Form 16A is a TDS certificate which outlines the tax deducted and deposited to the government of India by the deductor on income or payments made to the individual other than salary. Such costs include rent, interest, professional fees, etc. Form 16 is issued under section 203(1) of the Income Tax Act 1961.
The person who deducts the TDS is known as the deductor. In a nutshell, Form 16 is a tax deduction certificate that gives an overview of the TDS paid on behalf of the deductee for a certain quarter.
In this blog, we will explore what Form 16A is, its importance for NRIs, and the details included in Form 16, among other topics.
If you are a non-resident Indian or an Indian resident earning any income in India, such as rent, capital gains, interests, and more. In that case, it is essential to understand how tax is deducted at source and reported to the government of India. Form 16A is one such important document for NRIs and Indian residents, as it provides proof that the taxes have already been deducted at source.
Form 16A acts as a TDS certificate, which is issued by the person deducting the tax (TDS) every quarter. Form 16A differs from Form 16, which is issued annually to salaried employees. In contrast, Form 16A applies specifically to payments such as interest, professional fees, rent, and more.
The details mentioned below are primarily covered in the Form 16A Format:
Form 16A is a document that taxpayers need to file their Income Tax Returns accurately. When a taxpayer files its ITR, the tax will be calculated on their total income now if the taxpayer does not claim the TDS mentioned in Form 26AS and Form 16A. The taxpayer might end up paying twice on the same income for which the TDS has already been deducted and paid to the Income Tax Department on behalf of the taxpayer. Therefore, having Form 16A is essential because it acts as a valid proof and saves the taxpayer from getting taxed twice.
However, a taxpayer must ensure that the Form 26AS is always matched with Form 16 and 16A. In case of a mismatch, get it corrected by the concerned deductor because with mismatched details, the tax credit isn't given while filing IT return.
For the taxpayer to ensure proper tax credits are claimed, they must file Form 26AS via the TRACES website.
As we already know, Form 16A is provided by the tax department to the recipient of the income that is the deduction. The Form 16A can be downloaded from the official income tax website and is filled out as follows:
The deductor then must sign and issue the Form 16A to the concerned deductor within 15 days from the date of filing the TDS return for the respective quarter.
Form 16A would be issued for all types of payment other than the ones mentioned below:
Serial Number | Section Number | Payment Type | TDS Rate | Tax Exemption Limit |
---|---|---|---|---|
1 | 192A | Payment from a premature withdrawal from the EPF. | 10% | Payment is less than Rs 50,000. |
2 | 194 | Dividend Payout. | 10% | Up to Rs 2,500 in a financial year (individual) |
3 | 194DA | Life Insurance Policy Payout. | 1% | Payment is less than Rs 1 Lakh |
4 | 194F | Repurchase of Units by a mutual fund or unit trust of India. | 20% | Not Applicable (NA) |
5 | 194J | Technical or professional service fee payout. | 10% | Payment up to Rs 30,000 during the financial year (this limit applies to each type of payment) |
Many people tend to confuse Form 16 and Form 16A, as they both are TDS certificates. The employer issues Form 16 (Part A and B) to the person earning a salary, and Form 16A is issued for the deduction of tax for other heads of Income.
Apart from Form 16 and Form 16A, there are also other Tax deduction certificates for specified persons, which are Form 16B for payments that come from the source of the sale of an immovable property, and Form 16C is issued for housing rental payments.
As we know, Form 16A TDS certificate is issued every quarter after the taxpayer files their TDS return. The deadlines are as follows:
Track the date so you do not miss your Form 16A.
Below are the challenges that NRIs face with Form 16A.
Incorrect PAN Entry: If the deductor fails to enter the PAN details correctly, Form 16A will not be correctly generated.
Delayed Issuance: Some deductors delay issuing Form 16A, as required by the instructions, necessitating follow-up with the deductor.
Mismatch with Form 26AS: Form 26AS must be monitored regularly to spot and fix discrepancies early.
Be it Indian residents or non-resident Indians (NRIs), Form 16A is important for individuals for several reasons. Among which are mentioned below:
Form 16A is a TDS certificate, which is essential for non-resident Indian (NRIs) earning non-salary income in India. Staying organized with the tax deducted at source ensures that your income earned in abroad is handled accurately, and the next tax filing process went by smoothly.
However, a single error or missed deadline can bring the entire ITR filing process to a halt. Therefore, an NRI must take guidance from an NRI tax expert while filing their ITR and working with forms that will facilitate a smooth ITR filing process. Savetaxs, a leading NRI taxation firm, has been helping NRIs for decades now with taxation and consultancy services. Our team of experts brings 30 years of experience in handling NRI taxation cases with utmost precision, which is apparent in our satisfied client base.
Connect with us today and leave your stress behind. With Savetaxs, you'll experience the best tax services for NRIs in India, where stress, penalties, errors, and hassle are miles apart.
Note: This guide is for informational purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult with either a Chartered Accountant (CA) or a professional Company Secretary (CS) from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.
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