What Is Form 16?
Form 16 is the TDS certificate every employer in India must hand to salaried employees after the financial year ends, confirming how much income tax was deducted from their salary and deposited with the Central Government. It is prescribed under Rule 31(1)(a) of the Income Tax Rules, 1962, and issued under Section 203 of the Income Tax Act. Two parts make up the document: Part A covers TDS deposit proof, Part B covers the full salary and tax computation.
If your business deducts TDS under Section 192, you owe every employee a Form 16 by 15 June of the following assessment year. Miss the deadline, and Section 272A(2)(g) slaps a penalty of Rs.500 per day until you issue it.
What Are the Two Parts of Form 16?
Part A comes straight from the TRACES portal after the employer files quarterly TDS returns (Form 24Q). It carries a unique certificate number and cannot be prepared manually in Excel or Word.
| Part A Contains | Part B Contains |
|---|---|
| Employer’s TAN and PAN | Detailed salary breakup (basic, HRA, allowances) |
| Employee’s PAN | Exemptions under Section 10 (HRA, LTA, gratuity) |
| Quarterly TDS deposited (Q1 through Q4) | Standard deduction (Rs.75,000 new regime, Rs.50,000 old) |
| Challan identification numbers and BSR codes | Chapter VI-A deductions (80C, 80D, 80E, 80G) |
| Acknowledgement numbers of quarterly returns | Tax computation, rebate under 87A, cess at 4% |
Part A is the government’s record of what was actually deposited. Part B is the employer’s record of how the tax was calculated. When these two do not match, the employee’s ITR filing turns into a three-month headache.
Form 16 Example
An operations coordinator at an FMCG distributor in Thane’s Wagle Estate area earns Rs.8,28,000 annually (Rs.69,000 per month). He opts for the old tax regime for FY 2025-26, submits Rs.1,42,000 in 80C proofs (PPF and LIC) and Rs.18,500 under 80D.
| Line Item | Amount |
|---|---|
| Gross salary | Rs.8,28,000 |
| Less: Standard deduction | (Rs.50,000) |
| Less: Section 80C (PPF + LIC) | (Rs.1,42,000) |
| Less: Section 80D (medical insurance) | (Rs.18,500) |
| Taxable income | Rs.6,17,500 |
| Tax: 5% of Rs.2,50,000 (2.5L to 5L slab) | Rs.12,500 |
| Tax: 20% of Rs.1,17,500 (5L to 6.175L slab) | Rs.23,500 |
| Health and Education Cess at 4% | Rs.1,440 |
| Total tax liability | Rs.37,440 |
His employer deducts Rs.3,120 per month across 12 months, totalling Rs.37,440 in TDS. Part A of his Form 16 confirms this amount deposited across four quarterly challans. Part B shows the salary breakup, deduction claims, and slab-wise computation above. That single document is what he hands to his CA in July when filing the ITR.
Why Does Form 16 Matter for Indian Businesses?
Rs.500 per day. That is the penalty under Section 272A(2)(g) for every day an employer delays Form 16 past the 15 June deadline. For a business with 40 employees and a 30-day delay, that is Rs.6,00,000 in penalties before anyone even looks at the TDS numbers.
The bigger risk, though, is mismatch. At Petpooja, across 30,000+ Payroll clients, the pattern we see most often is this: the employer deposits TDS in March but the challan posts in April, so TRACES logs it in the next financial year. The employee’s 26AS shows a gap, the ITR does not go through, and both sides blame each other. Almost every time, the root cause is manual payroll processing on spreadsheets where TDS deposit dates slip without anyone noticing.
One more thing worth flagging: FY 2025-26 is the last year employers will issue Form 16 in its current format. The Income Tax Act, 2025 introduces Form 130 as the replacement from Tax Year 2026-27 onwards, with three parts instead of two.
How Does Petpooja Payroll Handle Form 16 Compliance?
Petpooja Payroll computes TDS under Section 192 as part of the monthly payroll run, factoring in the employee’s regime choice, declared investments under 80C and 80D, and HRA proofs. The Part B salary breakup is already structured correctly at each month-end, so generating the annexure in June is not a scramble.
We have seen clients like ISKCON, running payroll across multiple locations with different state Professional Tax slabs, use the dashboard to reconcile TDS deposits against Form 24Q filings before the 15 June deadline. The monthly payslip with TDS breakup goes to employees via WhatsApp, which means nobody is surprised when the final certificate arrives.
Frequently Asked Questions
Not technically. You can file your ITR using data from your 26AS or Annual Information Statement (AIS). But in practice, Form 16 is the primary source document every salaried taxpayer relies on, and income tax officers expect it during scrutiny.
The employer faces a penalty of Rs.500 per day under Section 272A(2)(g). You can file your ITR using 26AS/AIS data and raise the non-issuance with the Assessing Officer. Check with your CA about whether to flag it formally.
Yes. If you switched jobs mid-year, each employer issues a separate Form 16 for their respective employment period. Your new employer should also ask for Form 12B to factor in the previous employer’s salary while computing TDS.
Form 16 covers TDS on salary (Section 192). Form 16A covers TDS on non-salary payments like interest, rent, or professional fees (Sections 193 to 196). Freelancers and consultants receive Form 16A, not Form 16.
Flag it with your employer’s payroll or accounts team immediately. They will likely need to file a revised TDS return on TRACES. Do not file your ITR with mismatched numbers; the processing system will flag the discrepancy and delay your refund.
For FY 2025-26, employers still issue Form 16 by 15 June 2026. From Tax Year 2026-27 onwards, the Income Tax Act, 2025 replaces it with Form 130, which has three parts instead of two and references Section 395 of the new Act.
