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Form 26AS is, in essence, an acknowledgement of sorts when it comes to Tax Deducted at Source (TDS). Which is to say that Form 26AS shows the amount of TDS, which has been deducted and is available as credit against our Income Tax liability, if any.
To understand this concept and in order to make it work in one’s favour, one needs to understand the basics with respect to TDS and Form 26AS:
1. TDS or Tax Deducted at Source refers to the deduction of Tax from the respective source of one’s income. Example: Let’s say that you are a Salaried employee in an organization so, subject to the applicable basic deduction/exemption limit, the organization pays Salary to you after deducting TDS from the same. Thus, Salary is your source of income and the deduction of Tax by the organization from Salary (the source of income) before paying the same to you is referred to as Tax Deducted at Source (TDS).
2. Tax is Deductible from various sources of income subject to applicable basic deduction/exemption limits. Example: Bank deducts TDS from interest (the source of income) on Fixed deposits etc.
3. Now, TDS which has been deducted by the deductor (the person responsible for making the payment, example: Bank which pays interest on Fixed deposit so Bank will be referred to as a deductor), has to be deposited in Government account on behalf of the deductee (deductee is the one who receives the income, example: the receiver of interest on Fixed deposit from Bank).
4. After depositing TDS in Government account, the deductor, files a TDS return after the end of every quarter with National Security Depositories Limited (NSDL).
5. The main purpose of filing TDS return is to inform the Government as to what all payments have been made during the quarter, to whom have the payments been made, what was the nature of payment like interest, Salary etc., PAN no. of the person to whom the payments have been made, the rate and amount of TDS deducted etc.
6. Thus, basis these returns, Government gives the credit of TDS to the respective persons on behalf of whom TDS has been deducted by the deductor.
1. Government gives the credit of TDS on the basis of TDS return and this credit gets reflected in Form 26AS. Example: Let’s say that you have a Fixed deposit of Rs.10,00,000/- @8% with ICICI bank and the Bank paid the interest of Rs.18,000/- (20,000-2,000 (TDS)) for the period April to June and then in July filed the TDS return for the period April to June. Thus, after filing of TDS return by ICICI bank, a credit of Rs.2,000/- will get reflected in your respective Form 26AS because in the TDS return filed by Bank, Bank had given the details of interest payable to you i.e. Rs.20,000/-, the amount of TDS deducted from the same i.e. Rs.2,000/- , your PAN number, Name etc. Hence, on the basis of your PAN number, the Government gives the credit of Tax deducted from your income which gets reflected in Form 26AS.
2. The organization deducting TDS from your income, like ICICI bank in the aforementioned example, will issue a TDS certificate to you after filing TDS return.
3. You can compare Form 26AS with TDS certificates issued to you and if the amount of TDS deducted as per Form 26AS and as per TDS certificates is the same then it means that the Tax credit reflecting under your PAN in Form 26AS is correct. However, in case if TDS in certificates and Form 26AS does not match then you need to inform the deductor i.e. ICICI bank in the aforementioned example. The deductor will then revise the TDS return filed because such an issue of TDS credit not getting reflecting in Form 26AS occurs only when there is some error in TDS reurn filed by the deductor.
4. Most common reason due to which proper credit does not get reflected in Form 26AS is that the deductor has not quoted or has quoted incorrect PAN number (your PAN number) in TDS return.
5. Once the revised TDS return is filed by the deductor after making necessary corrections then the credit will get reflected in one’s Form 26AS after sometime.
6. Thus, before filing the return of income one must check Form 26AS to make sure that proper TDS credit is appearing in Government records.
Please remember that irrespective of TDS certificates you have, credit of Tax shall be given on the basis of Form 26AS only. However, these days TDS certificates are being downloaded from TRACES portal, thus, chances of mismatch between TDS certfificates and Form 26AS are minimal.
Please take care that you claim TDS credit in your Income Tax Return after tallying TDS certificates received by you with Form 26AS so that you get 100% benefit of TDS deducted from your income. As, at times, it so happens that the amount of TDS credit appearing in Form 26AS is more than the amount in TDS certificates and this happens because one or some of the deductors who have deducted TDS on your behalf have not issued TDS certificate(s), for the same, to you.
CA Sahil Jolly