Form 16, Form 26AS and the AIS: which document says what

Three documents, three different questions

Form 16 is one employer's certificate about your salary and the tax it withheld from it. The tax credit statement is a ledger of tax that has actually been deposited against your PAN, by everyone. The annual information statement is what third parties have reported about you. Three questions, not one.

The confusion is understandable, because all three arrive at roughly the same point in the year, all three carry your permanent account number — your PAN — and all three contain rupee figures that look like they ought to agree. Two of them frequently do not, and the reason is not that one of them is broken.

They are assembled by different people, from different raw material, measuring different things. Your employer writes the first. The department builds the second out of statements filed by everyone who withheld tax from a payment to you. It builds the third out of returns filed by banks, registrars, depositories, sub-registrars and other institutions that are required to report transactions of certain kinds. Nobody assembles all three.

One housekeeping note before the substance. The names used here — Form 16, its Part A and Part B, Form 26AS, the AIS — are the ones in current use, and they have been renamed before; worth confirming for the year you are actually filing. What follows does not depend on them. It depends on who writes each document and what unit its figures are in, and that has not changed.

What each one is drawn from

Set them side by side and the differences stop looking like discrepancies.

Read the last row before any of the others. None of these documents can be corrected in your return, because your return is not where any of them came from. That single fact is what makes the order of operations matter, and it is the subject of the last half of this article.

Form 16 is narrow, and its two halves have different authors

A salary certificate answers a question about one payer. It is not a summary of your year, and the most expensive misreading of it is treating it as one.

It comes in two parts that are produced quite differently. Part A is a receipt. It is generated from the quarterly statements the employer itself filed — the same filings that feed the tax credit statement — which is why those two documents agree by construction. If they disagree, the interesting conclusion is not that one of them is wrong about your salary. It is that the underlying filing is wrong, and it will stay wrong until the employer revises it.

Part B is different in kind. It is the employer's own computation: your salary, the exemptions it allowed, the deductions it accepted proof for, and the tax it arrived at. Nobody generated it from a filed return. It is an opinion about your tax, formed by an organisation that can see one income and one declaration.

And that opinion carries a decision you may not remember making. Under s.202 of the Income-tax Act 2025 the new regime applies unless you opt out, so an employee who declared nothing was computed on the default. Under that default there is no s.123 deduction with its ₹1.5 lakh cap, no s.126 relief for health premiums, and no house rent allowance exemption — the s.11 exemption read with Schedule III Sl. No. 11 belongs to the old regime only, and s.202(2)(a)(i) excludes it by name. Under the old regime that health relief is ₹25,000, raised to ₹50,000 where the insured is a senior citizen. The salary standard deduction — ₹75,000 under the new regime and ₹50,000 under the old — is granted either way, without being claimed.

So a short deduction list in Part B is not a statement about what the law allows you. It is a record of which regime you were placed in, which is a comparison worth running on your own numbers, and of what proof reached payroll before its internal cut-off. The exemption itself, and the three-limb calculation behind it, are in house rent allowance explained.

Two employers in one year

Here is the specific mistake, and it is common enough to be worth naming. Change jobs in October and you receive two certificates. Each was computed as though its own salary were your only salary — so each ran the slab ladder from the bottom rate upward, and each may have granted the standard deduction. Added together they under-state the tax, sometimes by a great deal, and neither employer did anything wrong.

The arithmetic is easy to see once stated. Two salaries of ₹9 lakh are not two separate tax problems; they are one ₹18 lakh problem, and the second half of that income sits in higher bands than either employer ever applied. Slabs are annual, not per-employer. The remedy is to tell the later employer about the earlier one, and the cost of not doing so is a balance due at filing plus interest for the time it went unpaid — the mechanism is in advance tax and tax deducted at source.

The credit statement is a ledger of tax, and it under-counts by design

The tax credit statement is the only one of the three whose figures are money that moved. Every line in it is a rupee that a deductor or collector took from a payment and deposited against your PAN, plus tax you paid yourself, refunds and demands. It is authoritative for exactly one purpose: how much tax you are entitled to set off.

It is not a list of your income, and it never was. Nothing appears unless somebody withheld. Where no payer had a duty, no entry exists — not because the income is untaxed, but because nobody was made responsible for it.

Take rent as the clean case. Under s.393 an individual tenant who is not subject to tax audit deducts 2% where monthly rent exceeds ₹50,000. A tenant paying ₹45,000 a month sits below that threshold and deducts nothing at all, so ₹5.4 lakh of rent reaches the landlord across the year with no entry in the credit statement, no entry in any salary certificate, and nothing reported by anyone. The income is fully taxable. Three documents saw none of it.

The same silence covers a gain on an exchange trade, freelance fees below a payment threshold, interest on a small deposit, and cash. Which is why the credit statement answers the question it was built for and no other: what may I set off? The question what did I earn? was never put to it. Where the withholding machinery reaches and where it stops is worked through in advance tax and TDS.

The information statement is a mailbox, not a verdict

The annual information statement is the widest of the three and the most misunderstood, because its width is mistaken for authority. It is an aggregation of what institutions have reported about you: interest credited, dividends paid, securities bought and sold, property registered, large deposits, and more besides.

Notice the verb. Reported, not verified. The department did not audit these entries before showing them to you; it collected them. Each came from an institution filing a return of its own, keyed to a PAN, and it is on your screen because a computer matched that PAN to you.

Three consequences follow, and each produces an entry a reader does not recognise.

• It can be somebody else's. A PAN quoted wrongly by a reporting institution attaches their transaction to your record. Nothing about the entry looks unusual; it is simply not yours.
• It can be partly yours. A deposit held in two names is reported against a PAN, and where the whole of the interest is reported against one holder, the entry is real and the amount attributed to that holder is not.
• It can be counted twice. Where two institutions are separately required to report the same underlying transaction, two entries appear for one event.

Now the part that decides your timetable. There is a facility to record that an entry is wrong, and it does something narrower than people assume: it puts your response on record against the entry. The reported figure itself belongs to the institution that filed it, and it changes when that institution revises its own return — on its filing cycle, not yours. The statement also keeps moving after the year ends, as late and revised reports arrive, so a figure read early is provisional.

The two wide statements fail in opposite directions

This is the part worth carrying, because it is the opposite of how most people use these documents. The credit statement and the information statement are both incomplete, but they are incomplete in opposite directions, and each direction follows from who assembles it.

Work one transaction through all three. You redeem equity fund units for ₹8 lakh, having invested ₹6.2 lakh in them some years ago. The registrar reports the redemption, because it is required to report a transaction in units and it knows what the units sold for. It does not know what you paid for them — cost of acquisition lives in your records, not the registrar's.

So the information statement carries ₹8 lakh. The credit statement carries nothing, because an exchange trade has no identified payer with a duty to withhold. The salary certificate carries nothing, because this is not salary. And the taxable amount is neither of those numbers: the gain is ₹1.8 lakh, and held longer than 12 months it falls under s.198 at 12.5% on the amount above ₹1.25 lakh in the year. Subtract that threshold from the gain and ₹55,000 is left to tax, which at that rate is ₹6,875. Sold sooner it would fall under s.196 at 20% on the whole ₹1.8 lakh instead.

Look at the spread. One document said ₹8 lakh, two said nothing, and the tax base was ₹55,000. None of the three lied. Each reported the thing it is built to report, and only one party in the chain — you — holds the cost figure that turns a transaction into a gain.

State the asymmetry plainly, because it is the useful form:

• Transaction values are not income. An information-statement total sums what each reporter could see, gross of cost, and copying it into a return converts sale proceeds into profit.
• Silence is not absence. An empty credit statement means no deductor existed, which is a fact about the withholding rules and not about your earnings.

Two further consequences, since the same asymmetry drives both. The information statement will disagree with your return in the ordinary course, and a disagreement is therefore not evidence of an error — it is the expected state, which is precisely why the ones that do matter get missed among the ones that do not. And a modest earner with an equity gain is the person both statements fail at once: nothing was withheld, the reported figure overstates the gain several times over, and the default regime's rebate — up to ₹60,000 where total income does not exceed ₹12 lakh — cannot shelter it, because s.156(3) excludes special-rate income such as an s.198 gain. That last point is set out in income tax, in the order it is computed.

Reconciling before filing, and why the sequence costs money

The comparison that carries information is not “do the three documents agree?” It is a set of narrower questions, each put to the document that can actually answer it.

1. Set off from the ledger. Not from payslips, not from a certificate, and not from what you believe was deducted. Only tax that reached the government against your PAN is available to you, and this is the document that says so.
2. Compare Part A against that statement. They come from the same filing, so a difference is not a puzzle about which is right — it is the employer's filed statement being wrong, and it is fixed by the employer.
3. Read it as questions. For each information-statement entry: is it mine, is all of it mine, and is it income at all? A sale value is not a gain, a joint deposit's interest is not one holder's, and a duplicate is not two events.
4. Add what none saw. Rent below the withholding threshold, fees paid without deduction, interest on small balances, gains on trades. This step has no document to prompt it, which is exactly why it is skipped.
5. Then compute. In the order set out in income tax basics, with capital gains taken separately at their own rates rather than at your slab — the holding-period arithmetic is in capital gains tax explained.

Now the timing, which is the whole practical point of the article. Filing is an evening's work on figures you already hold. Getting a reported entry changed is not: it runs back to the institution that filed it, and the corrected figure appears only when that institution revises its return on its own cycle. The two clocks differ.

Which produces the sequencing rule, and it is a rule about order rather than about what to declare. Read the statements early enough that a wrong entry still has somewhere to go. Discover it on the last evening and the choice has already narrowed to two unattractive options.

Both of those options cost something, and it is worth seeing both rather than pretending one is safe. Filing on your own figures with a disputed entry outstanding leaves a mismatch on record that you may have to explain later, though the figures in the return are the ones you can support. Waiting for a correction to flow through risks a deadline you do not control, in exchange for a clean record. There is no version where the entry is corrected and the deadline is untouched — the only cheap move is the one made early, which is why the order matters here more than the arithmetic does.

Five errors, each traceable to a document doing its job

1. Treating a total as income. It is a sum of transaction values, gross of cost, sometimes gross of the other holder's share, occasionally counted twice.
2. Reading silence as absence. No entry in the credit statement means no withholding duty existed. The income is taxable exactly as before.
3. Adding two salary certificates. Each ran the slab ladder from the bottom and each may have granted the standard deduction, so the sum of the two tax figures is not the tax on the sum of the two salaries.
4. Correcting it in the return. Overriding a reported figure in your own filing does not change what the institution reported. That correction is made with the institution.
5. Reading Part B as law. A short deduction list records which regime you were placed in by default and what proof reached payroll in time. It is not a statement of what you are entitled to.

Four of the five share one root, and it is the same root as most tax surprises: assuming somebody is keeping score. For a single salary and nothing else, roughly true. For a household with a job change, a joint deposit and a redemption, three institutions each hold one fragment and none of them holds the arithmetic.

The one figure none of the three holds

Everything above turns on a single fact that no document in this article contains. The employer knows your salary. The deductor knows what it withheld. The registrar knows what your units sold for. Nobody knows what you paid.

Cost of acquisition, and the date on which it was acquired, decide whether s.196 or s.198 applies to a fund sale, and they decide how much of a reported transaction value was ever a gain. Units of a fund that is mostly debt, bought on or after 1 April 2023, fall under s.76 instead and are taxed at slab rates, with the gain always treated as short-term — which again turns on a purchase date only you hold.

FNOTrader's Mutual Funds app runs on the full published history of daily per-unit scheme values from AMFI — the net asset value, or NAV — around 34 million rows of it, refreshed nightly at 22:30 IST, and for any scheme and period reports invested amount against value alongside the return on cashflows landing on irregular dates, which is XIRR. It computes nobody's tax. What it holds is the dated, priced record that a gain computation has to start from — and it is that record, not the rate, that people cannot reconstruct in March.

Nothing here is tax advice, and FNOTrader is not a chartered accountant, a tax practitioner or a SEBI-registered investment adviser. Form names, thresholds and dates change; what is worth carrying between years is that three documents with three authors cannot be expected to agree, and that only one party holds the figure that reconciles them.

Common questions

Continue reading

More in Tax Planning · App: Mutual Funds · Definitions: glossary · Free tools: calculators · All: every article