Form 16 Guide for Employers India 2026 — TDS on Salary Compliance

Form 16 is the TDS certificate every Indian employer must issue to salaried employees under Section 203 of the Income Tax Act. It certifies the salary paid and the tax deducted at source. Issuing Form 16 correctly and on time is one of the most critical employer compliance obligations in 2026. This guide explains Part A vs Part B, due dates, common mistakes and the Code on Wages impact.

What is Form 16?

Form 16 has two parts:

Part A – Certificate of TDS deducted by employer. Generated from TRACES portal after quarterly TDS returns (Form 24Q) are filed. Contains TAN, PAN, total TDS deposited.
Part B – Statement of salary, deductions claimed, exempt allowances, and tax computation. Generated by employer using salary records.

Who Must Issue Form 16?

Every employer who deducts TDS from salary under Section 192 must issue Form 16 to each employee on the rolls. If no TDS was deducted (salary below tax threshold), Form 16 is not mandatory but employers may issue a salary certificate instead.

Form 16 Due Date

By 15 June following the end of financial year (e.g., 15 June 2026 for FY 2025-26 / AY 2026-27).

Quarterly TDS Returns – The Foundation of Form 16

Quarter	Period	Form 24Q Due Date
Q1	April – June	31 July
Q2	July – September	31 October
Q3	October – December	31 January
Q4	January – March	31 May

Form 16 Part A is auto-generated only after all 4 quarterly returns are filed correctly.

TDS Calculation Under Section 192

Estimate employee total income for the year (salary, other income disclosed)
Apply employee chosen tax regime (Old vs New)
Allow eligible deductions (Section 80C, 80D, HRA, LTA, standard deduction etc.)
Compute tax liability
Deduct in 12 monthly instalments
Deposit by 7th of next month (or 30 April for March deduction)

New Tax Regime vs Old Regime – 2026

From FY 2024-25, the New Tax Regime is the default. Employees can opt in to the Old Regime at the start of the year. The employer must collect employee declaration (Form 12BB) and apply the chosen regime for TDS calculation.

Impact of the Code on Wages on Form 16

The new wage definition under the Code on Wages 2019 (one of the four Labour Codes) affects Form 16 in 2026:

Higher basic pay (50% of CTC minimum) means higher PF, which is fully exempt – good for employees
Gratuity provisioning increases (employer benefit shown in Form 16 under tax-free perks)
Allowance caps on HRA, conveyance and other exemptions may need recalculation
Salary restructuring during the year affects Form 16 reporting

Penalties for Form 16 Defaults

Late issuance: Rs 100 per day per certificate (Section 272A(2)(g))
Incorrect TDS deduction: Disallowance of 30% of expense in employer P&L (Section 40(a)(ia))
Late deposit of TDS: Interest 1.5% per month + penalty up to tax amount (Section 201)
Failure to file Form 24Q: Late fee Rs 200/day (Section 234E) + penalty up to Rs 1 lakh (Section 271H)