By 15 June each year, your Indian subsidiary must issue Form 16 to every employee who had TDS deducted at any point in the previous financial year. Errors here are visible (every employee reads the form), they travel to CAs and the tax department's matching system, and they generate avoidable corrections cycles.
Two parts, two issuers
- Part A — Generated by TRACES (the Income Tax Department's deductor portal) after your fourth-quarter 24Q TDS return is processed. Shows TDS deducted and deposited quarterly with challan and BIN references. Downloaded by you; you do not type Part A.
- Part B — Generated by your payroll system. Shows the detailed salary computation: gross salary, exempt allowances, standard deduction, professional tax, Chapter VI-A deductions, taxable income, tax computed, rebate, cess, net tax payable.
Both parts are stapled together (digitally or in print), signed by the deductor (your CFO, finance head or delegated signatory), and issued as a single Form 16 to the employee.
The Form 130 transition
Under the Income-tax Act 2025, the equivalent of Section 192 is Section 392. The form name moves from 'Form 16' to 'Form 130'. The mechanics are largely unchanged for salary; the citation and the form name move.
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. We are in the transition year.
Form 16 + Form 130 cycle owned by your consultant
FastLegal prepares Part B from the year's payroll register, downloads Part A from TRACES after your 24Q return is processed, applies your digital signature, and dispatches the finished form to each employee inside the statutory window. The transition to Form 130 for FY 2026-27 onwards is handled automatically — your CFO doesn't need to learn the new template.
The errors that cause re-issuance
- PAN mismatch — Form 16 PAN differs from the employee's official tax record. Verify PAN at onboarding and lock it.
- Mismatch between Part B salary totals and the 24Q quarterly return. The two must reconcile to the rupee.
- Missing previous-employer salary for mid-year joiners who submitted Form 12B disclosing prior salary.
- Issuing Part B without a valid digital signature on Part A. Both parts must be authenticated.
- Calling it 'Form 16' for FY 2026-27 when it should be 'Form 130' under the new Act.
- Incorrect section reference — citing Section 192 (1961 Act) when Section 392 (2025 Act) applies, or vice versa.
What employees actually look at
Most employees scan three numbers on Form 16: gross salary, net tax liability, and TDS already deducted. If TDS = liability, they file with zero refund and zero payable. If TDS > liability, refund. If TDS < liability, they owe. The cleanest way to head off questions is to attach a one-page cover note with the form explaining the gross-to-net calculation.
Form 12BA — the perquisite annexure
If your employee received any perquisites — company-paid car, ESOP exercise gain, interest-free loan, accommodation, gifts above ₹5,000 — Form 12BA must accompany Form 16. It details the perquisite computation that feeds into Part B.
For foreign-owned subsidiaries, the most common perquisite is the ESOP-at-exercise perquisite. If you grant US parent ESOPs to your Indian engineers, the spread at exercise is reported in Form 12BA and flows through to Form 16.
Frequently asked questions
Do we need to issue Form 16 if no TDS was deducted?+
Strictly no — Form 16 is the TDS certificate. With zero TDS, it isn't statutorily required. In practice many employers issue a Form 16 with zero TDS anyway, for the employee's convenience and as a salary-proof document.
Can we use a digital signature?+
Yes — class-3 DSC is standard for issuance at scale (more than 50 employees). Print + manual signature is also valid for smaller teams.
What if our employee left mid-year — do we still issue?+
Yes — Form 16 is required for any employee who had TDS deducted at any point in the year, regardless of whether they were still employed at year-end.
When does Form 130 take effect?+
From FY 2026-27 onwards (income earned 1 April 2026 to 31 March 2027). Form 16 still applies for FY 2025-26 income. The transition year is currently underway.
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.