Is Form 16 Enough For Filing ITR In AY 2025-26? Here’s What You Might Be Missing

It is possible that salaried taxpayers may have received their Form 16 from their employers by now to file the income tax return (ITR) for the assessment year 2025-26 (FY 2024-25).

Form 16 clearly summarises your salaried income, the tax deducted at source (TDS) by your employer, and the deductions you have declared through them.

But is it sufficient to just file an ITR? The answer is 'no'. Here's why!

What Is Form 16?

Form 16 is a report about your salary from your employer. It does not account for financial activities outside that employer-employee relationship.

If taxpayers fail to report any additional income or claim eligible deductions which are  not processed via their salary, they can end up underpaying tax (inviting penalties and interest) or overpaying (leaving their hard-earned money with the IT department).

What Does Form 16 Miss Out?

1. Income From Other Sources:

Interest Income: Form 16 does not display the interest you have earned from fixed deposits (FDs), savings accounts (above the exempt limit of Rs 10,000, and Rs 50,000 for seniors), recurring deposits (RDs), or bonds. Banks deduct TDS (typically 10%) if interest exceeds R s40,000 (Rs 50,000 for seniors), but taxpayers need to report all interest income, even below TDS thresholds.

Freelancing: Sometimes taxpayers also earn through consulting or freelancing work, through writing or design gigs, or by driving for a ride-sharing app outside of their regular job. This income is also taxable and absent from Form 16.

Other Incomes: There are a few other sources of incomes from where taxpayers may earn including lottery winnings, taxable gifts, and family pension, all fall under 'Income from Other Sources' and need to be reported separately.

2. Capital Gains (Stocks, Crypto, Property, Mutual Funds)

Stock Market: Taxpayers may often earn their income trough sold shares (listed or unlisted) and make a profit. This profit may be short-term or long-term but capital gains tax is applicable on the same. Form 16 is oblivious to trading activities.

Crypto: There is also income from virtual digital assets (VDAs) such as cryptocurrencies or NFTs and this is taxable income and are also not part of Form 16.

Property/Mutual Funds: Profits from selling a house, land or redeeming mutual fund units generate capital gains which must be reported separately.

3. Rental Income & Second Home Implications:

Rent Received: Owning a property and receiving rent on it, is taxable income under 'Income from House Property' Form 16 doesn’t capture this.

Deemed Rent On Second Home: Owning over one residential properties and not earning rent from the additional one is still something that can earn a 'Deemed Rental Income' by the government. This tax liability is not mentioned in Form 16.

4. Directly Claimed Deductions:

Health Insurance: Form 16 only shows deductions you submitted proofs for to your employer. However, it does not show the premiums you paid for yourself, parents (senior or not), or family outside your employer’s payroll deduction system.

Charitable Donations: If you have made any donation to eligible charities or institutions, you can claim deductions, but only if you report them in your ITR and Form 16 does not reflect these.

Education Loan Interest: Additionally, there is also paid interest on education loan for yourself, spouse or children and you need to claim it directly on your ITR. It is not on Form 16.

Deduction For Disabled Dependent: These deductions also need to be claimed directly if not processed through salary.

5. Mismatches With AIS/Form 26AS &TDS Errors:

The AIS/26AS Reality Check: Form 16 is the employer’s version of events. However, the record of all reported financial transactions linked to the taxpayer's PAN is the annual Information Statement (AIS) and Form 26AS. This shows:

• TDS deducted by all deductors (banks, clients, tenants, stock brokers etc.), not just your employer.
• Reported high-value transactions (mutual fund purchases/sales, property deals, large deposits etc.).
• Interest income reported by banks.
• Tax payments (advance tax, self-assessment tax). 

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