heirs of deceased assessee.
- If tax on estimated total income of the previous year is zero (including any withdrawal) and a declaration is given by the assessee in Form 15-I and verified in a prescribed format by the person who made the payment.
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Note: Depositing TDS is the part of the income of the Deductee who receives income after tax and excess TDS paid is credited to the taxpayer after filing of the Income Tax and all requisite details are verified.
