Published Editorial

Procedural change for issuance of Form 16 may not bear desired result

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The Financial Express

by

Surbhi Jain
Senior tax professional
EY

It’s that time of the year when employers get busy with issuing Form 16 to their employees. In this regard, it is important to note that Central Board of Direct taxes (CBDT), vide its circular dated February 19, 2013, has prescribed a revised format for Form 16, which contains two parts viz., Part A (contains detail of tax deducted and deposited along with a unique identification number) and Part B (contains detail of salary paid, other income and taxes thereon).

Subsequently, a new circular dated April 17, 2013, has been issued by CBDT whereby all employers are required to issue Form 16 by downloading Part A from TRACES website and prepare Part B manually. Thereafter, the employer needs to combine both Parts A and Part B, authenticate the form (either manually or with digital signature) and, then, issue it to the employee.

While the due date for issuance of Form 16 for FY13 remains May 31, 2013, the circular has provided that Form 16 issued by downloading Part A from TRACES portal shall only be treated as valid compliance for issuance of Form 16.

The new procedure, however, does not apply to issue of Form 12BA (i.e., statement of perquisites and profits in lieu of salary) which will need to be complied as per the existing practice.

The detailed steps to be followed for downloading part A have been mentioned on the TRACES portal.

While the intention of moving towards the new procedure is to streamline the TDS procedures and curb the mismatch of TDS claimed in the income-tax return vis-a-vis TDS deposited by employers, this may increase the administrative burden for employers who need to download one part from TRACES, prepare other part manually, combine both parts and authenticate them before issuing to the employees.

This is more so when the due date of filing e-TDS return for last quarter and issuance of Form 16 remains May 15, 2013, and May 31, 2013, respectively. Thus, only 15 days’ time is available before the e-TDS return is processed and tax paid details are captured in Part A to be downloaded from TRACES. There could also be instances where an employer needs to revise e-TDS returns for earlier quarters and until the revision happens and revised e-TDS returns are processed, Part A downloaded from TRACES may not give the correct picture, thus defeating the purpose of the change brought in by the CBDT.

Views expressed are personal