Form 16 Explained — What Every Part Actually Means

Rohan gets his Form 16 every June. He downloads it, uploads it to ClearTax or his CA, and moves on. He’s never actually read it.

Most salaried employees treat Form 16 this way — a document you need for filing, not one you need to understand. That’s a mistake. Form 16 is the most detailed record of your tax life for the year. If your employer made an error, if your TDS doesn’t match your computation, or if your refund is smaller than expected — the answer is in here.

All figures follow FY 2025–26 rules. Verified against incometax.gov.in.

What Form 16 actually is

Form 16 is a TDS certificate. Your employer is legally required to deduct tax at source from your salary and deposit it with the government on your behalf. Form 16 is the proof that this happened — and it documents precisely how the tax was calculated.

It’s issued under Section 203 of the Income Tax Act. Every employer who has deducted TDS from your salary must issue it by 15 June of the following year. If you worked at two companies in a financial year, you get two Form 16s — one from each.

Form 16 has two parts.

Part A is government-generated. It comes directly from TRACES (the TDS reconciliation portal) and contains your TDS deduction and deposit details — quarter by quarter. Your employer downloads this from the government portal and hands it to you.

Part B is employer-generated. It contains the full salary breakup and tax computation — the “how we arrived at this number” section. This is where most of the useful information lives.

Part A — the TDS deposit record

Name and PAN of employer and employee. Check these first. A wrong PAN means the TDS credit won’t reflect in your Form 26AS or AIS — you’ll end up paying tax you’ve already paid.

Employer’s TAN. The Tax Deduction Account Number — your employer’s identifier for TDS purposes. Used internally; you don’t need to do anything with it.

Period of employment. If you joined mid-year or left before March, this shows the tenure. Useful when reconciling why full-year numbers don’t match.

Summary of quarterly TDS. The most important section of Part A. It shows TDS deducted each quarter, when it was deposited with the government, and the challan number. Cross-reference this against your Form 26AS to confirm the deposits landed correctly.

If “Date Deposited” is blank or shows “Pending,” your employer deducted TDS but hasn’t deposited it — a fairly common issue at smaller companies. You still owe the tax, but you can’t claim the credit until it’s deposited. Follow up with the finance team immediately.

Part B — the salary and tax computation

Part B is effectively a miniature ITR — a line-by-line breakdown of how your employer calculated your tax liability for the year.

Gross salary

Everything your employer pays before any deductions — basic salary, HRA, special allowance, LTA, food coupons, performance bonus, joining bonus, and any other CTC component.

For a ₹25 LPA employee in Bangalore with a standard structure:

Exemptions under Section 10 (old regime only)

Under the old regime, certain salary components are legally exempt from tax and are deducted from gross before the slab calculation begins. Under the new regime, these exemptions — including HRA and LTA — are not available. If you’re on the new regime, skip to Standard Deduction.

HRA exemption (Section 10(13A)). The exempt amount is the lowest of three numbers: actual HRA received, 50% of basic salary if in a metro city (40% if non-metro), or actual rent paid minus 10% of basic salary. You need rent receipts, and your landlord’s PAN is mandatory if annual rent exceeds ₹1 lakh.

For Rohan on old regime, paying ₹25,000/month rent in Bangalore (non-metro):

• HRA received: ₹5,00,000
• 40% of basic (non-metro): ₹4,00,000
• Rent paid − 10% of basic: ₹3,00,000 − ₹1,00,000 = ₹2,00,000

Exempt HRA = ₹2,00,000 (the lowest of the three).

LTA exemption (Section 10(5)). Exempt if you actually travelled and submitted bills. Maximum twice in a 4-year block. Rohan claimed ₹50,000.

Food allowance. Up to ₹26,400/year (₹50/meal × 2 meals × 22 working days × 12 months) is exempt under Section 10.

After these exemptions, Rohan’s net salary (old regime):

Standard deduction

Both regimes give every salaried employee a flat ₹75,000 standard deduction. No paperwork, no proof required.

• Old regime: applied to the net salary after Section 10 exemptions → taxable = ₹21,48,600
• New regime: applied directly to gross salary → taxable = ₹24,25,000

Deductions under Chapter VI-A (old regime only)

If Rohan is on the old regime, he can claim:

• 80C (PPF, ELSS, PF, home loan principal): Up to ₹1,50,000
• 80D (health insurance premium): Up to ₹25,000 self + ₹25,000 parents
• 80CCD(1B) (NPS self-contribution): Up to ₹50,000
• 24(b) (home loan interest): Up to ₹2,00,000

These only appear in Part B if Rohan submitted investment proofs to his employer before the year-end deadline. If he missed the deadline, the employer won’t apply these — but he can still claim them directly when filing his ITR.

Under the new regime, Chapter VI-A deductions don’t apply (except employer NPS contribution under 80CCD(2)).

Final tax comparison

The tax computation section in Part B shows a slab-by-slab breakdown, plus 4% health and education cess, plus any surcharge if your income exceeds ₹50 lakh.

The number that matters most: does Part A match Part B?

Part A shows how much TDS was actually deducted and deposited. Part B shows how much should have been deducted according to the salary computation. These must match.

If Part A TDS < Part B tax liability: you owe the difference at filing — either as self-assessment tax or advance tax going forward.

If Part A TDS > Part B tax liability: you’re entitled to a refund. This happens when your employer deducted excess TDS (common when year-end investment proofs weren’t submitted on time) or when you have deductions the employer didn’t account for.

Common problems — and what to do

TDS deducted but not deposited. Check your AIS on the income tax portal. If the credit isn’t there, contact your employer’s payroll team. If unresolved, file a grievance on the portal.

Wrong PAN on Form 16. Happens after HR system migrations. Ask your employer for a corrected Form 16. Don’t file with wrong PAN — the TDS credit won’t transfer to you.

Perquisites missing. If you received ESOPs, a company car, or other perquisites during the year, they should appear under “Perquisites under Section 17(2)” in Part B. If missing, your employer may have calculated tax incorrectly, which can lead to a demand notice after filing.

Two Form 16s from employers using different regimes. You can only use one regime for the full year in your ITR. Consolidate carefully — consult a CA if the gap is significant.

Bonus paid in April for FY 25–26 work. If your employer paid your FY 25–26 performance bonus in April 2026, it won’t appear in your FY 25–26 Form 16. It will land in FY 26–27’s Form 16 instead. This is a timing difference — keep your own records.

How to verify Form 16 in 3 minutes

1. Log in to incometax.gov.in
2. Go to AIS / TIS (Annual Information Statement / Taxpayer Information Summary)
3. Under “TDS/TCS,” find TDS from salary (Section 192)
4. Match the total against Part A of your Form 16

If the numbers match, you’re clean. If they don’t, investigate before filing.

→ Run your salary numbers on Unpakk — enter your CTC and see your expected tax liability to compare against Form 16.

Quick reference