TDS Certificates and the TRACES Portal — Form 16, 16A, 26AS, and AIS

Learning Objectives

• Navigate the TRACES portal to download Form 16 and Form 16A
• Understand what information Form 26AS contains and how it differs from AIS
• Know the due dates for issuing TDS certificates to deductees
• Reconcile TDS credits in the payee's books against 26AS
• Understand how TRACES flags defaults and how to respond to demand notices

The TRACES Portal

TRACES stands for TDS Reconciliation Analysis and Correction Enabling System. It is the primary portal for TDS-related compliance activities in India, operated by the Income Tax Department at traces.gov.in.

What Can You Do on TRACES?

As a deductor (Sunrise Retail):

• Download Form 16A (TDS certificates for non-salary payees)
• Download Form 16 Part A (TDS certificate for employees)
• View and correct TDS returns (using online correction facility)
• View defaults — mismatches, short deduction notices, late deposit notices
• Submit responses to demand notices
• View challan status — verify that deposited challans are matched to returns

As a deductee (payee — e.g., R K & Associates receiving TDS certificates):

• Download Form 16A issued by deductors
• View 26AS statement — all TDS deducted against their PAN
• Verify that TDS deducted by a company actually appears in their 26AS (confirms the deductor filed the return correctly)

As an individual employee:

• Download Form 26AS to verify employer's salary TDS
• Download AIS (Annual Information Statement) for comprehensive income data

Form 16 — TDS Certificate for Salary

Form 16 is issued by an employer to an employee as proof of TDS deducted on salary. It has two parts:

Form 16 Part A

Part A is the authoritative TDS certificate — it can only be downloaded from TRACES by the employer using their TAN. It cannot be generated manually.

What Part A contains:

• Employer's TAN and name
• Employee's PAN and name
• Period of employment (April to March, or joining/leaving date if mid-year)
• Quarter-wise TDS deposited with BSR codes and challan numbers
• Total TDS deposited for the year
• Unique certificate number (TRACES-generated)

The TRACES certificate number on Part A makes Form 16 verifiable — anyone can check the certificate number on the TRACES portal to confirm authenticity.

Form 16 Part B

Part B is prepared by the employer and contains the salary computation:

• Gross salary (component-wise: basic, HRA, allowances)
• HRA exemption under Section 10(13A)
• Other exemptions
• Standard deduction
• Net salary
• Chapter VI-A deductions (80C, 80D, etc.)
• Net taxable income
• Tax computation (slabs, cess)
• Relief under Section 89 if applicable
• Net TDS deducted

Part B is the employer's computation — it is not downloaded from TRACES. The employer prepares it and signs it along with Part A.

When Must Form 16 Be Issued?

By 15 June following the financial year. Form 16 for FY 2025-26 must be issued to all employees by 15 June 2026.

If an employee leaves mid-year, they can request Form 16 for the period of employment. The employer should issue it within a reasonable time, ideally at the time of relieving.

Form 16A — TDS Certificate for Non-Salary

Form 16A is the TDS certificate for deductions under Sections 194C, 194J, 194H, 194I, and all other non-salary sections. Like Part A of Form 16, it is downloaded from TRACES by the deductor.

What Form 16A Contains

• Deductor's TAN and PAN
• Deductee's PAN and name
• Nature of payment (section code) and description
• Amount paid/credited
• TDS deducted
• Challan BSR code, date, and serial number
• TRACES certificate number

When Must Form 16A Be Issued?

Within 15 days from the due date of the quarterly TDS return. Since returns are due on 15 July, 15 October, 15 January, and 15 May, the certificates are due by 30 July, 30 October, 30 January, and 30 May respectively.

For Sunrise Retail:

• April–June TDS: Form 16A to R K & Associates, Speedy Logistics, Apex Electronics, Pradeep Properties — by 30 July 2025
• The payees use these certificates to claim TDS credit when filing their income tax returns

Form 26AS — Annual Tax Credit Statement

Form 26AS is an annual consolidated statement linked to a taxpayer's PAN. It shows all taxes paid and credited against that PAN during the year.

What Form 26AS Contains

How to Access Form 26AS

• Log in to the Income Tax portal (incometax.gov.in) using PAN
• Navigate to My Account → View Form 26AS
• Download as PDF or view online
• TRACES portal also allows deductees to view their 26AS

What Payees Do With 26AS

When a CA firm (R K & Associates) receives ₹45,000 from Sunrise Retail and Sunrise Retail deducts ₹4,500 TDS:

1. Sunrise Retail deposits ₹4,500 via challan and files Form 26Q
2. Within 3–5 working days of the return being processed, ₹4,500 appears in R K & Associates' 26AS against their PAN
3. R K & Associates, when filing their annual income tax return, claims ₹4,500 as TDS credit — this is auto-populated in their ITR from 26AS

If TDS does not appear in 26AS: The payee should contact the deductor. The deductor may have quoted the wrong PAN in the return, or the return may not have been filed yet. The payee cannot claim TDS credit for amounts not reflected in 26AS.

AIS — Annual Information Statement

The AIS (Annual Information Statement) was introduced in FY 2021-22 as a comprehensive supplement to 26AS. While 26AS focuses on TDS/TCS and taxes paid, AIS includes a much broader picture:

What AIS Adds Beyond 26AS

• Salary income — reported by employers
• Interest income — from banks (savings, FD)
• Dividend income — from companies
• Securities transactions — equity, mutual fund purchases and sales
• Property purchases and sales (SRO data)
• Foreign remittances
• GST turnover — businesses' GST return data now appears in AIS
• Rent received — reported by tenants through 26Q
• Off-market securities transfers

AIS and Pre-Filled ITR

The income tax department pre-fills ITR forms using AIS data. If a taxpayer earned interest of ₹12,000 from savings account that they forgot to include, AIS will show it and the ITR pre-fill will include it. This reduces tax gaps significantly.

Taxpayer Information Summary (TIS)

AIS also provides a Taxpayer Information Summary (TIS) — a simplified view that aggregates the AIS data and gives the net figure for each income category. TIS is what gets auto-populated into ITR.

Feedback Mechanism

Taxpayers can submit feedback on AIS entries if they believe a figure is incorrect — for example, if a property transaction is double-reported. The feedback is considered by the assessing officer.

TRACES Defaults and Demand Notices

After every TDS return is processed, TRACES automatically runs a matching exercise and flags discrepancies — these are called defaults.

Types of TRACES Defaults

What to Do When a Default Notice Arrives

1. Log in to TRACES → Statements/Payments → Default Summary
2. Identify the nature of the default
3. For PAN errors: file a correction statement with the correct PAN — this will resolve the default
4. For short deduction: file the corrected return with the correct amount and deposit the shortfall
5. For interest defaults: deposit the interest via a new challan (ITNS 281) tagged to the relevant period
6. Once corrections are made, TRACES re-processes and closes the default

Demand Under Section 200A

The TDS return is processed under Section 200A — an intimation (similar to a Section 143(1) intimation for income tax returns) is sent to the deductor with computed defaults. The deductor can pay the demanded amount or contest it by filing a correction return.

Sunrise Retail Case Study — Q1 26AS Reconciliation

At the end of Q1 (April–June 2025), Sunrise Retail has:

• Deducted and deposited ₹9,120 in April
• Filed Form 26Q for Q1 by 15 July 2025
• Downloaded Form 16A from TRACES (available after TRACES processes the return — typically within 2–3 weeks of return acceptance)

Reconciliation check from Pradeep Properties' perspective (landlord):

Pradeep Properties receives rent from multiple tenants. After receiving Form 16A from Sunrise Retail showing Q1 rent TDS of ₹10,500 (₹3,500 × 3 months), their accountant checks their Form 26AS:

Pradeep Properties' 26AS — Part A1 (non-salary TDS)
Deductor: Sunrise Retail Pvt Ltd (TAN: HYDS12345A)
Section: 194I(b) — Land/building rent
Quarter 1 (April–June 2025):
  Amount paid/credited:  ₹1,05,000
  TDS deducted:          ₹10,500
  Date of payment:       30 April 2025, 31 May 2025, 30 June 2025
  Status:                Booked (amounts matched to challan)

The ₹10,500 TDS credit appears, and Pradeep Properties can claim this when filing their ITR for FY 2025-26. If Sunrise Retail had filed an incorrect PAN for Pradeep Properties, the amount would not appear — and Pradeep would contact Sunrise Retail to file a correction.

Practice Exercises

Key Terms

Module Summary

Check each item before moving to the next lesson:

• I can describe what the TRACES portal is used for as a deductor (Form 16/16A download, default resolution, corrections)
• I know that Form 16 Part A must be downloaded from TRACES — it is not manually generated
• I know that Form 16A is due within 15 days of the quarterly TDS return due date
• I can explain what each section of Form 26AS contains (Part A, A1, A2, B, C, D, E, F, G)
• I understand how AIS goes beyond 26AS (bank interest, dividends, securities, GST data, property)
• I know the six common TRACES default types and the action required for each
• I can trace the end-to-end flow: Sunrise Retail deducts → deposits → files 26Q → TRACES processes → Pradeep Properties sees credit in 26AS

Summary

• TRACES (traces.gov.in) is the authoritative portal for downloading Form 16 and 16A, viewing defaults, and correcting TDS returns
• Form 16 Part A must be downloaded from TRACES — it cannot be prepared manually; Part B is the employer's computation
• Form 16A (non-salary TDS certificate) is issued within 15 days of the quarterly return due date
• Form 26AS shows all TDS credited against a PAN — payees must reconcile this against their books before filing ITR
• AIS is more comprehensive than 26AS, including bank interest, dividends, property transactions, and GST turnover
• TRACES defaults (short deduction, PAN mismatch, short payment) must be corrected through correction returns or additional deposits

Quick Quiz

1. Form 16 Part A for FY 2025-26 can be issued by:

   • A) Printing it from any accounting software
   • B) Downloading from the TRACES portal using the employer's TAN
   • C) Sending a plain letter to the employee with TDS details
   • D) Uploading to the income tax portal Answer: B — Part A of Form 16 is only valid when downloaded from TRACES. It carries a unique certificate number that confirms authenticity.

2. The Q2 Form 26Q return was filed on 15 October. By when must Form 16A be issued?

   • A) 15 October (same day)
   • B) 30 October (15 days from due date)
   • C) 15 November (one month after)
   • D) 31 December (year-end) Answer: B — Form 16A is due within 15 days from the return due date. Q2 return due = 15 October → Form 16A due = 30 October.

3. Pradeep Properties (Sunrise Retail's landlord) wants to verify the TDS deducted on rent. Which document should they check?

   • A) Their copy of the rent agreement
   • B) Their Form 26AS on the income tax portal
   • C) The challan receipt provided by Sunrise Retail
   • D) The GST invoice for rent Answer: B — Form 26AS shows all TDS deducted against the payee's PAN. The landlord checks Part A1 of their 26AS for rent TDS under Section 194I.

4. What is the key difference between Form 26AS and AIS?

   • A) 26AS is for individuals; AIS is for companies
   • B) 26AS only shows TDS; AIS is comprehensive and includes bank interest, securities, property, GST data
   • C) AIS is the older system; 26AS replaced it
   • D) 26AS is maintained by TRACES; AIS is maintained by GST Network Answer: B — 26AS focuses on TDS/TCS and taxes paid. AIS is much broader, incorporating data from banks, registrars, stockbrokers, mutual funds, and GST returns.

5. A TRACES default shows "PAN not available" for a payee entry in Sunrise Retail's 26Q. What is the consequence and remedy?

   • A) The TDS is reversed; Sunrise Retail must repay the amount to the vendor
   • B) TDS rate becomes 20% for that entry; remedy is to file a correction return with the correct PAN
   • C) The payee loses their TDS credit permanently
   • D) The default is automatically waived if deposited on time Answer: B — When PAN is not quoted or is invalid, the effective TDS rate becomes 20% on the amount. The remedy is to file a correction TDS return on TRACES with the correct PAN, after which the credit appears in the payee's 26AS.

Next up: Module 7 — TCS — the seller-side mechanism: how Sunrise Retail's scrap sale triggers 1% TCS under Section 206C, why the ₹10 crore turnover threshold exempts them from 206C(1H), and what happens when a large distributor collects TCS from Sunrise Retail as a buyer.