New Form 16: Key changes in Form 16 You Must Know

  • Blog|Income Tax|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 16 January, 2021
Every employer who deducts tax at source on salary of his employees is liable to issue a certificate in Form 16.  The TDS Certificate has two Parts – Part A and Part B.  Part A of the certificate contains the details of tax deducted on salary. Part B contains the details of the salary and various allowances, deductions, rebates, etc., claimed or allowed to the employee. Deductor shall authenticate the certificate either by using manual signature or by using digital signature. 
With a view to restrict the employees from claiming false exemption or deductions or to have a common structure among all the organisations, a series of changes have been made in Form 16. Now, employer would be able to generate Part-B of Form 16 from Traces website. Further, many changes have been made to Form 16 in line with the changes made in Form 24Q, i.e., the statement for tax deducted on salary. Revised Form 24Q mandates the deductor to furnish various additional details such as break up of salary and deductions, under section 87A, rebate, etc.

The key changes in Form 16 are as follows:-

Online generation of Part B of Form 16-

Previously employers were required to prepare Part B of the Form 16 on their own either with help of the software or otherwise. Now the deductors would be able to issue the same by downloading it from Traces website in respect of all the sums deducted on or after April 1, 2018. This will help to reduce the compliance burden of the tax deductors.

Clause wise reporting of allowances and deductions: 

Previously employers were required to enter the description of exempt allowances as well as deductions manually. Now Form 16 has been amended wherein deductors have to mention the amount of exempt allowance or deductions before earmarked fields. This change is made with a view to incorporate a common structure of TDS certificate. Further, it will also help in matching the deductions or exemptions claimed by employee in his return of income with those specified in the TDS certificate. It will also restrict the employees from claiming false exemptions or deductions. The list of exemptions and deductions which are specifically required to be reported are as follows:-

Exemption under section 10:


a) Leave travel concession [Section 10(5)] b) Gratuity [Section 10(10)] c) Commuted Pension [Section 10(10A)] d) Leave Salary Encashment [Section 10(10AA)] e) House Rent Allowance [Section 10(13A)]

Deduction under Chapter VI-A:


a) Life Insurance Premium or contribution to PF etc. [Section 80C] b) Contribution to Pension funds [Section 80CCC] c) Employee’s contribution to Notified Pension scheme (NPS) [Section 80CCD(1) and Section 80CCD(1B)] d) Employer’s contribution to Notified Pension scheme (NPS) [Section 80CCD(2)] e) Medical insurance premium [Section 80D] f) Interest on higher education loan [Section 80E] g) Donation to notified funds, charitable institution etc. [Section 80G] h) Deduction in respect of interest from saving account [Section 80TTA]

Reporting of other Income: 


Earlier employers were required to furnish the details of other income, reported by employee, by providing the description themselves. Revised form 16 requires the breakup wherein separate clauses have been provided for reporting of Income or loss under the head house property and other sources.

Standard deduction:


The Finance Act, 2018 introduced the standard deduction of up to Rs. 40,000 for the salaried persons. The new Form 16 has been revised to incorporate the effect of this amendment.  

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