Form 16 is the most-read document a finance team produces all year. Every salaried employee, every June, downloads it and uses it to file their income-tax return. Errors here travel — to the employee's CA, to the tax department's matching system, to LinkedIn complaints. Worth getting right the first time.
Part A and Part B
A complete Form 16 has two parts. Part A is generated by TRACES — the tax department's deductor portal — and shows the TDS the employer deducted and deposited each quarter, with challan and BIN references. Part B is generated by the employer and shows the detailed salary computation: gross salary, exempt allowances, standard deduction, professional tax, Chapter VI-A deductions, taxable income, tax computed, rebate, cess, and net tax payable.
Part A you do not type — you download it from TRACES after your fourth-quarter 24Q TDS return is filed and processed. Part B you generate from your payroll system. Stapled together, signed by the deductor or with a valid digital signature, this is the document the employee receives.
Section 192 — and Section 392 from 2026-27 onwards
TDS on salary has been governed by section 192 of the Income-tax Act, 1961 for as long as most current finance teams have been working. With the Income-tax Act, 2025 coming into force from the 2026-27 tax year onwards, the corresponding provision is section 392. The form name moves from 'Form 16' to 'Form 130' for the new regime.
Practically: for the year ending 31 March 2026, you issue Form 16 under section 192 of the 1961 Act. For the year ending 31 March 2027 onwards, you issue Form 130 under section 392 of the 2025 Act. The computation logic is essentially unchanged for salary; the citation and the form name are the things that move.
Form 16 issuance run by your consultant
On FastLegal, your dedicated consultant prepares Part B from the payroll data, downloads Part A from TRACES after your 24Q return is processed, applies the deductor's digital signature, and dispatches the finished Form 16 (or Form 130 from 2026-27) to each employee. You sign once at the top — they handle the rest.
When to issue
The statutory deadline is 15 June of the assessment year — that is, 15 June 2026 for income earned in the financial year 2025-26. Employees with valid TDS at any point in the year are entitled to Form 16, even if they left mid-year. Employees with zero TDS through the year (because their income was below the taxable threshold) do not strictly need a Form 16, but most employers issue one anyway because it is the simplest proof-of-salary document an employee can show.
The errors that cause re-issuance
- PAN mismatch — Form 16 PAN differs from the PAN in the employee's tax records. This is the single most common ITR-filing error employees flag back to HR. Verify PAN at onboarding and lock the field.
- Mismatch between Form 16 Part B figures and the 24Q quarterly return. The two must reconcile to the rupee — Part B and 26AS / AIS must show the same TDS amount.
- Mid-year joiners whose previous employer's salary was not added in. If the employee submitted Form 12B disclosing previous salary, the current employer's Form 16 must include it. If they did not, do not include it — the employee will reconcile in their ITR.
- Issuing Part B without a valid digital signature on the Part A. Both must be authenticated by the same deductor.
- Naming the form 'Form 16' for the year 2026-27 and onwards when it should be 'Form 130' under the new Act.
What employees actually look at
Most employees scan three numbers on Form 16: their gross salary, their net tax liability, and the TDS already deducted. If TDS deducted equals net tax liability, they file their ITR with zero refund and zero additional payable. If TDS exceeds liability, they expect a refund and start asking when it will arrive. If TDS is short, they owe — and they ask why the employer did not deduct enough.
The cleanest way to head off questions is to attach a one-page cover note with the Form 16 explaining the gross-to-net calculation in plain English. A good payroll system generates this automatically; a great one does it without anyone asking.
Frequently asked questions
Do contractors receive Form 16?+
No. Form 16 is for salaried employees. Contractors receive Form 16A — the TDS certificate for non-salary TDS, covering payments under sections 194C, 194J and others. From the 2026-27 year onwards under the ITA 2025, the corresponding non-salary TDS framework is section 393, and the certificate name moves to Form 16A's successor under the new Act.
What if I deducted no TDS from an employee — do I still issue Form 16?+
Strictly, no — Form 16 is the certificate of TDS. If no TDS was deducted, no certificate is required. In practice many employers still issue a Form 16 with zero TDS for the convenience of the employee and for use as a salary-proof document.
Can I sign Form 16 manually?+
Yes, a manual signature on a printed Form 16 is still valid. The digital signature route is faster at scale — and required if you are issuing through the deductor's portal. For more than 50 employees, almost everyone uses a class-3 DSC.
What is Form 12BA?+
Form 12BA is the perquisites statement that accompanies Form 16 when the employee received any perquisites — company car, ESOP exercise, accommodation, interest-free loans, gifts. It details the perquisite computation that feeds into Form 16 Part B.
Stop reading circulars. Start running clean payroll.
Every FastLegal plan ships with a dedicated payroll consultant — a real human who runs your PF, ESI, PT, TDS and Form 16 issuance, configured to your salary structure, your state, and your hiring plan. You sign off. We do the rest.