Reading Form 16 and Filing Your ITR for AY 2026-27

How to Read Form 16 and File Your ITR Correctly for AY 2026-27

Form 16 is the single most important document for salaried taxpayers in India when filing their income tax return. It summarizes your entire salary structure, the tax your employer deducted on your behalf, and the exemptions and deductions factored into the computation. Understanding each section of Form 16 allows you to file an accurate ITR in India and reduce your exposure to compliance-related notices.

This comprehensive guide walks you through every section of Form 16, explains what to verify, and shows you how to transfer the data correctly into your ITR 1 or ITR 2 for AY 2026-27. Once you have your Form 16 data verified, you can proceed to ITR login and file on the new e-filing portal. For detailed ITR login instructions, see our guide on ITR Login & E-Filing Portal 2026.

When Will You Receive Form 16?

Your employer must issue Form 16 by June 15 of the year following the financial year. For FY 2025-26, this means you should receive it by June 15, 2026. If your employer has not issued it by this date, they are liable to pay a penalty of Rs 100 per day of default under Section 272A(2)(g).

The penalty cannot exceed the amount of TDS. If no tax was deducted from your salary during the year, the employer is not required to issue Form 16, though many still do.

Password for the PDF: Employers usually send Form 16 as a digitally signed PDF, and some protect it with a password. There is no single standard format; check the covering email or ask payroll.

Form 16 Part A: TDS Certificate

Part A is generated directly from the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal. Your employer downloads it after filing quarterly TDS returns (Form 24Q). Because it comes from the government's system, Part A serves as proof that your tax has actually been deposited with the government.

What Part A Contains

Quarter-Wise TDS Table

Part A breaks down the TDS into four quarters:

• Q1: April to June 2025
• Q2: July to September 2025
• Q3: October to December 2025
• Q4: January to March 2026

For each quarter, you will see:

• Total tax deducted
• Total tax deposited (should match the deducted amount)
• BSR code and challan serial number (references to the bank payment)
• Date of deposit

How to Verify Part A

1. Log in to the income tax e-filing portal (incometax.gov.in/iec/foportal/)
2. Download your Form 26AS for AY 2026-27
3. Check that the TDS amounts in Part A of Form 16 match the entries under "Part A: Details of Tax Deducted at Source" in Form 26AS
4. The employer's TAN and the amounts should match exactly

If there is a mismatch, contact your employer's payroll or accounts team. They may need to file a corrected TDS return (Form 24Q correction statement) on TRACES. Until the correction reflects in Form 26AS, the Income Tax Department will not allow you to claim that TDS credit.

Also check the salary figure in AIS against Part B. AIS sometimes shows salary from a previous employer or a gross figure that includes exempt allowances; report what is correct and give feedback on AIS where it is wrong.

Form 16 Part B: Salary Computation

Part B is prepared by your employer and contains the detailed salary computation for the financial year. This is where you find the breakup of your gross salary, exemptions, deductions, and tax calculation.

Section 1: Gross Salary

This section lists every component of your salary:

• Basic salary (Section 17(1)): Your basic pay for the year
• Value of perquisites (Section 17(2)): Car, accommodation, ESOP, or other non-cash benefits provided by the employer
• Profits in lieu of salary (Section 17(3)): Gratuity, commuted pension, leave encashment (if taxable)
• Total gross salary: Sum of the above three

Section 2: Exemptions Under Section 10

These are the tax-free allowances deducted from gross salary. They apply only under the old regime; under the new regime this section should be blank apart from items exempt under both regimes, such as gratuity, leave encashment on retirement and transport allowance for specially-abled employees.

• HRA exemption (Section 10(13A)): The exempt portion of House Rent Allowance, calculated as the lowest of: actual HRA received, rent paid minus 10% of salary (basic plus DA forming part of retirement benefits), or 50%/40% of that salary (metro/non-metro)
• Leave Travel Allowance (Section 10(5)): Actual travel expenses up to the exempt limit (two journeys in a block of four years)
• Other allowances: Children education allowance (Rs 100/month per child), hostel expenditure allowance (Rs 300/month per child), and any other specified exempt allowance. Transport allowance is no longer exempt for most employees (it was folded into the standard deduction from FY 2018-19); only specially-abled employees still get Rs 3,200 a month exempt, under both regimes

Section 3: Net Salary and Standard Deduction

After deducting Section 10 exemptions from gross salary, you get the balance. From this balance, the following are deducted:

• Standard deduction (Section 16(ia)): Rs 75,000 under the new tax regime; Rs 50,000 under the old regime for FY 2025-26
• Professional tax (Section 16(iii)): The amount of professional tax deducted by your employer (varies by state, maximum Rs 2,500 per year). Old regime only; it is not deductible under the new regime
• Entertainment allowance (Section 16(ii)): Applicable only to government employees, old regime only

The result is your Income chargeable under the head "Salaries".

Section 4: Income from Other Sources (as reported to employer)

If you have declared other income to your employer for TDS purposes, it appears here:

• Income from house property (rental income minus standard 30% deduction and home loan interest under Section 24)
• Income from other sources (interest on fixed deposits, savings accounts, etc.)

Important: This section only contains what you voluntarily disclosed to your employer. If you have additional income (capital gains, freelance income, other interest), you must add it separately while filing your ITR. Your employer does not have visibility into your complete financial picture.

Section 5: Gross Total Income

This is the sum of salary income (after the standard deduction) and any other income declared to the employer.

Section 6: Deductions Under Chapter VI-A

Under the old tax regime, this section lists:

• Section 80C (maximum Rs 1.5 lakh): EPF, PPF, ELSS, life insurance premium, tuition fees, NSC, 5-year FD, home loan principal
• Section 80CCC: Contribution to pension funds
• Section 80CCD(1): Employee contribution to NPS (within 80C limit)
• Section 80CCD(1B): Additional NPS contribution (Rs 50,000 extra deduction)
• Section 80CCD(2): Employer contribution to NPS (under the old regime, up to 14% of salary for Central and State government employees and 10% for others; not subject to the 80C limit)
• Section 80D: Health insurance premium (up to Rs 25,000 self, Rs 25,000 parents; Rs 50,000 for senior citizen parents)
• Section 80E: Interest on education loan
• Section 80G: Donations to approved funds
• Section 80TTA/80TTB: Savings account interest (Rs 10,000 limit for 80TTA; Rs 50,000 for senior citizens under 80TTB)

Under the new tax regime, Chapter VI-A is almost empty: the main deduction a salaried employee sees is Section 80CCD(2), at up to 14% of salary for every employer from FY 2024-25.

Perquisites to check in Section 17(2): employer contributions to PF, NPS and superannuation above Rs 7.5 lakh a year in total (and the interest on that excess) are taxable perquisites, as are ESOPs or RSUs allotted during the year, a company car used privately and rent-free accommodation. If a perquisite you received is missing, add it in your ITR; the department can see ESOP allotments and high employer contributions.

Section 7: Total Taxable Income and Tax Computation

The final section shows:

• Total taxable income (after all deductions)
• Tax payable on this income (based on the applicable slab rates)
• Rebate under Section 87A (if total income is within Rs 12 lakh under new regime for FY 2025-26)
• Surcharge (if applicable)
• Health and education cess (4%)
• Relief under Section 89 (for arrears of salary)
• Total tax payable
• TDS deducted during the year

How to Use Form 16 to File Your ITR

Step 1: Decide Which ITR Form to Use

• ITR 1 (Sahaj): If you are a salaried individual with total income up to Rs 50 lakh, income from one house property, other sources (interest, dividends), and agricultural income up to Rs 5,000. For AY 2026-27, you can also include long-term capital gains up to Rs 1.25 lakh in ITR 1.
• ITR 2: If your income exceeds Rs 50 lakh, you have capital gains above Rs 1.25 lakh, income from more than one house property, or foreign income/assets.

Step 2: Transfer Salary Details

On the income tax portal (incometax.gov.in/iec/foportal/), the ITR form auto-populates some salary details from your employer's TDS return. Verify these against Part B of your Form 16:

1. Enter gross salary as shown in Part B Section 1
2. Enter exemptions under Section 10 (HRA, LTA) as shown in Section 2
3. Confirm standard deduction and professional tax from Section 3
4. Enter Chapter VI-A deductions from Section 6

Step 3: Add Income Not in Form 16

Form 16 only reflects what your employer knows. You must separately add:

• Interest from all bank accounts (check your AIS for the full picture)
• Capital gains from mutual funds, stocks, or property sales
• Rental income from properties not disclosed to employer
• Freelance or business income
• Dividend income (taxable in your hands)

Step 4: Verify TDS Credits

Cross-check the TDS shown in Part A of Form 16 against your Form 26AS. Only claim TDS that appears in Form 26AS. If your Form 16 shows Rs 1,50,000 TDS deducted but Form 26AS shows only Rs 1,20,000, you can only claim Rs 1,20,000 in your ITR.

Step 5: Compute Tax and File

The portal auto-computes your tax liability. Compare this with the tax computation in Part B Section 7 of your Form 16. Small differences are normal if you have additional income or deductions not reported to your employer.

Multiple Form 16s (Job Change During the Year)

If you changed jobs during FY 2025-26, you will receive separate Form 16 certificates from each employer. Here is how to handle this:

1. Each Form 16 will cover only the period you worked with that employer
2. Add the salary income from both Part B annexures to get your total salary
3. Verify that exemptions like HRA are correctly calculated based on the period of employment with each employer
4. Add TDS from both Part A certificates (both should reflect in your Form 26AS under different TANs)
5. Watch for excess standard deduction: each employer may have applied the full Rs 75,000 standard deduction. In your ITR, you can claim it only once

Common trap: If you did not inform your second employer about the salary earned at the first job, they may have computed TDS assuming your total income is lower than it actually is. This results in short deduction of TDS, and you will have a tax liability to pay as self-assessment tax before filing.

What If Your Employer Has Not Issued Form 16?

You can still file your ITR without Form 16 by using:

• Payslips: Your monthly salary slips contain the breakup of each component
• Form 26AS: Shows the TDS deposited by your employer
• AIS/TIS: Provides salary income data reported by your employer
• Bank statements: Verify the net salary credited matches your calculations

Our guide to filing ITR without Form 16 walks through building the salary schedule and taking TDS credit step by step. However, you should follow up with your employer. Not issuing Form 16 by June 15 is a legal default, and the Rs 100/day penalty applies.

Key Differences: Form 16 vs Form 130 (From FY 2026-27)

For the current filing season (FY 2025-26, AY 2026-27), your employer issues Form 16. From FY 2026-27 (Tax Year 2026-27) onwards, the Income Tax Rules 2026 replace Form 16 with Form 130 (what changes in Form 130). The structure remains similar (Part A for TDS details, Part B equivalent for salary computation), but the legal references and section numbers change per the new Income Tax Act 2025.

If you are filing for AY 2026-27 now, you will receive Form 16, not Form 130.

Checklist Before Filing

Use this verification checklist after receiving your Form 16:

• PAN on Form 16 matches your actual PAN
• Period of employment is correct
• Salary components match your payslip totals for the year
• HRA exemption claimed matches actual rent paid and HRA received
• Standard deduction amount is correct (Rs 75,000 new regime / Rs 50,000 old regime)
• 80C investments match your actual contributions (EPF, PPF, ELSS, insurance)
• TDS amount in Part A matches Form 26AS exactly
• Tax regime (old or new) matches what you selected with your employer
• If you changed jobs, verify no double-counting of standard deduction

Deadline Reminder

The due date for ITR 1 and ITR 2 for AY 2026-27 was 31 July 2026, and it was not extended. If you have not filed yet, you can still file a belated return by 31 December 2026, with a late fee under Section 234F (Rs 5,000, or Rs 1,000 if total income is up to Rs 5 lakh) and interest under Section 234A on any unpaid tax. A belated return must use the new regime if you have no business income, because the old regime can be chosen only in a return filed by the due date.

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This guide is based on the Income Tax Act, 1961 as applicable to AY 2026-27, CBDT notifications, and current rules published on incometax.gov.in/iec/foportal/. Information verified against ClearTax, Tax2win, and Bajaj Finserv reference documentation. Tax laws are subject to amendments; always confirm current rules on the official income tax portal before filing.

Frequently Asked Questions

What should I do if TDS in my Form 16 does not match Form 26AS?

Ask your employer's payroll team to check their Form 24Q return, since TDS shows in Form 26AS only after the employer files it correctly with your PAN. If there is an error, they must file a correction statement on TRACES. You can claim only the TDS that appears in Form 26AS, so wait for the correction before filing if the difference is large.

Can I claim HRA or 80C in my ITR if I did not submit proofs to my employer?

Yes, if you choose the old regime in your return. Your employer may have ignored them for TDS, but you can still claim HRA exemption, Section 80C, 80D and other old-regime deductions directly in the ITR and get a refund of excess TDS. Keep rent receipts, the rent agreement and investment proofs, since the claim may be questioned later.

Can I choose a different tax regime in my ITR from the one I told my employer?

Yes. The regime you declare to your employer only decides how much TDS is deducted. A salaried person without business income can choose either regime while filing the ITR, as long as the return is filed by the due date under Section 139(1). The tax payable or refund is then recomputed on the regime you finally choose.

How do I file ITR with two Form 16s after a job change?

Add the salary figures from both Form 16 Part B documents and claim the standard deduction only once, Rs 75,000 under the new regime or Rs 50,000 under the old regime. Add TDS from both employers, which should appear in Form 26AS under separate TANs. If neither employer knew about the other salary, you will usually owe balance tax, payable as self-assessment tax before filing.

What is the difference between Form 16 Part A and Part B?

Part A is the TDS certificate your employer downloads from TRACES. It shows the employer's TAN and PAN, your PAN, the period of employment and quarter-wise TDS deducted and deposited. Part B is prepared by the employer and shows the salary computation: gross salary, Section 10 exemptions, standard deduction, Chapter VI-A deductions, the regime applied and tax payable. Verify Part A against Form 26AS and Part B against your payslips.

My employer deducted TDS from my salary but it is not in Form 26AS. What can I do?

Ask the employer to file or correct the Form 24Q statement, since you can claim credit in the ITR only for TDS that appears in Form 26AS. If the employer deducted tax but never deposited it, Section 205 bars the department from demanding that tax from you directly to the extent it was deducted. Keep payslips showing the deduction and raise a grievance on the e-filing portal if the demand arises.

Can I file my ITR without Form 16?

Yes. Form 16 is not attached to the return. You can compute salary from your payslips, verify TDS in Form 26AS and use the salary details in AIS and TIS, which the portal also pre-fills. Your employer is still required to issue Form 16 by 15 June, and failure attracts a penalty of Rs 100 per day under Section 272A(2)(g), capped at the TDS amount.