Form 130 to replace Form 16 from FY27: How the new salary TDS certificate is expected to work

For decades, Form 16 has been a familiar part of every salaried employee’s financial life in India, the annual certificate from employers detailing salary income and the tax deducted at source (TDS). But that long-standing system is now set for a major overhaul.

FY 2025-26 will mark the final year of Form 16.

Beginning tax Year 2026-27, the government will replace it with a new document — Form 130 — under the revamped Income Tax Act 2025.

The purpose is the same; it’s your official salary TDS certificate.

Form 130 is issued by your employer once a year, after the financial year ends. Employees should receive it by June 15, 2027 for income earned between April 2026 and March 2027.

It is generated exclusively through the government’s portal, the employer cannot prepare it manually or offline. This is a key change from the old Form 16, where employers could fill in Part B themselves.

The form has three parts: Part A, Part B, and Part C.

Part A: The Identity Section

What to check:

• Your name and PAN — Make sure there are no spelling errors and the PAN matches your PAN card exactly. A mismatch here can cause your TDS credit to not reflect in your tax account.
• Your employer’s name, address, and TAN — The TAN (Tax Deduction Account Number) is what links your employer’s tax filings to your records.
• Period of employment — This is a new field in Form 130 that didn’t exist in Form 16. It shows the start and end date of your employment with this employer during the tax year. If you changed jobs mid-year, each employer will issue a separate Form 130 covering only their period. Make sure the dates are accurate and together they cover your full year.
• Quarter-wise TDS receipt numbers — These are reference numbers for each quarter (Q1 to Q4) when your employer deposited your TDS with the government. You don’t need to do anything with these numbers, but they confirm your tax was actually deposited.

If Part A shows an incorrect PAN, contact your employer’s HR or payroll team immediately before filing your ITR. Tax credits are linked to PAN, and errors here mean you may not get credit for tax already paid.

Part B: The TDS Summary

A quarter-wise summary of how much salary was paid to you and how much tax was deducted and deposited.

What to check:

• Total salary paid or credited — This is the gross amount credited to you across the year. Cross-check this against your payslips or bank credits. Major discrepancies could indicate a data entry error.
• TDS deducted (including surcharge and cess) — The total tax amount your employer cut from your salary across the year.
• TDS deposited to the government — This should match the TDS deducted. If there’s a difference, it could indicate your employer deducted tax but didn’t deposit it — a serious issue.
• Quarter-wise breakdown — The four rows (Q1: Apr–Jun, Q2: Jul–Sep, Q3: Oct–Dec, Q4: Jan–Mar) let you verify when tax was deposited. This is useful if there are gaps or mismatches.

Once you receive Form 130, compare Part B figures with Form 168 (the new Form 26AS, also called the Tax Passbook). Form 168 is an independent record maintained by the Income Tax Department showing all taxes deposited against your PAN. If the TDS in Form 130 doesn’t match Form 168, do not proceed with ITR filing until it’s resolved. The discrepancy could lead to a tax demand notice later.

Part C: The detailed salary computation

This is the biggest addition over the old Form 16. Part C breaks down exactly how your taxable income was calculated.

It has two sub-sections:

Annexure I — Salary breakdown (All salaried employees)

It covers:

Gross Salary

• Basic pay, DA, HRA, special allowance, bonus, commissions, and any other components
• Perquisites (non-cash benefits like company car, rent-free accommodation, ESOPs) — these are taxable and will appear here
• Profits in lieu of salary (like joining bonuses or notice period pay from a previous employer)

Allowance Exemptions

• HRA exemption — how much of your House Rent Allowance is exempt from tax (calculated based on rent paid, salary, and city)
• LTA, Children’s Education Allowance, and other standard exemptions

Net taxable salary (after exemptions)Deductions under chapter VI-A

• 80C investments (PPF, ELSS, LIC premiums, home loan principal, etc.)
• 80D health insurance premiums
• 80E education loan interest
• 80CCD NPS contributions, and other eligible deductions

Taxable income

• The final number your employer used to calculate how much tax to deduct from your salary

Tax liability

• Tax computed at applicable slab rates
• Surcharge and health & education cess added
• Rebate under Section 87A (if applicable — for those with income up to ₹12 lakh under the new regime)
• Final tax payable

TDS deductedWhat to check: If you submitted investment proofs to your employer (like 80C receipts, rent receipts for HRA), verify they’ve been correctly accounted for in Annexure I. Employers sometimes miss declared investments or compute HRA exemptions incorrectly. If you spot an error, you can still claim the correct deduction directly when filing your ITR — you are not bound by what your employer computed.

Annexure II — For senior citizens (aged 75+)

This applies only to senior citizens who have opted for the Section 393 scheme, where their bank computes and deducts tax on pension and interest income directly. In this case, the bank not an employer, issues the Form 130, and Annexure II covers pension income, interest income, applicable deductions, and tax deducted.

How to use form 130 to file your ITR

Once you have Form 130:

Step 1 — Collect all your Form 130s. If you worked with more than one employer during Tax Year 2026-27, you’ll have a separate Form 130 from each. All of them are needed.

Step 2 — Download Form 168 (new Form 26AS / Tax Passbook) from the Income Tax portal. This shows all TDS deposited against your PAN by all deductors — employers, banks, clients, etc.

Step 3 — Match Part B of Form 130 with Form 168. The TDS figures should match. If they don’t, contact your employer immediately. Do not file your ITR with a mismatch.

Step 4 — Use Part C (Annexure I) as your working document. The gross salary, exemptions, deductions, and taxable income figures from Annexure I directly feed into the relevant sections of your ITR form (ITR-1 or ITR-2 for most salaried individuals).

Step 5 — Add or correct deductions if needed. If you have deductions your employer didn’t account for (e.g., you forgot to submit proof of an 80C investment), you can still add them directly in your ITR.

Step 6 — File by the due date. For Tax Year 2026-27, the ITR due date for salaried individuals is 31 July 2027.

Quick Reference: Form 130 at a glance

 

What if you don’t receive Form 130?

Your employer is legally required to issue Form 130 by 15 June 2027. If you don’t receive it:

• Follow up with your HR or payroll team first, delays often happen because employers haven’t filed their quarterly Form 138 returns on time.
• You can check your TDS credit independently via Form 168 on the Income Tax portal at incometax.gov.in.
• If your employer refuses or is unresponsive, you can file a complaint on the TRACES portal or with the Income Tax Department.