Difference in Salary Amount of Form 16? A Step-by-Step Guide to Resolve It

With the time to file returns round the bend, many of us are trying to wrap are heads around tax jargon. One of the most common questions asked is how to file tax returns with form 16? Further, the difference between form 16A and 16B leaves taxpayers confused. To answer all your questions, here is all you need to know about Form 16 and the difference between Form 16 part A and B.

What is Form 16?

If you are filing returns for the first time, the question that is most likely to on top of your mind is what is Form 16 salary certificate or what is the salary certificate?

Form 16, is an Income Tax certificate that salaried individuals receive from their employers. It validates the fact that taxes on the income for the financial year have been deducted and deposited to the Government on the employee’s behalf.

What is the Rate of TDS on Salary?

Your employer will deduct 10% TDS on your salary if your income for the financial year exceeds the basic exemption limit of Rs. 2.5 lakhs a year under Section 192 of the Income Tax Act. Now that you know what is the salary limit for Form 16, it will help to know that if  you disclose your income from other sources during the year, your employer will consider your total income for deduction of TDS. Your employer provides the Form 16 to you as a proof of the fact that TDS has been deducted on your salary.

The Parts of Form 16

Form 16 has two components, part A and part B. Part A can be downloaded from the TRACES site while employers create Part B. Let’s now understand what is the difference between Form 16 Part A and B

Form 16 A

  • An employer needs to file quarterly returns for each employee under Form 24Q.
  • Annexure 1 of Form 24Q, features the details of the salary paid and the tax deducted for each employee each quarter.
  • If an organisation pays monthly salaries and tax is deducted on each month’s salary, all monthly deductions (per quarter) must be represented under Annexure 1 of Form 24Q.
  • After Form 24Q is filed for the last quarter of a financial year by the employer, the Income Tax Department updates Form 26AS of an employee according to the details that the employer provides under Annexure 1 of Form 24Q.
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Form 16B

  • Form 24Q contains Annexure I and II. In the first three quarters, Annexure II is left blank.
  • In the last quarter, both Annexure I and II of Form 24Q need to be filled
  • The gross salary and TDS credit columns in Annexure I and II have to be in sync with one another.
  • Annexure II data contains the total salary paid, tax exemptions/deductions claimed and the TDS for the year.
  • This data is used by the Income Tax Department to verify tax liability on an employee’s salary on an annual basis.

Click here for further insights on Form 16 parts A and B. You can use the form, to fill the details you need to file under the head of income under salary column 3 in ITR1.

Difference of Salary Amount in Part A and B of Form 16

Part A of Form 16 can be called a summary of the “amount of tax deducted” whereas Part B is a summary of the “Tax payable” (inclusive of total income tax, surcharge and education cess). Many payroll managers are of the opinion that salary figures should match between Part A and Part B. If not, it may be concluded there has been an under or additional tax deducted from the salary of an employee. However, this is always not the case. There may be a mismatch in salary figures in parts and B for the following reasons:

An Employee may not be Liable for Tax Deductions in all four Quarters

According to the Income Tax Department, an employee need not feature in Form 24Q unless there is a tax deduction. For example, an employee does not face tax deduction at source in the first quarter of the year, but only in the subsequent three quarters. Therefore, the employee does not feature in Form 24Q in the first quarter, but does so from the second quarter onwards. In Part A of his Form 16, the salary details will be shown from June to March whereas in Part be the salary computation in Part B would be for the whole year (April to March) thus creating a mismatch.

Perquisite Value not Shown in Part A

A perquisite may be the value of concessional or a rent-free accommodation provided by the employer or the value of a loan or any other special benefit granted at a employee’s request. Part B of Form 16, contains value of the perquisites. Part A may not contain the same, thus resulting in a mismatch.

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Some Tax-Free Reimbursements do not Feature in Part B

Some organisations include non-taxable reimbursements such as telephone bills only in Part A and not B of Form 16 A.

Thus, a salary mismatch in Part A and Part B of Form 16 could be a possibility. But once you know how to fill form 16 for salary with example the problem could be overcome to great extent. The Income Tax Department has also clarified that details of the salary amount in Part and B need not be equal.

In Case of a TDS Mismatch

However if there is a TDS mismatch in Form 26AS and Form 16/16A of an employee, you will  not receive the TDS credit unless a rectification is made. There may be several reasons for the mismatch of TDS. Some common reasons include:

  • Non filing of TDS return
  • Wrong PAN number quoted
  • Wrong TAN number of employer
  • Omission of TDS payment in TDS return
  • Wrong Challan Identification number
  • Quoting of wrong assessment year

In order to rectify TDS mismatch in Form 26AS and Form 16/16a, you need to:

  • Compare Form 16/16AS and identify the reason for the mismatch
  • Intimate the employer about the mismatch if you are unable to do it yourself
  • Employer will then need to file a revised TDS return which will then reflect in Form 26AS

In Conclusion

Once rectified, revision of 26AS takes some time to update and upload. Form 16 is an important document needed to file your returns. Understanding its various components Form 16 will make the process of filing returns a seamless experience for you.

Filing returns has numerous benefits including an easy access to credit, as all banks and financial institutions ask for a copy of IT returns. For instance, if you have applied for a loan, the bank may request your Form 16 for loan.

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