Form 12BAA: Meaning, Features, and Benefits

What is Form 12BAA?

Form 12BAA is a new form or statement that includes the details of TCS and the non-salary income, which were not included in the previous versions. This form requires employees to report their TDS and TCS from other sources. It acts as an additional notice to employers and helps reduce the TDS deduction from salary. Employees have to submit both forms 12BA and 12BAA to their employers.

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What are the Key Features of Form 12BAA?

Given below are the key features of Form 12BAA -

• Makes Reporting Process Easy - Form 12BAA makes the reporting process easier for employees and employers. It allows the employees to provide the details of the tax paid on other income sources to their employer to reduce their tax deductions.
• Reduces the TDS Deduction from Salary - Form 12BAA helps employees declare the tax they have already paid on other sources of income. Using this information, the employer can calculate and consider all the taxes paid while deducting tax at source.
• Increases the Employee’s Disposable Income - The reduced tax deduction also increases the overall disposable income of the employee.
• Improves Cash flow - It also increases the cash flow by reducing the amount of tax deducted from the source. It is especially useful for those facing cash crunch.

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What are the Benefits of Form 12BAA?

Employees declare their investments and eligible expenses in form 12BA and submit it to the employer. Based on this information, the employer deducts the Tax Deducted at Source (TDS) from the salary. However, before the introduction of form 12BAA, the TDS paid on other income sources was not declared to the employer, resulting in higher TDS deductions.

The introduction of Form 12BAA changes this. This form allows the employees also to declare the TDS paid on other income sources and the TCS collected, thus, reducing their TDS deductions. This can also improve cash flow and increase the overall disposable income of salaried individuals.

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What Information Has to be Provided in Form 12BAA?

The newly introduced Form 12BAA simplifies the reporting process by requiring employees to provide the following:

For Tax Deducted at Source (TDS) -

• The section under which the tax was deducted.
• The name and address of the deductor.
• The deductor’s Tax Deduction and Collection Account Number (TAN).
• The amount of tax deducted.
• The income received or credited.
• Any other relevant details.

For Tax Collected at Source (TCS) -

• The section under which the tax was collected.
• The name and address of the collector.
• The collector’s TAN.
• The amount of tax collected.
• Any other important details.

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How Does New Form 12BAA Help Reduce TDS from Salary?

Form 12BAA is a welcome change in the taxation system as it helps increase the disposable income of the employees by reducing the TDS deduction from salary. Here’s how it helps reduce TDS from salary -

• The new Form 12BAA was introduced by the CBDT on 15th October, 2024. This change addresses the issue where employers did not previously adjust taxes paid on other income sources when deducting TDS from salaries.
• Previously, employers based TDS deductions only on employee declarations regarding investments and tax-eligible expenses.
• The new form allows employees to disclose TCS and TDS from other sources, helping them reduce tax deductions from their salaries.
• This update helps employees manage cash flow more efficiently and increases their disposable income.

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