Form 16 — What It Is, Who Needs It, and How to Generate It (2025 Guide)

Form 16 is a TDS certificate issued by employers to employees at the end of every financial year. It is one of the most important compliance documents in Indian payroll — required by employees for income tax filing, bank loan applications, and visa processing.

What is Form 16?

Form 16 is a certificate issued under Section 203 of the Income Tax Act, 1961. It certifies that the employer has deducted TDS from the employee's salary and deposited it with the government. It serves as proof of income and tax paid for the financial year.

Form 16 — Part A vs Part B

Who must issue Form 16?

Every employer who has deducted TDS from employee salaries is required to issue Form 16. If an employee's annual income is below the taxable threshold (₹2.5 lakh for below 60 years), no TDS is deducted and Form 16 is not mandatory — though many employees request it as proof of income anyway.

Form 16 deadline

Late issuance attracts a penalty of ₹100 per day of delay under Section 272A(2)(g).

What goes into Part B — the salary details

• Gross salary (Basic + HRA + special allowance + other components)
• HRA exemption under Section 10(13A)
• Standard deduction (₹50,000 for FY 2024-25)
• Professional Tax paid
• All deductions claimed under Chapter VIA — Section 80C, 80D, 80G, etc.
• Net taxable income
• Tax calculated and TDS deducted month-by-month

Generating Form 16 automatically

Payroll software like Peymatrix generates Form 16 (both Part A and Part B) automatically at year-end for every employee, based on the salary data, TDS deducted, and declarations collected during the year. Employees can download their Form 16 directly from the self-service portal.