TRACES stands for TDS (Tax Deduction at Source) Reconciliation and Correction enabling system. This is the official portal of the Income tax department to view and download both :

1. Form 16 (Can be downloaded by the Employer)
2. Form 26AS (Can be downloaded by the taxpayer himself)

Form 16 has two parts, and both parts bear the official TRACES emblem/logo on it. It is the responsibility of your employer to provide you your form 16 in tie by downloading it from the TRACES Portal.

[Important: If you have changed jobs during the year, you will need 2 form 16s from both your employers. Click this link to access this article for guidances on 2 form 16s]

I have received my Form 16. What do I do now?

There are two parts in form 16:

1. Part A (It contains General Information of Taxpayer, and summary of taxes deducted by the employer)
2. Part B (It contains the details of total income which you have earned during the year from your employer.

Lets Discuss each Part in Detail.

Part A of Form 16:

Let's start from scratch, here is a useful step by step guide for you.

Step 1: Check the TRACES Logo, Basic Information, including PAN number on your Form 16.

TRACES LOGO:

Form 16 is only available on the TRACES portal, and as such, it contains the official TRACES emblem in both parts. You should check for this official logo, in both parts (A and B) of the form 16, it ensures that you indeed have the correct form 16 in your hand.

PAN NUMBER:

If there has been a mistake in quoting your PAN number by your employer, you will not find the details of such taxes or income in your Form 16 or your Form 26AS.

In the rarest of cases where your PAN number is quoted wrong in your form 16, you should contact your employer immediately.

Form 26AS:

We have already discussed form 26AS in a different article, so we won't bother you with too much information in this one.

Still, for a brief introduction of form 26AS including how to download it, and what information it contains, you can use this link.

BASIC INFORMATION:

After checking the PAN, you should check your basic information viz name, address, date of birth and mobile/email address. If everything is correct, you should move on to step 2.

Step 2: Collect your salary slips ( or bank statement for the year) and check two things:

1. Details of income, that you have earned
2. Details of Taxes, that your employer has deducted and deposited to the government.

You should check your salary slips or bank account to see the amount of salary your employer has paid you monthly. You should also refer to your employment agreement contract to check the salary due (payable) to you every month, and you can cross verify the amount of tax deducted in this part A of form 16.

Step 3: Download your form 26AS and cross verify all entries of TDS that are deducted by your employer.

Now, Form 26AS is more detailed than form 16. But, every entry of tax or income in form 16 has a corresponding matching entry in form 26AS. You just need to find all these entries and match them, it ensures that all taxes that you should have paid, have indeed been paid by you.

FORM 26AS and FORM 16 - Basic Comparision

Please note that your form 26AS may have more instances of tax deducted and collected using your PAN. Form 16 only contains the tax deductions by your employer, while Form 26AS contains the tax information of all entities, whether or not they are your employer.

(Eg TDS deducted by contractor as per provisions of section 194C (of Income Tax Act, 1961), can be found in form 26AS, but it may not be available in your form 16, if you have not declared it to your employer.)

Form 26AS is easy to download, just use this link to see how.

After completing these three steps, you can now move on to part B of the form 16.

Part B of Form 16:

Part B of form 16 is nothing but a minuscule Income Tax Return (ITR) on its own.

If you look at the format of FORM ITR-1 Sahaj, you can find that the format of part B of form 16 is practically the same.

Step 1: Fill all details of Part B of Form 16 in your ITR Form.

You should incorporate this entire part in your return of income. Bonus point is that all these information will be pre-filled in your ITR-1 automatically. If not, you can just copy paste the figures, it is that easy.

But even if your information is prefilled, you must cross verify this amount as there may be some mistakes by your employer in your form 16, or some error or glitch in the income tax website/portal, that you may need to self-rectify in your return of Income.

Step 2: Check your form 26AS to see if there are any amounts extra in your form 26AS that are not reflected in your form 16.

You should make the corresponding entries of income and the corresponding entries of taxes in your return of income, and you must make sure to incorporate all the particulars of form 26AS in your return of Income. This is the right of a taxpayer, and you must use it wisely.

Step 3: Check for any activities of investments, or exemptions that you have not declared to your employer.

The way form 16 works is simple. It reflects all activities of investments made and exemptions claimed, PROVIDED that you have declared these activities with your employer.

If you have made an investment in the last date of the financial year to save taxes, your form 16 will not show this information.

So, any such actvities that you have not declared to your employer, you should feed them manually in your ITR.

Step 4: Reconciliation

IF you have noted any errors or discrepancies in your form 16, you should contact your employer immediately and ask them to revise or correct your form 16.

And that is about it. If there are any discrepancies, you should use the revised form 16, as an when your employer issues it to you, and use it to file your return of incmome.