As the new financial year 2025–26 kicks off, taxpayers are gearing up for Income Tax Return (ITR) filing. In a move to make the process more streamlined and accurate, the Income Tax Department has not only released ITR Forms 1 and 4, but also updated the format of Form 16 — a key document for salaried individuals. These changes are aimed at increasing transparency, simplifying data entry, and ensuring better accuracy in tax calculations.
Form 16 is a certificate issued by employers to salaried employees. It acts as proof that Tax Deducted at Source (TDS) has been deducted from the employee's salary and deposited with the Income Tax Department. More than just a TDS certificate, it is a comprehensive summary of salary income and tax-related details for the financial year.
It is divided into two parts:
Part A: Contains details of the employer and employee, PAN, TAN, the amount of tax deducted, and deposited with the government on a quarterly basis.
Part B: A detailed statement of salary components, exemptions, and deductions—such as:
Tax-exempt allowances under Section 10 (like HRA, LTA)
Deductions under Sections 80C, 80D, etc. (like LIC premiums, PPF, health insurance)
This year, the Central Board of Direct Taxes (CBDT) has revamped the structure of Form 16 to align it more closely with the newly notified ITR forms. The main objectives behind the changes are data consistency, automation, and error reduction.
Enhanced salary break-up: More granular information on salary components such as basic pay, allowances, perquisites, bonuses, etc.
Standardized deduction reporting: Uniform formats for claiming deductions under various sections (80C, 80D, 80E, 80G, etc.)
More transparency in exemptions: Separate fields for each exemption claimed under Section 10.
Pre-filled ITR support: The new format will support better integration with the Income Tax Portal’s pre-filled ITR forms, making filing faster and more accurate.
These changes are expected to help taxpayers avoid mismatches between Form 16 and Form 26AS or AIS (Annual Information Statement), which often lead to notices or scrutiny.
Simplifies ITR Filing: It serves as the base document for filing ITR, particularly for Form ITR-1 and ITR-2.
Proof of Income: Required for loan applications, visa processing, or background verification.
Helps Claim Tax Refunds: If excess TDS has been deducted, Form 16 helps in calculating and claiming refunds.
Legal Compliance: It acts as a record of tax compliance in case of future tax scrutiny or queries from the IT Department.
Employers are required to issue Form 16 by June 15, 2025, for the financial year ending March 31, 2025. Employees should cross-check all details, especially deductions and exemptions claimed during the year, to ensure there are no errors before filing returns.
The new format of Form 16 is a step toward simplified, transparent, and error-free ITR filing. Salaried individuals are advised to stay updated with these changes and ensure that their employers issue the revised version. This not only speeds up the tax-filing process but also reduces the chances of discrepancies and unwanted legal hassles.
