What is Form 16?

Detailed definition

Form 16 is the cornerstone document for Indian salaried income tax filing. Section 192 of the Income Tax Act 1961 obliges every employer to deduct TDS on the estimated annual salary income of each employee, based on the regime chosen (old or new) and the proofs of investment and exemption submitted. Section 203 then requires the employer to issue a TDS certificate (Form 16) summarising the salary paid, exemptions allowed, deductions accepted, taxable income computed, tax payable, and tax deducted and deposited. The format and timing are notified by Rule 31 of the Income Tax Rules 1962.

The form has two structurally distinct parts. Part A is downloaded by the employer from the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal of the Income Tax Department, carries a unique TDS certificate number, the employer's TAN and PAN, the employee's PAN, the period of employment in that financial year, and the quarterly TDS deducted and deposited as per the employer's quarterly TDS return (Form 24Q). Part B is prepared by the employer outside TRACES and details the full salary break-up: basic, HRA, LTA, special allowance, perquisites under Section 17(2), exemptions under Section 10 (HRA exemption, LTA, conveyance), the standard deduction under Section 16(ia), deductions under Chapter VI-A (Sections 80C through 80U), taxable income, tax payable under the chosen regime, Section 87A rebate, cess, and net TDS.

For FY 2025-26 (AY 2026-27), the new tax regime is the default under Section 115BAC. The standard deduction in the new regime is Rs 75,000 (Rs 50,000 in the old regime). The 87A rebate eliminates tax up to Rs 12 lakh taxable income in the new regime (Rs 5 lakh in the old). Form 16 Part B must reflect the regime chosen at the start of the year via the Form 12BB declaration. Failure to elect in writing defaults the employer to the new regime, and any change at ITR filing must be reconciled.

What each part of Form 16 contains

PART A (from TRACES, employer downloads):
  - Employer name, address, TAN, PAN
  - Employee name, address, PAN
  - Period of employment in the FY
  - Assessment Year
  - Quarter-wise summary:
      Receipt Number of Form 24Q
      Amount paid/credited
      TDS deducted
      TDS deposited (with challan details)

PART B (prepared by employer):
  - Gross salary under Section 17(1)
  - Perquisites under Section 17(2)
  - Profits in lieu of salary under Section 17(3)
  - Exemptions under Section 10 (HRA, LTA, etc.)
  - Standard deduction under Section 16(ia): Rs 75K new / Rs 50K old
  - Professional tax under Section 16(iii)
  - Income from other sources reported to employer
  - Chapter VI-A deductions (Sec 80C, 80D, 80CCD(1B), etc.) - old regime only
  - Taxable income
  - Tax on total income at slab rates
  - Section 87A rebate
  - Surcharge (if income > Rs 50L)
  - Health and education cess at 4%
  - Total tax payable
  - TDS deducted and deposited

Worked example: Form 16 for a Rs 15 lakh salary (FY 2025-26, new regime)

Arjun works at Infosys with CTC structured as Rs 12,00,000 basic plus Rs 2,40,000 HRA plus Rs 60,000 special allowance, totalling Rs 15,00,000 gross.

1. Gross salary (Part B section A): Rs 15,00,000.
2. HRA exemption (new regime): Not allowed. Standard deduction Rs 75,000.
3. Taxable salary: 15,00,000 - 75,000 = Rs 14,25,000.
4. Slab tax (new regime FY 2025-26): 0 on first 4L + 5% on next 4L (20,000) + 10% on next 4L (40,000) + 15% on next 2.25L (33,750) = Rs 93,750.
5. Section 87A rebate: Not eligible (income above Rs 12 lakh). Marginal relief band closed by 12.75L; full slab tax applies here.
6. Health and education cess (4 percent): 93,750 x 0.04 = Rs 3,750.
7. Total tax liability: Rs 97,500.
8. TDS deducted across 12 months (Part A): Rs 97,500 (roughly Rs 8,125 per month).

Form 16 vs Form 16A vs Form 26AS vs AIS

Common pitfalls

• Form 16 TDS does not match Form 26AS. The employer's quarterly Form 24Q TDS return may have an incorrect PAN, wrong financial year, or unpaid challan. Always cross-check before filing; ask the employer to file a corrected return.
• Multiple Form 16s in one year. If you switched jobs, each employer issues its own Form 16. The new employer should be told about the previous salary (via Form 12B) so it can deduct TDS on combined income, otherwise you may face a tax demand at year end.
• Choosing the wrong regime at TDS time. Form 16 reflects the regime declared via Form 12BB. If you switch regimes at ITR filing, the tax calculation changes; verify the result with an income-tax calculator before filing.
• Missing the 15 June deadline. If the employer has not issued Form 16 by 15 June, file a written complaint with the Assessing Officer. The Rs 100 per day penalty under Section 272A(2)(g) accrues, capped at the TDS amount.
• Treating Form 16 as full income proof. Form 16 only covers salary income. Interest from banks, dividend, capital gains, freelance income, and rental income must be added at ITR filing. Use the AIS as the wider data source.
• Old digital format issues. Form 16 must carry a digital signature from FY 2019-20 onwards. PDF-only files without DSC or certificate number can be rejected during ITR e-verification.

Related terms

Related calculators on 3Tej

Use Form 16 inputs in these free Indian tax calculators to verify the employer's TDS computation:

Frequently asked questions

Sources and further reading

• Income Tax Act 1961, Sections 192, 203, 272A, Income Tax Department.
• Income Tax e-filing portal for Form 26AS, AIS, and ITR utilities AY 2026-27.
• TRACES portal, the official source for Form 16 Part A generation and Form 24Q reconciliation.
• Income Tax Rules 1962, Rule 31, format and timing for Form 16.
• CBDT Notification 30/2024 introducing the revised Form 16 format with new-regime fields.

Last updated 2026-05-28.