- Form 16/26AS reconcile TDS deducted against total tax owed.
Many salaried employees assume that if their employer is already cutting Tax Deducted at Source (TDS) every month, they do not need to file their income tax returns for the year. That assumption can cost you.
TDS and filing an Income Tax Return (ITR) are two separate requirements under Indian tax law, and confusing the two is one of the most common mistakes salaried taxpayers make.
What TDS Actually Does
When your employer pays your salary, a chunk of it is deducted upfront and deposited with the government on your behalf. This is TDS or Tax Deducted at Source. It is essentially an advance payment of your income tax. But TDS is calculated only on your salary income. It does not account for other earnings you may have, such as interest from a savings account or fixed deposit, rental income, or freelance work.
Your employer has no way of knowing about the income you did not declare to them. So even if TDS is being deducted correctly on your salary, your actual tax liability for the year could be higher.
Who Must File An ITR
The Income Tax Act is clear on this. Under the New Tax Regime, which is now the default, the basic exemption limit is Rs 4 lakh per year. However, with the Section 87A rebate applied, income up to Rs 12 lakh is effectively tax-free. For salaried individuals, the standard deduction of Rs 75,000 pushes this further, making income up to Rs 12.75 lakh free from tax liability in practice.
That said, crossing these thresholds does not automatically mean you owe more tax. It does mean you are required to file an ITR and declare your income. Note that under the New Tax Regime, common deductions such as 80C investments and HRA cannot be claimed. If you want to use those, you would need to opt for the Old Tax Regime while filing.
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Will You Be Taxed Twice? No, And Here Is Why
This is where Form 16 becomes important. Issued by your employer at the end of each financial year, Form 16 is a certificate that shows exactly how much TDS was deducted from your salary and deposited with the government. When you file your ITR, this amount is credited against your total tax liability. You pay the difference, not the full amount again.
If you do not have Form 16 or need to verify TDS across all your income sources, Form 26AS serves the same purpose. It is a consolidated tax credit statement available on the Income Tax portal and covers all TDS deducted, not just from salary.
Changed Jobs This Year? Check Your TDS Carefully
There is one situation where salaried employees are often caught off guard. If you changed jobs during the financial year, each employer calculates TDS independently, without accounting for what the other paid you. This can result in lower-than-required TDS being deducted overall.
The shortfall has to be paid by you at the time of ITR filing as self-assessment tax. Informing your new employer about your previous salary can help them calculate TDS more accurately for the rest of the year.
What Happens If You Skip Filing
Skipping ITR when you are required to file invites penalties. Under Section 234F, late filing can attract a fee of up to Rs 10,000. In cases of serious tax evasion, Section 276CC provides for imprisonment of three months to seven years, along with fines. The threshold for the more severe penalty is tax evasion above Rs 25 lakh.
TDS reduces your tax burden but does not replace the legal obligation to file a return. Filing also gives you a chance to correct any gaps and claim deductions your employer may not have accounted for.
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