Introduction

In this article, we are going to answer some of your basic doubts and queries about taxation like what is the difference between Form 16 vs ITR (Income Tax Return)? Do you need to file an Income Tax return despite having only one Form 16 with yourself? Why is the filing of Income Tax Return important? Let us discuss the details.

Income Tax Knowledge Bank by Tax Yadnya

Form 16 Vs Income Tax Return (ITR)| Benefits of Filing ITR

Many taxpayers submit their income tax returns based on the information reflected in Form 16. While doing this, no other income and deductions apart from form 16 are reported to the Income Tax Department. This may cause a receipt of IT to notice from the IT Department.

Form 16 vs ITR – Income Tax Return

What is Form 16 meaning?

Form 16 means a Certificate issued by the employer showing Tax Deducted at Source or TDS deducted and paid on the employee’s salary. Each employer issues IT Form 16 to his employees liable to TDS on salary. Therefore, if an employee switches his job from one company to another, he will receive form 16 from each of his employers if his income is liable to tax. However, Form 16 is not a substitute for Income Tax returns. This is because IT Form 16 includes only that information disclosed to the employer.

What is Income Tax Return (ITR)?

Income Tax Return is a reporting of :

1. The income earned under all the heads

2.  Deductions claimed during the year

3.  Taxes paid during the year (TDS, Advance Tax, and Self-Assessment Tax)

Income Tax Return is linked to PAN, and hence, an individual can file only one Income Tax Return for one financial year. The Income Tax Return can be revised. Section 139(1) of the Income Tax Act, 1961 provides the conditions for filing Income Tax Return. Accordingly, if the Gross Total Income of an individual exceeds the basic exemption limit, then such individual shall file his income tax return, irrespective of whether his TDS has been deducted or not.

I have Form 16. Should I file ITR (Income Tax Return)?

I have only one job throughout the year and obtained only one Form 16. Do I need to file Income Tax Return?

Yes. As stated earlier, Income Tax department Form 16 is just a TDS Certificate showing TDS details on Salary. It is not your final liability. Therefore, Form 16 is not a substitute for the Income Tax Return. One may have other income apart from the Income from salary, like

•  Rental Income
•  Interest in FD/SB/RD/Bonds, etc.
• Capital Gain/Loss
•  Income from Business

An individual may not have disclosed all the income to his Employer. Similarly, in the case of deductions, the tax saver investments maybe not be adequately disclosed to the employer, and hence, the employer might have deducted the higher amount of TDS. Therefore, an individual should offer all the income and claim all the eligible deductions in his Income Tax Return. Therefore, even if you have only one income tax Form no.16, you can only claim the TDS on salary when filing your income tax return.

Other Reasons to File Income Tax Return

• It is always a good practice to file your Income Tax Return. It creates your database with Income Tax Department.
• Submission of ITR Acknowledgement is a must while applying for a loan.

As stated earlier, Income Tax Act, 1961 has described the conditions for filing the income tax return. Income Tax Department levies heavy penalty for non-filing of Income Tax Return. (Ranging between ₹ 1,000 to ₹ 10,000) The detailed chart is given below :

Frequently Asked Questions (FAQs)

1. What is Form 16?

Form No. 16 means a Certificate issued by the employer showing TDS deducted and paid on the employee’s salary.

2. What is Income Tax Return (ITR)?

ITR is a reporting of 3 things :

a. Income earned under all the heads

b. Deductions claimed during the year and

c. Taxes paid during the year (TDS, Advance Tax, and Self-Assessment Tax)

3. What are the 5 Heads of Income under the Income Tax Act?

i. Income from Salary

ii. Income from House Property (Rental Income)

iii. Income from Profit or Gain from Business or Profession

iv. Income from Capital Gains includes Long-term capital gains (LTCG) and Short-term capital gains (STCG) on sale of any capital assets.

v. Income from other sources like Interest on Savings Bank Accounts, Fixed Deposit (FD), Recurring Deposit (RD) and Bonds etc

4. Do I need to file an Income Tax return despite having only one Form 16 with me?

Yes. Form 16 is just a TDS Certificate showing TDS details on Salary. It is not your final liability. Therefore, while comparing Form 16 vs ITR, one should remember that Form 16 is not a substitute for the Income Tax Return.

5. What is the Penalty for non-filing of Income Tax Return

Income Tax Department levies heavy penalty for non-filing of Income Tax Return, Ranging between ₹ 1,000 to ₹ 10,000.