Table of Content
What is Form 16A?
When the payer makes a payment to the payee, as per the Income Tax Department, the payer should deduct a certain amount from the total payment for the payee, and pay it to the Income Tax Department. This is called Tax Deducted at Source or TDS. Here, the payer is the deductor while the payee is the deductee.
After the deductor has paid the amount to the Income Tax Department, they must ensure a TDS certificate to the deductee, detailing all the taxes deducted from the total income at source.
The Form 16A is a TDS certificate that specifies the amount deducted, the nature of the payment, and the TDS deposited or paid to the Income Tax Department. This form is issued when TDS is deducted on non-salary payments, such as professional fees, rental payment, interest on bank fixed deposits, and so on.
The format of Form 16A
The Form 16A is issued as per section 203 of the Income Tax Act. The individual has to furnish the Form 16A while filing for their income tax returns. The Form 16A contains the following details as mentioned below:
- Name of the deductor: This section has the name and address of the deductor or the entity making the payment, who deducts the TDS amount from the total income of the deductee.
- Name and address of the deductee: In this section, the details of the deductee or the person who receives the income from the deductor are included.
- The deductor’s identification details: This section has the PAN and the TAN numbers of the deductor.
- The deductee’s Identification details: This section has the PAN details of the deductee. This PAN number is vital as it signifies that the tax is deposited on the deductee’s behalf.
- The total due amount: This section shows the amount received as payment by the deductee.
- The amount deposited with the Income Tax Department and the amount deducted as TDS: The respective amount is calculated depending on the deductee’s total income.
The procedure to fill out the Form 16A
- Enter the name and address of the deductor. While filling the address details, make it a point to enter the PIN code as well.
- Enter the TAN details of the deductor. The TAN number is generally alphanumeric. It starts with four alphabets, followed by five digits, and ends with one alphabet.
- Next, enter the PAN details of the deductor. The PAN number is also alphanumeric. It starts with four alphabets, followed by five digits and ends with one alphabet.
- Fill in the four acknowledgement numbers.
- Next, enter the nature of payment — whether the type of payment is professional or contractual.
- The form contains corresponding codes for all types of payment. Enter the appropriate code in the payment section.
- Next, enter the name of the deductee, i.e., the individual, from whose income, TDS is deducted.
- Enter the deductee’s PAN number in the appropriate column.
- Enter the appropriate period. This section will contain the financial year for which you want to get Form 16A. For example, for the current financial year, you should enter the period as 1st April 2020 – 31st March 2021.
- Once you have filled all the above details, enter the details about TDS deduction.
- The TDS amount should be indicated in words.
How to get form 16A?
- In general, the deductor of the TDS has to issue the Form 16A to the deductee, from whose income the TDS has been deducted.
- The Form 16A is issued for the current financial year. This document shows the total income of the deductee from non-salary sources and the total tax deducted from that income in the given financial year.
- The taxpayer can get form 16A from the Income Tax Department website, wherein they have the option of downloading Form 16A pdf.
- The Form 16A download happens in the editable PDF format.
When is Form 16A required?
Form 16A is required while filing the income tax returns for the given financial year. If an individual has other non-salary sources of income with TDS deducted on such income as applicable under Form 16A, then they have to furnish Form 16A while filing their income tax returns.
In general, financial institutions and banks ask for the Form 16A income tax document for verification purposes when the individual applies for any loan, such as personal loan, vehicle loan, housing loan, consumer loan, and so on.
Payment types that are applicable for TDS as per the Form 16A
Mentioned below are the different payment types along with the relevant sections of the Income Tax Act:
- Interest earned from securities (193)
- Dividends (194)
- Interest earned from bank deposits (194A)
(Note: No TDS is applicable on interest earned from saving bank deposits if the interest amount is lower than ₹10,000).
- Deposits under the Nation Savings Scheme (194EE)
- Payments that are done for repurchasing mutual funds units or those from Unit Trust of India (194F)
- Commission on lottery ticket sale (194G)
- Prizes on winning crossword puzzles or lottery (194B)
- Insurance commission payment (194D)
- Prizes on winning the horse race (194BB)
- Payment to sports associations or non-resident sportsmen (194E)
- Payment to subcontractors and contractors (194C)
- Rent (194I)
- Brokerage or commission (19H)
- Fees for professional or technical services (194J)
- Compensation payment on the acquisition of immovable property (194LA)
These are some of the most generally observed payment types that fall under the Form 16A category. There are other more elaborate payment schemes as well, which fall under the Form 16A.
TDS rates on different sources of income applicable under Form 16A
- Rent of building, land or furniture: This includes rents on guest houses, offices and warehouses. The TDS rate is 10%, and the tax exemption limit is ₹1,80,000 annually.
- Rent on machinery and plants: This includes rent on machinery such as generator sets. The TDS rate is 2%, and the tax exemption limit is ₹1,80,000 annually.
Technical and professional services, non-compete fees and royalty
- Audit fees, bills for services offered by CA, CWA, CS or any other consultancies that fall in this category
- The TDS rate is 10%, and the tax exemption limit is ₹30,000.
Brokerage income or commission
- The TDS rate is 5%, and the tax exemption limit is ₹15,000 annually.
Interest received on recurring deposits and fixed deposit
- The TDS rate is 10%, and the tax exemption limit is ₹10,000.
Payment to contractor
- This includes the payment to all kinds of contractor services such as security staff, maintenance agency, advertisement agency, courier, cab service, contractual workers, etc.
- The TDS rate is 1% for HUF/individual and 2% for others. The tax exemption limit is ₹30,000 for payment below ₹1,00,000.
Provident fund withdrawal before five years
- The TDS rate is 10%, and the tax exemption limit is ₹50,000.
Lottery sale commission
- The TDS rate is 5%, and the tax exemption limit is ₹15,000.
Compensation payment on the mandatory acquisition of immovable property
- Agricultural land doesn’t fall into this category. The TDS rate is 10%, and the tax exemption limit is ₹2,50,000 annually.
- If the deductee is unable to furnish the PAN number, then the TDS rate is 20%.
Deposits made under National Savings Scheme
- The interest accrued in this category is liable for TDS deduction at the rate of 20%. However, there are some exceptions:
- If the payable amount for the given financial year is not more than ₹2500
- If the payment is done to the legal heir of the departed assessee
- If the tax paid on the total earnings for the past year was zero
Difference between Form 16 and Form 16A
- Form 16 is issued by the employer to certify the income tax deducted at source on the salary of their employees and deposited with the Income Tax Department. On the other hand, Form 16A is issued to certify the TDS deducted from the individual’s non-salary income.
- Employers issue Form 16 to their employees if their annual salary income goes beyond ₹2,50,000 and the appropriate TDS is deducted. The TDS applicable will be as per the income tax slab. While for a non-salary income, the payer who makes the payment has to deduct TDS at the rate of 10%. The details of this taxation are shown in Form 16A.
- For employees, the tax exemption limit is ₹2,50,000. The TDS is deducted if annual income is above the limit. This deduction is mentioned in Form 16. On the other hand, TDS is deducted on the non-salary income if the income is more than the limit of ₹30,000.
- Form 16 is issued annually, while Form 16A is issued quarterly.
By knowing these details about Form 16A, you can file your income tax returns successfully.