Form 16

Form 16 is the employer's written account of two things: what it paid an employee over a year, and what tax it withheld from that pay and handed to the government. Its practical use is as the starting point for the employee's income tax return, which is why it arrives shortly before the filing season opens.

The certificate changed name and shape on 1 April 2026. For tax year 2025-26 and earlier it is Form 16, issued under section 203 of the Income-tax Act, 1961 and Rule 31 of the Income-tax Rules, 1962. From tax year 2026-27 it is Form 130, issued under section 395 of the Income-tax Act, 2025 read with rule 215 of the Income-tax Rules, 2026. Both statements are currently live: the 1961 Act was repealed with effect from 1 April 2026 but its savings keep it governing tax years that began before that date, so an employee filing for 2025-26 is still holding a Form 16 and is correct to.

Form 130 also reaches further than Form 16 did. It certifies tax deducted on salary under section 392, and additionally on the pension or interest income of a specified senior citizen under section 393(1), where a specified bank rather than an employer issues it.

One point causes recurring confusion under either name. The certificate proves tax deducted, not employment or income. Where an employee's income falls below the threshold and no tax was deducted, there is nothing to certify and the employer is not obliged to issue anything. A salary certificate serves the purposes people usually want it for.

Form 16 had two parts. Form 130 has three, and the contents moved between them, so an employee comparing last year's certificate with this year's will not find the salary computation where they left it.

Part C (Annexure-I) opens by asking whether the employee is opting out of taxation under section 202(1), which is the regime choice, and then works down through gross salary under section 16, the value of perquisites under section 17, profits in lieu of salary under section 18, allowances exempt under section 11, and salary reported from other employers. Where perquisites are involved the detail comes across from Form 123, the successor to Form 12BA.

Both certificates are generated from the portal rather than typed by the employer, so a defect cannot be corrected on the face of the document. A wrong PAN or a missing challan has to be fixed by revising the quarterly return, after which the certificate is downloaded again. Rule 215 lets the deductor sign digitally, and where it does, the certificate must carry a control number and the contents must be locked against change after signing.

Rule 215 fixes the date: 15 June of the financial year immediately following the tax year in which the income was paid and the tax deducted. This is a real improvement in certainty. Under the 1962 Rules the date had been amended more than once and entries about it had to hedge; it is now stated in the rule itself.

The date still depends on the fourth quarter return underneath. The employer files the quarterly statement in Form 138, the successor to Form 24Q, for the January to March quarter. That statement is due 31 May, which leaves a fortnight between the return and the certificate. The return is processed, the certificate becomes available on the portal, and it is issued.

Delay is rarely deliberate. It usually traces back to a defect in the quarterly statement, most often a PAN mismatch or an unmatched challan, which blocks the certificate from generating at all. An employer that leaves the fourth quarter statement to the last week meets the defect and the deadline in the same fortnight, which is why challans are worth reconciling to deductee entries at the close of every quarter rather than at the end of the year.

Each employer certifies the months it paid the employee, so a mid-year job change produces a certificate from each. Under rule 215(2) each employer issues Part A and Part B for its own period of employment. Part C is treated differently: it may be issued by each of the employers, or by the last employer alone, at the option of the employee.

That option is worth exercising. Part C is where the salary computation lives, and having the last employer prepare a single one means the year is computed once on the whole rather than twice on halves.

The reason it matters is the shortfall that catches people out. Where each employer computes tax on the salary it paid as though that were the employee's whole income for the year, each applies the deductions and works up through the slab bands from the bottom. The employee gets the benefit twice, while the true liability is computed once on the combined income, and the difference falls due at filing.

Giving the new employer the previous employer's salary and tax details heads this off, by letting it compute tax on the year as a whole. Those particulars are furnished in Form 122 under rule 204, the successor to Form 12B. Otherwise the difference is paid as self assessment tax when the return is filed.

Four checks catch nearly everything, and all four are quicker than answering a notice later.

• The PAN on the certificate matches the PAN on the return being filed. A single wrong character sends the credit to a different taxpayer.
• The tax summarised on the certificate matches the annual information statement quarter by quarter. The computation is the employer's arithmetic; only the deposit record proves the money reached the government.
• The regime shown is the one that was intended. In Form 130 this is the section 202(1) question at the head of Part C (Annexure-I), and the whole computation below it follows from the answer.
• Exemptions and deductions match what was declared and proven, including house rent allowance. Note that the house rent allowance rules changed with rule 279: Hyderabad, Pune, Ahmedabad and Bengaluru now attract the fifty per cent bracket alongside the four metros, so an employee in those cities may be entitled to more than a certificate prepared on the old four-metro basis allows.

A deduction that was genuinely available but missed at declaration can still be claimed in the return even though it does not appear on the certificate. The reverse is not true: an amount shown that is not actually deductible remains the employee's problem when the return is examined.

The employee can still file. The annual information statement, provided for by rule 245, carries the deposited tax, and payslips supply the salary figures, so the return can be built without the certificate. Credit rests on the deposit record rather than on the paper.

The harder case is tax deducted from salary but never deposited. An employee is generally not liable for tax the employer withheld and failed to pay, but claiming credit that the deposit record does not show still draws a demand that has to be contested with payslips as evidence. Raising the gap with the employer when it first appears is the shorter path.