It is the first week of June. Your payroll team is processing the last batch of year-end work. Three employees have already messaged HR asking when their Form 16 will be ready — one has a home loan application pending that needs it immediately. Your Q4 TDS return (Form 24Q), which must be filed before Form 16 can be generated, is still sitting with your accountant. This exact situation plays out in thousands of Indian companies every May and June. Form 16 for FY 2025-26 must reach every eligible employee by June 15, 2026 — as per CBDT Rule 31(3) of the Income Tax Rules, 1962. Missing that deadline attracts a penalty of ₹100 per day per certificate. This guide covers everything employers must know — what Form 16 contains, how to download it from TRACES, the exact penalty structure, and the critical update: Form 16 is being replaced by Form 130 under the new Income Tax Act, 2025, effective from Tax Year 2026-27 onwards.
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What Is Form 16 and Who Must Issue It?
Form 16 is a TDS certificate issued under Section 203 of the Income Tax Act, 1961 by an employer to every salaried employee from whose salary Tax Deducted at Source (TDS) has been deducted during the financial year. It is the primary document a salaried employee uses to file their Income Tax Return (ITR). Every employer who deducted TDS from any employee’s salary during FY 2025-26 must issue Form 16 — there is no exemption based on company size, sector, or profit status. This obligation applies to private companies, LLPs, partnerships, NGOs, schools, hospitals, and all other establishments.
Form 16 is directly connected to your TDS on salary compliance — every error in monthly TDS deduction and deposit reflects in Form 16. Getting TDS right throughout the year is the only way to ensure clean, penalty-free Form 16 generation in June.
Official Deadline — June 15, 2026
As per Rule 31(3) of the Income Tax Rules, 1962, confirmed by CBDT, the deadline for employers to issue Form 16 for FY 2025-26 is June 15, 2026. The logic is: Q4 TDS return (Form 24Q for January–March 2026) must be filed by May 31, 2026 → Form 16 Part A can only be generated from TRACES after that → employers get 15 days to issue it → June 15 is the final date.
⚠️ Penalty for Late Issue — Section 272A(2)(g)
Failure to issue Form 16 by June 15 attracts ₹100 per day per certificate for every day of default. For a company with 50 employees issuing Form 16 just 30 days late: 50 × ₹100 × 30 days = ₹1,50,000 penalty. This is separate from any interest or penalty on late TDS deposit. If your TDS on salary deductions have errors, the Form 24Q must be corrected before Part A can be correctly generated — adding further delay risk.
Form 16 Structure — Part A and Part B Explained
Part A — Downloaded from TRACES (Government Generated)
Part A is the official TDS record from the Income Tax Department. It contains: employer name, address, and TAN; employee PAN; duration of employment; and a quarter-by-quarter table of TDS deducted and deposited — BSR code, challan date, challan serial number, and amount per quarter. Part A carries a unique TRACES-generated certificate number. It cannot be manually created by the employer — it must be downloaded from the TRACES portal (traces.gov.in) after Form 24Q is filed and processed. Any mismatch between Part A and the employee’s Annual Information Statement (AIS) triggers notices from the Income Tax Department.
Part B — Prepared by Employer
Part B is the detailed salary and tax computation prepared by the employer’s payroll or accounts team. It contains: gross salary breakup (basic, HRA, LTA, special allowance, etc.); exemptions under Section 10 — HRA under 10(13A), LTA under 10(5); standard deduction (₹75,000 under new tax regime / ₹50,000 under old regime); deductions under Chapter VI-A — 80C, 80D, 80G, etc. (only under old tax regime); total taxable income; tax computed; rebate if applicable; and net TDS deducted. Part B must accurately reflect whether each individual employee opted for the old or new tax regime for FY 2025-26.
| Feature | Part A | Part B |
|---|---|---|
| Source | TRACES portal — government generated | Prepared by employer / payroll software |
| Contains | TAN, PAN, quarter-wise TDS deposits | Salary breakup, exemptions, deductions, tax computation |
| Can employer modify it? | No — fixed as per TRACES records | Yes — per individual employee data |
| Signature required | TRACES digital signature (mandatory) | Employer authorised signatory |
| Primary use | Verify TDS deposited with government | ITR filing, deductions, loan applications |
How to Download Form 16 from TRACES — Step by Step
Step 1 — File Form 24Q Q4 by May 31, 2026
Form 24Q is the quarterly TDS return for salary. Q4 (January–March 2026) must be filed by May 31, 2026. Form 16 Part A can only be generated after Form 24Q is processed. If you missed earlier quarters or filed with errors, file revised returns immediately. Any unresolved short deduction or PAN mismatch will block Part A generation. Your payroll service provider should have been tracking TDS accuracy through the year — this is the annual consequence of monthly errors.
Step 2 — Log In to TRACES Portal
Go to traces.gov.in. Log in using your TAN and password. Navigate to Downloads → Form 16. Select Financial Year 2025-26 and quarter range Q1 to Q4.
Step 3 — Request, Wait, and Download
Submit the download request. TRACES processes this within a few hours to 24 hours. Download the zipped file containing Form 16 Part A for all employees. The password for each file is typically the first 5 characters of the employee’s PAN in uppercase followed by their date of birth in DDMMYYYY format.
Step 4 — Combine Parts and Issue by June 15
Combine Part A with the employer-prepared Part B for each employee. Digitally sign the document. Distribute to every eligible employee — both current and those who left during FY 2025-26 — by June 15, 2026. Both parts must go together as one complete certificate.
Critical 2026 Update — Form 16 Being Replaced by Form 130
🚦 Important — Form 16 Renamed to Form 130 From Tax Year 2026-27
Under the Income Tax Act, 2025 and Income Tax Rules, 2026 — effective April 1, 2026 — the annual TDS certificate for salary has been renamed Form 130. Form 16A (non-salary TDS certificate) becomes Form 131. This applies from Tax Year 2026-27 (income earned from April 1, 2026 onwards).
For FY 2025-26 (salary April 2025 – March 2026): You must still issue Form 16 — not Form 130. The CBDT transition FAQ confirms that income earned before April 1, 2026 remains under the old Income Tax Act, 1961. For the full breakdown of all TDS and TCS changes from April 2026, read our dedicated guide.
What Changes in Form 130 vs Form 16?
Form 130 retains the same core structure — Part A for TDS deposits and Part B for salary computation — but references new section numbers under the Income Tax Act, 2025. Section 392 replaces the old TDS on salary section. The new form is built to integrate directly with the AI-driven Annual Information Statement (AIS) system. Payroll and TDS software must be updated before filing the first quarterly return for Tax Year 2026-27. If your salary structure still has allowances exceeding 50% of CTC, that also changes the Form 130 base — read our guide on the new salary structure 2026 and the 50% wage rule.
| Form | Applies To | Law | Deadline |
|---|---|---|---|
| Form 16 | FY 2025-26 (Apr 2025–Mar 2026) | Income Tax Act, 1961 | June 15, 2026 |
| Form 130 | FY 2026-27 onwards (Apr 2026+) | Income Tax Act, 2025 | June 2027 (as notified) |
Form 24Q filing, Form 16 generation and distribution — all before June 15? Futurex’s payroll team manages end-to-end TDS compliance for 100+ companies. We track every deadline. You never pay a penalty.
Employer Compliance Checklist — Form 16 FY 2025-26
| Task | Deadline | Risk if Missed |
|---|---|---|
| File Form 24Q Q4 (Jan–Mar 2026) | May 31, 2026 | Late fee ₹200/day; Form 16 Part A blocked |
| Verify all employee PAN details in TDS return | Before filing Form 24Q | PAN mismatch → AIS discrepancy → employee ITR notices |
| Download Form 16 Part A from TRACES | June 1–10, 2026 | Delay cascades to employee ITR filing deadline |
| Prepare Form 16 Part B — check tax regime per employee | By June 12, 2026 | Wrong regime flag = incorrect Part B = employee ITR error |
| Issue complete Form 16 (Part A + B) to ALL eligible employees | June 15, 2026 — FINAL | ₹100/day/employee penalty from June 16 |
| Issue Form 16 to employees who left during FY 2025-26 | June 15, 2026 | Same penalty for ex-employees — no exemption |
| Update payroll software for Form 130 (Tax Year 2026-27) | Before April 2027 | Wrong form = non-compliance under new Income Tax Act 2025 |
Common Form 16 Errors Employers Must Avoid
Error 1 — Mismatch Between Form 16 and AIS
TDS in Form 16 Part A must match the employee’s Annual Information Statement exactly. A mismatch means TDS was deposited late, PAN was incorrectly mapped in Form 24Q, or a quarterly return had errors. Fix by filing revised Form 24Q before generating Part A. Issuing Form 16 with a known AIS mismatch triggers Income Tax notices for the employee — creating complaints and legal liability. Your payroll compliance process must include quarterly AIS reconciliation, not just annual.
Error 2 — Wrong Tax Regime Flag in Part B
For FY 2025-26, the standard deduction is ₹75,000 under the new regime and ₹50,000 under the old regime. HRA exemption under Section 10(13A) is only available under the old regime. If an employee opted for the new regime but Part B incorrectly shows HRA deduction — the ITR will mismatch. Check every employee’s tax regime declaration before generating Part B. Read our full guide on the old vs new tax regime comparison to understand which employees benefit from which regime.
Error 3 — Not Issuing Form 16 to Ex-Employees
Form 16 must be issued to all employees from whose salary TDS was deducted during FY 2025-26 — including those who resigned mid-year. Many companies only track active employees and miss issuing Form 16 to those who left in May, September, or January. The penalty applies equally. Maintain a complete register of all employees — active and separated — for TDS deducted during the year. This is also a good time to verify PF settlement was correctly processed for employees who left.
Error 4 — Incorrect Salary Base Due to Wrong CTC Structure
If your salary structure has allowances exceeding 50% of total CTC — which violates the Code on Wages — the TDS may have been computed on an incorrect base throughout the year, which directly flows into Form 16 Part B. This is especially common in companies that restructured salaries to reduce PF outflow. Read our guide on the new salary structure rules 2026 and 4 Labour Codes impact on salary to audit your current structure.
Frequently Asked Questions — Form 16 FY 2025-26
What is the last date to issue Form 16 for FY 2025-26?
The last date to issue Form 16 for FY 2025-26 (AY 2026-27) is June 15, 2026, as per Rule 31(3) of the Income Tax Rules, 1962. Employers who miss this date face a penalty of ₹100 per day per certificate under Section 272A(2)(g). Form 24Q Q4 must be filed by May 31, 2026 before Part A can be generated from TRACES.
Is Form 16 mandatory if no TDS was deducted?
Technically, Form 16 is mandatory only when TDS was deducted. If an employee’s total income was below the exemption limit and no TDS was deducted, the employer is not legally required to issue Form 16. However, many employers issue a Form 16 with nil TDS as good practice — it helps employees apply for loans and file ITR using a single structured document.
What is the difference between Form 16 and Form 26AS?
Form 16 is the employer’s certificate showing TDS on salary from that specific employer. Form 26AS — now part of the Annual Information Statement (AIS) — is the government-maintained tax passbook showing all TDS credits from all sources. Before filing ITR, employees must verify Form 16 figures against AIS. Any mismatch must be resolved with the employer by filing a revised Form 24Q.
What is Form 130 and does it replace Form 16?
Form 130 is the new name for the annual salary TDS certificate under the Income Tax Act, 2025, effective from Tax Year 2026-27. It replaces Form 16 for income earned from April 1, 2026 onwards. For FY 2025-26 salary, employers must still issue Form 16 — not Form 130. The full details of this and all other TDS changes from April 2026 are covered in our dedicated blog.
Can an employee file ITR without Form 16?
Yes. ITR can be filed using monthly salary slips, Form 26AS, and AIS — without Form 16. But Form 16 makes filing faster, more accurate, and less likely to trigger notices. If an employer fails to issue Form 16, the employee can report it to the Income Tax Department.
How does Form 16 change if employee switched jobs in FY 2025-26?
An employee who worked for two employers gets two separate Form 16 certificates — one from each for the respective period. When filing ITR, both must be combined. If the employee declared prior employer’s salary to the new employer for TDS recomputation, the new employer’s Form 16 Part B should reflect both salaries. If not, the employee may need to self-assess and pay balance tax. This is one reason why HR and payroll processes must include clear onboarding tax declaration workflows.
What should an employee do if Form 16 has an error?
Notify HR or the payroll team immediately. The employer must file a revised Form 24Q, after which a corrected Form 16 Part A can be downloaded from TRACES. Do not file ITR using a Form 16 with a known error. Cross-verify all figures against your salary slips, Form 26AS, and AIS before filing. If the error affects HRA exemption calculation, that must also be corrected in Part B before reissuance.
Related Articles from Futurex
- TDS on Salary in India FY 2025-26 — Complete Employer Guide
- TDS & TCS Changes from 1 April 2026 — New Sections, Forms and Rates
- Old vs New Tax Regime FY 2025-26 — Which One Saves You More?
- HRA Exemption Calculation 2026 — Complete Guide for Employees and HR Teams
- New Salary Structure 2026 — 50% Basic Rule and Payroll Impact
- 4 Labour Codes India — Impact on Salary Structure, PF, Gratuity & Bonus
- PF Withdrawal Rules 2026 — New EPFO Framework and Employer Checklist
- Payroll Services for Small Businesses India 2026 — Complete Guide
Form 16 Generation, TDS Filing & Full Payroll Compliance — Let Futurex Handle It
Futurex Management Solutions handles complete payroll and TDS compliance — monthly TDS deduction and deposit, quarterly Form 24Q filing, annual Form 16 generation from TRACES, employee-wise Part B preparation, and distribution before the June 15 deadline. When Form 130 replaces Form 16 from Tax Year 2026-27, our team handles the transition seamlessly. We serve businesses in Noida, Delhi NCR and across India. First consultation is free.
Sources & References: Income Tax Act, 1961 — Section 203 (Form 16 obligation), Section 272A(2)(g) (penalty ₹100/day) · Income Tax Rules, 1962 — Rule 31(3) (June 15 deadline, CBDT confirmed) · Income Tax Act, 2025 and Income Tax Rules, 2026 — Form 130 replacing Form 16 effective Tax Year 2026-27 (ClearTax April 2026, CMA Knowledge April 2026) · CBDT Circular dated February 20, 2025 — revised Form 16 and Form 24Q formats · CBDT Transition FAQ — dual-track system confirming FY 2025-26 income under old Act. This blog is for informational purposes only. For organisation-specific compliance advice, consult Futurex’s payroll and compliance team.