Form 16
What is Form 16?
Form 16 is a certificate issued by an employer to an employee under the Indian income tax rules, showing the tax deducted at source from salary during a financial year and deposited with the government. It also lists the salary paid, exemptions, deductions and the final tax computation. Form 16 is the main document salaried people use to file their income tax return, and it is checked closely by banks, visa offices and new employers.
For US companies with employees in India, Form 16 is a mandatory part of payroll compliance. Indian employees expect it every year, and a late or wrong certificate causes real hardship at filing time.
Why Form 16 Matters
- Proves that tax was deducted and paid on behalf of the employee. - Helps employees file accurate returns. - Supports loan, visa and credit applications. - Reduces mismatches between employer and tax department records. - Shows that the employer follows tax compliance rules.
Parts of Form 16
The certificate has two parts. Part A is generated from the government TRACES portal and shows the employer and employee details, PAN and TAN, quarterly TDS deducted and deposited, and challan details. Part B is prepared by the employer and shows salary break-up, allowances, exemptions, deductions, taxable income and tax payable.
Part A in Detail
Part A is system generated, authenticated and downloaded after TDS returns are filed and the deductions match. It confirms what the employer has deposited against the employee’s PAN. If the employer has not filed returns or deposited tax, Part A cannot be generated correctly.
Part B in Detail
Part B includes gross salary, perquisites, allowances exempt under the chosen regime, standard deduction, deductions such as provident fund, NPS and insurance, and the tax on total income. It should match the salary slips and payroll ledger, and any bonus or settlement paid during the year.
Due Date
Employers must issue Form 16 by 15 June following the end of the financial year. Many issue it earlier, in May, to help employees file returns. Delay can attract a penalty per day for the employer. Check current rules, because forms, sections and dates may change under the Income-tax Act, 2025.
Who Needs Form 16
Every employee whose salary is subject to TDS should receive it. Employers deduct tax only if the salary exceeds the basic exemption limit after deductions. If no tax is deducted, a certificate is not mandatory, but many employers still give a salary statement.
Employees With Multiple Employers
An employee who changed jobs during the year will receive Form 16 from each employer for the period worked. The employee must combine both when filing the return. The new employer may consider the previous employer’s income if the employee submits Form 12B.
Tax Regimes and Declarations
Employees choose between the old and new tax regimes, and declare investments and exemptions to payroll. The calculation in Part B depends on this choice. Collect declarations early, verify proofs in the last quarter and record the final regime clearly.
Corrections
If there is an error, the employer should file a TDS correction return and then reissue Form 16 with the right figures. Inform the employee about the change. Keep a record of what was corrected and why.
Common Form 16 Mistakes
Frequent errors include late filing of returns, mismatched PAN, wrong regime applied, missed perquisites, unverified deductions, lack of Form 12B for job changers and failure to share the certificate in time.
Example Timeline
A company in Bengaluru runs payroll all year, deposits TDS monthly, files quarterly returns by the due dates and collects investment proofs in February. After the March payroll, it finalises each employee’s tax, generates Part A from the portal in May and prepares Part B. All certificates are emailed by 31 May. Employees file returns smoothly. This planned approach makes Form 16 straightforward.
Checking Form 16 Before Filing
Employees should compare Form 16 with their salary slips and the Annual Information Statement on the tax portal. If figures differ, ask the employer to correct them. A careful check prevents notices later.
Digital Delivery and Security
Send Form 16 by secure email or the HR portal, password protected, and keep a log. Do not share certificates over open chat apps. Store copies securely under data protection rules.
Employees Who Have Left
Former employees may ask for Form 16 after exit. Provide it by the due date and keep contact details current. The final settlement should include a note on when and how it will be sent.
Offshore Teams
For employees paid by an Indian employer on behalf of a US company, the certificate comes from the Indian employer of record. Make sure the payroll entity holds a valid TAN and files returns on time.
Perquisites and Allowances
Part B must show the value of perquisites such as company cars, interest-free loans, stock options and housing. Allowances such as house rent allowance and leave travel allowance are exempt only under the old regime and only against proof. Payroll should classify each item correctly during the year, because adjustments in March can sharply change the take-home pay for employees.
Standard Deduction and Other Deductions
The standard deduction is allowed for salaried employees under both regimes, at a limit set by the law, while deductions for provident fund, life insurance, home loan interest and the National Pension System apply only under the old regime, except for employer NPS contributions. Collect proofs by a fixed date, check them for accuracy and store them with the payroll file.
Reconciling With Returns and the AIS
Before issuing certificates, reconcile payroll to the TDS returns and the quarterly statements. Compare PAN details, challan numbers and amounts, and fix any difference with the tax department before the certificate is issued. Keep a log of each correction with the date and the person who approved it. Mismatches cause Part A errors and notices to employees, so a quarterly reconciliation saves time and protects trust in the process.
How kaam.work Supports Form 16 Issuance
kaam.work is an Employer of Record that employs your India team and runs payroll. We calculate TDS each month, collect declarations, file quarterly returns, download Part A, prepare Part B and issue Form 16 before the due date.
We also correct errors, support employees with questions and keep records. With kaam.work, Form 16 is accurate and on time every year.
Frequently asked questions
- What is Form 16?
- A certificate of TDS on salary issued by the employer.
- When is it due?
- By 15 June after the financial year, subject to current rules.
- What are its parts?
- Part A from TRACES and Part B prepared by the employer.
- Do job changers get two?
- Yes, one from each employer.
- Can an Employer of Record issue it?
- Yes. kaam.work prepares and delivers it.
