Form 16 Under Income Tax Act 2025 for Employers: Form 130 Compliance Playbook
By Finin2min Research DeskP0 — Publish FirstUpdated June 2026Form 16 → Form 130
✅ Verified: incometax.gov.in | Income Tax Rules 2026 Rule 215 | India Briefing | CAClubIndia | Zoho Payroll India | SCC Online
Every Indian employer who has issued Form 16 to employees needs to know one thing: Form 16 is being replaced by Form 130 under Rule 215 of the Income Tax Rules, 2026. For FY 2025-26 (income earned April 2025 to March 2026), employers still issue old Form 16 by 15 June 2026. From Tax Year 2026-27 onwards, Form 130 takes over permanently — with a new three-part structure, new section references, and tighter integration with the AIS system. This compliance playbook tells you exactly what changed, what stayed the same, and what you must do as an employer or HR professional.
Use the Income Tax CalculatorModel the tax impact alongside this guide.
What's Happening Right Now — June 2026 Action Required
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June 2026 Employer Action: You must issue old Form 16 to all employees by 15 June 2026 for FY 2025-26 income. This is governed by old Income Tax Act, 1961, Section 203 and the old rules. Your payroll software must generate Part A (download from TRACES) and prepare Part B (salary computation) using old section numbers. Missing this deadline attracts ₹100/day/employee penalty. Form 130 (the new format) applies only from Tax Year 2026-27, issued by 15 June 2027.
Same, but references Tax Year and new Act section numbers
Part B content
Salary computation with exemptions and deductions
Same but uses new section references (Schedule II, Section 123, Section 32, etc.)
Part C content
Does not exist
New — consolidated taxable income, deductions under new Act, final tax liability, total TDS
TDS Section cited
Section 192
Section 392(1)
HRA exemption reference
Section 10(13A)
Schedule II, Entry — HRA
Standard deduction
Section 16(ia)
Section 32
80C deduction reference
Section 80C, max ₹1.5 lakh
Section 123, max ₹1.5 lakh
80D deduction reference
Section 80D, max ₹25,000/₹50,000
Section 126, max ₹25,000/₹50,000
Year label in form
"Assessment Year 20XX-XX"
"Tax Year 20XX-XX"
Form 26AS renamed
Form 26AS
Form 168
Form 16A renamed
Form 16A (non-salary TDS)
Form 131
Issue deadline
15 June of the following AY
15 June of the following Tax Year period
What Part C in Form 130 Adds — The New Consolidated Section
The most significant structural difference in Form 130 is the addition of Part C, which consolidates everything that was scattered across Form 16 Part B in a single consolidated tax computation view. Part C integrates:
Total gross salary: Sum of all salary components for the Tax Year
All exemptions: HRA, LTA, and other Schedule II allowances
Standard deduction: Under Section 32
All Chapter VIA deductions: Section 123 (80C equivalent), Section 126 (80D), Section 128 (80E), Section 140 (80TTA), etc.
Net taxable income
Tax computation: Slab-wise breakdown, surcharge if applicable, cess
Total TDS deducted: Cross-referenced to Form 168 (old Form 26AS) for verification
Tax liability vs TDS paid: Shows whether employee has over/under-paid TDS
This consolidated Part C is designed to make ITR prefilling more accurate and reduce TDS mismatches that historically led to notices.
Step-by-Step: Issuing Form 130 for Tax Year 2026-27 (Due by 15 June 2027)
1
File Q4 Form 138 (January–March 2027) by 31 May 2027. Form 130 Part A is generated from TRACES only after the Q4 return (Form 138 Annexure II containing full-year salary computation) is filed. Without Q4 filing, you cannot generate Part A.
2
Download Part A from TRACES. Log in to traces.gov.in → Request → Form 130 Part A. Authenticate with TAN and TDS return details. TRACES generates Part A for each employee on the TDS return.
3
Prepare Part B using HRMS/payroll software. Part B contains the detailed salary breakup — basic, HRA, LTA, special allowance, perquisites, and deductions. Ensure your software uses new Act section numbers. This is employer-prepared (not downloaded from TRACES).
4
Prepare Part C — the new consolidated section. This is generated by payroll software combining Part B data with final tax computation. Ensure the regime chosen by employee (via Form 124) is correctly reflected. Part C must cross-reference Form 168 TDS data.
5
Digitally sign and issue to employees by 15 June 2027. Form 130 requires digital signature (DSC or EVC) from the employer. Provide to employees via email or secure HR portal download — physical copies are optional.
6
Employee cross-checks with Form 168 (old Form 26AS). Advise employees to download Form 168 from the income tax portal (incometax.gov.in → e-File → View Form 168) and verify that TDS figures match Form 130 Part A. Any mismatch should be flagged to HR immediately.
The Form 16 Deadline for FY 2025-26 — June 2026 (Current Priority)
While Form 130 is the future, your immediate action is the old Form 16 for FY 2025-26:
Deadline: 15 June 2026 — issue Form 16 to all employees who had TDS deducted on salary in FY 2025-26
Process: File Q4 Form 24Q (Annexure II) by 31 May 2026 → Download Part A from TRACES → Prepare Part B using old section numbers → Combine and sign → Issue
If no TDS was deducted: Employer is NOT required to issue Form 16 when no TDS was applicable (salary below taxable threshold)
Late penalty: ₹100/day/employee — for 50 employees, 30 days late = ₹1,50,000
Case Study: FinServe HR — Navigating the June 2026 Form 16 and Future Form 130 Transition
Kavita manages HR compliance for a 300-employee firm. She had to handle two parallel tasks in May–June 2026: (a) issuing old Form 16 for FY 2025-26 by 15 June 2026, and (b) setting up processes for Form 130 for Tax Year 2026-27 (due June 2027).
Task A — Old Form 16 (FY 2025-26): Filed Q4 Form 24Q Annexure II on 28 May 2026. Downloaded Part A from TRACES on 1 June 2026. Generated Part B using HR software with old section numbers (80C, 80D, 10(13A), 16(ia)). Issued to 300 employees by 12 June 2026 — 3 days ahead of deadline. Zero penalties.
Task B — Future Form 130 preparation: Confirmed payroll software vendor will update to generate Form 130 with 3-part structure and new section numbers by September 2026. Tested on a sample employee profile.
Common mistake avoided: Her payroll vendor initially claimed Form 130 was already being issued from April 2026 (confusing "new format" with "when it applies"). Kavita corrected: Form 130 applies to Tax Year 2026-27, not FY 2025-26. Her employees got the correct Form 16 (not Form 130) for July 2026 ITR filing.
FY 2025-26 Certificate
Old Form 16 (due 15 Jun 2026)
Tax Year 2026-27 Certificate
New Form 130 (due 15 Jun 2027)
TDS Return for FY 2025-26
Form 24Q (old)
TDS Return for TY 2026-27
Form 138 (new)
For Employees — Using Your Form 16 / Form 130 Correctly
For July 2026 ITR (FY 2025-26 income)
You will receive old Form 16 from your employer (not Form 130)
Use Form 16 Part A to confirm TDS deducted and deposited — cross-check with Form 26AS (old name) on the portal
Use Form 16 Part B to fill salary details in your ITR — all old section numbers apply
If your employer missed the 15 June deadline and hasn't issued Form 16 yet, you can still file ITR using Form 26AS and your salary slips — no need to wait
From July 2027 ITR (Tax Year 2026-27 income)
You will receive Form 130 (3-part) from your employer by 15 June 2027
Use Part A to verify TDS credits against Form 168 (renamed Form 26AS) on the portal
Use Part C as the primary computation document for your ITR filing
New section numbers in Part B/C: Section 123 (80C), Section 126 (80D), Schedule II (Section 10 exemptions)
Form 16 / Form 130 — Key Points for Employers
FY 2025-26: Issue old Form 16 by 15 June 2026 — this is your immediate compliance
Tax Year 2026-27: Issue Form 130 (3-part) by 15 June 2027 — start preparing systems now
Form 130 references Section 392(1), Schedule II, Section 123/126/128 — update payroll software
Form 26AS renamed Form 168 — employees should use Form 168 for TDS verification from TY 2026-27
Form 16A (non-salary TDS) renamed Form 131 — update AP team processes
Late issuance penalty: ₹100/day/employee — no cap on total penalty
Employees should cross-check TDS in Form 16/130 with Form 26AS/168 before filing ITR
Source: Rule 215 of Income Tax Rules, 2026 governs Form 130 requirements
Form 16 remains valid for FY 2025-26 income (AY 2026-27). Employers must issue old Form 16 by 15 June 2026. From Tax Year 2026-27 onwards, Form 16 is permanently replaced by Form 130 under Rule 215 of the Income Tax Rules, 2026. Employees working in FY 2026-27 will receive Form 130 from employers by 15 June 2027. For the July 2026 ITR, use your old Form 16.
Form 130 serves the same purpose as Form 16 — certifying TDS on salary — but has three parts instead of two. Part A: TDS summary. Part B: Salary computation with exemptions and deductions using new Act section numbers (Section 123 instead of 80C, Schedule II instead of Section 10). Part C (new): Consolidated view of taxable income and final tax liability. Form 130 uses Section 392 (not Section 192) and references Tax Year (not Assessment Year). Form 26AS has been renamed Form 168 under the new rules.
The penalty for late issuance of the TDS certificate (Form 130 / Form 16) is ₹100 per day per employee for each day of delay. For a company with 50 employees where Form 130 is issued 30 days late: 50 × ₹100 × 30 = ₹1,50,000 in penalties. There is no upper cap. Issue Form 16 by 15 June 2026 for FY 2025-26 and Form 130 by 15 June 2027 for Tax Year 2026-27 to avoid this penalty.