Published 9 May 2026
What Stays, What Changes Under the Income-tax Act, 2025
Form 16 -- the salary tax-deducted-at-source certificate -- has been the most widely-recognised tax document in India for six decades. With the Income-tax Act, 2025 framework taking effect from 1 April 2026, the entire tax-deducted-at-source certificate scheme is being rationalised. This article walks through the form-renumbering proposals, what stays the same, and what changes for employers and employees.
As of publication, the Central Board of Direct Taxes is finalising the new form schedule under the 2025 Act. This article reflects the proposed framework subject to final notification. Whether the new salary certificate is numbered Form 130 or otherwise depends on the formal Central Board of Direct Taxes Notification expected before tax year 2026-27 commences.
The Familiar Form 16 (Income-tax Act, 1961 Framework)
Form 16 has two parts. Part A is generated by the Tax Deduction Reconciliation Analysis Correction Enabling System (TRACES) portal -- it captures employer Tax Deduction Account Number, employee Permanent Account Number, tax-deducted-at-source deposited per quarter, Bank Sort and Routing codes, challan numbers, and deductor verification. Part B is prepared by the employer -- it carries the detailed salary breakup, allowances, perquisites, deductions under section 16 (standard deduction / professional tax / entertainment allowance), Chapter VI-A claims (sections 80C / 80D / 80E etc.), gross income, tax computed, tax-deducted-at-source deducted, and the balance refund or payable.
Form 16 is to be issued by 15 June following the financial year (per Rule 31 of the Income-tax Rules, 1962). Companion forms include Form 16A for non-salary tax-deducted-at-source (interest, contractor payments, professional fees), Form 16B for tax-deducted-at-source on immovable property under section 194-IA, Form 16C for tax-deducted-at-source on rent by individuals under section 194-IB, and Form 16D for tax-deducted-at-source under section 194M payments.
The Income-tax Act, 2025 Framework
The 2025 Act consolidates tax-deducted-at-source provisions into Chapter XIX (sections 390 to 430). Section 397 (Compliance and Reporting) is the master compliance provision, replacing sections 200(3) / 203 / 203A / 203AA / 206 of the 1961 Act and Rules 31 / 31A / 31AA / 26AS together. Substantively, the certificate framework continues unchanged. The Central Board of Direct Taxes is in the process of issuing rules under the 2025 Act, expected to renumber forms in a unified series.
What Stays the Same
Element | Position (Both Acts) |
|---|---|
Average-rate computation methodology | Section 392 of the 2025 Act / section 192 of the 1961 Act |
Quarterly tax-deducted-at-source statement filing | Form 24Q / 26Q / 27Q / 27EQ schedule preserved |
Standard deduction in new regime | INR 75,000 (Finance Act, 2024 No. 2) |
Standard deduction in old regime | INR 50,000 |
Multi-employer credit mechanism | Section 392(5) of 2025 / Form 12BAA framework under Finance Act, 2024 |
Tax-on-tax for non-monetary perquisites | Section 392(7) of 2025 / sections 192(1A) and (1B) of 1961 |
Annual certificate by 15 June | Preserved (subject to revised due dates per new rules) |
New regime as default; old regime via Form 10-IEA election | Preserved under both Acts |
What Could Change
Likely Change | Practitioner Implication |
|---|---|
Form numbering rationalisation | Update payroll software with new form schedule; client communication for transition year |
Possible consolidation of Form 24Q and Form 16 | Single unified salary tax-deducted-at-source schedule may emerge |
Annual Information Statement / Taxpayer Information Summary integration | Certificate may auto-populate into the taxpayer's annual statement -- reducing manual reconciliation |
Digital-first issuance | Digital Signature Certificate / Electronic Verification Code mandatory; physical certificates phased out |
Permanent-Account-Number-Aadhaar real-time check | Certificates auto-block where Permanent Account Number is inoperative |
Income-tax Return pre-filling integration | Form 16 data flows directly into pre-filled Income-tax Return |
What Practitioners Should Do
- For financial year 2025-26 (assessment year 2026-27): continue using Form 16 / 16A under the 1961 framework.
- For financial year 2026-27 (tax year 2026-27 under 2025 Act): wait for the Central Board of Direct Taxes Notification on the new form numbers.
- Update payroll software to flag dual-Act compliance -- some clients will be in transition.
- Train Human Resources teams on multi-employer credit (Form 12BAA replacement under 2025 framework).
- Verify employee Permanent-Account-Number / Aadhaar linkage status quarterly via Compliance Check on the Income Tax Portal.
- Issue financial year 2025-26 Form 16 by 15 June 2026.
- Reconcile employee Form 16 with the Annual Information Statement / Taxpayer Information Summary quarterly to catch mismatches early.
Key Takeaways
- The Form 16 framework substantively continues under section 397 of the Income-tax Act, 2025.
- Form-number rationalisation expected -- pending Central Board of Direct Taxes Notification.
- Financial year 2025-26 returns: Form 16 unchanged. Financial year 2026-27: new form schedule.
- Average-rate computation, multi-employer credit, regime election -- all preserved.
- Watch for Annual Information Statement / Taxpayer Information Summary auto-population integration.
- Payroll software must support both 1961 and 2025 frameworks during transition.
Disclaimer: This article is for general information only. It does not constitute tax / legal advice. Please consult a qualified Chartered Accountant or tax practitioner for advice specific to your circumstances. The legal position is current as of FA 2024 (No. 2) / FA 2025; subsequent amendments and CBDT notifications may modify the position.