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?

• Low TDS on Salary: Form 12BAA allows employees to report TDS on non-salary income. This helps reduce the total TDS deducted from their salary.
• Better Cash Flow: The reduction in TDS deducted improves the take-home pay of the employee.
• Comprehensive Reporting of Income: This form requires detailed reporting of various sources of income, which ensures accurate calculation of taxes.
• Easier Tax Compliance: Form 12BAA simplifies the process of reporting non-salary income. This makes TDS calculation easier for employers.
• Fewer Refund Claims: Accurate reporting of TDS reduces the chances of employees getting TDS deductions, and thus minimizes the need to claim refunds.

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What is the Applicability of Form 12BAA?

Form 12BAA is applicable to all the salaried employees who have income sources beyond salary, such as insurance commissions, fixed deposits, dividends from equity investments, etc.

• Form 12BAA must be submitted at the beginning of the financial year or while joining employment.
• If it is not submitted, the employer will assume that the employee has opted for the new regime and calculate taxes accordingly.
• The declaration is valid only for TDS purposes. The employee can choose a different regime while filing their ITR.

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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.

Loss under the head “Income from House Property”

• Amount
• 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.

Let’s understand the same with an example:

Mr. Arun has a Salary of Rs. 15,00,000 and a tax liability of Rs. 5,00,000 on the same. He also has an Income from Dividends of Rs. 2,00,000, on which TDS of Rs. 20,000 has already been deducted.

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How to Download and Submit Form 12BAA?

Follow the steps below to download Form 12BAA -

• Visit the official income tax e-filing portal.
• Navigate the Forms section.
• Search for Form 12BAA, and click the download link.
• Print it or fill it out electronically.

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