How to make Entries in Form 24Q and Form 16?
Payroll managers can consider TDS on Other Income for the sake of calculating tax on salary. However, from the point of view of issuing Form 16 and filing Form 24Q, TDS on Other Income poses a problem to the employer.
In both Form 16 and Annexure 2 in Form 24Q for the last quarter, the details of Other Income can be displayed, but there is no provision to display details of TDS on Other Income. As a result, in both Form 16 and Form 24Q (fourth quarter), it would look as though there is a shortfall in tax deducted by the employer while in reality it is not the case. Let us take a look at an example to examine this.
There is no provision in Form 16 and Annexure 2 of Form 24Q (fourth quarter) to present TDS on Other income. By taking a look at just Form 24Q (fourth quarter) – in its current format – the Income Tax Department will not be able to figure out whether the difference between the Tax Payable figure in Part B of Form 16 and the Tax deducted/remitted figure in Part A of Form 16 is as a result of a genuine under deduction of tax by the employer or due to TDS on Other Income. In case the Income Tax Department raises a query in this regard, the employer needs to explain that the difference is on account of the TDS figure on Other Income.
The Income Tax Department should consider modifying the format of Form 16 and Annexure 2 of Form 24Q (fourth quarter) to show TDS on Other Income separately. This will ensure that the Tax Payable amount (due to salary) in Part B of Form 16 is equal to Tax deducted/remitted amount in Part A of Form 16.