Form 16 explained: Part A, Part B and what to reconcile

Form 16 is the certificate of tax deducted at source (TDS) on salary that an employer issues to each employee for a financial year. Employees rely on it to file their income tax returns, so it must be accurate, reconciled and issued on time. For payroll, Form 16 is the visible proof that the whole year's TDS was handled correctly.

What Form 16 is

Form 16 certifies how much salary an employer paid an employee in a financial year, how much tax was deducted, and how that tax was computed. It has two parts, generated from different sources.

Part A: the deposit summary

Part A is generated from the TRACES portal of the income tax department, not typed by the employer. It shows:

• Employer and employee identity details (including PAN and TAN).
• The period of employment in the year.
• A quarter-by-quarter summary of TDS deducted and deposited.

Because Part A comes from TRACES, it reflects the TDS challans the employer actually filed. If a quarter's challan was short or filed late, Part A will show it. This is what makes Part A the anchor for reconciliation.

Part B: the computation

Part B is prepared by the employer and shows the detailed computation:

• Gross salary and the value of perquisites.
• Exemptions such as HRA under Section 10.
• The standard deduction.
• Chapter VI-A deductions (80C, 80D and others) under the old regime.
• Taxable income, tax on it, rebate, and the final tax.

Part B is where the employee sees exactly how their tax was arrived at, and where old-regime deductions appear.

When Form 16 is due

Form 16 for a financial year (April to March) is generally issued by 15 June of the following year, after the fourth-quarter TDS return (Form 24Q) is filed. Rushing Form 16 before the Q4 return is filed risks a mismatch with Part A.

The reconciliation that catches errors

The single most common Form 16 issue is a mismatch between the tax shown in Part A and the tax actually deposited during the year. If a quarter's challan was short, or a correction was filed late, the employee's Form 26AS and Part A will not match what payroll believed it deducted. The fix is to reconcile TDS deposited against payroll every quarter, not once at year-end.

The PAN problem

An employee without a valid PAN cannot be issued a proper Form 16, and TDS on their salary is deducted at a higher rate through the year. Collecting and validating PAN at onboarding prevents a painful year-end scramble and protects the employee from excess deduction.

Common mistakes to avoid

• Issuing Form 16 before the Q4 return is filed.
• Not reconciling Part A deposits against payroll each quarter.
• Missing employees with no or invalid PAN.
• Errors in Part B exemptions that do not match the year's declarations.

Frequently asked questions

What if I worked for two employers in a year? Each employer issues a Form 16 for their period; you combine them when filing.

Is Form 16 mandatory if no TDS was deducted? If tax was deductible but nil due to the rebate, practice varies; many employers still issue Part B for the record.

How does Form 16 relate to Form 24Q? Form 24Q is the quarterly TDS return; its annexure feeds Part B, and its challans feed Part A.

Key takeaways

• Part A comes from TRACES and shows deposited TDS; Part B is the employer's computation.
• Form 16 is due by 15 June after the year ends.
• Reconcile TDS quarterly to avoid Part A mismatches.
• Collect valid PAN at onboarding.

NeevHR generates Form 16 per employee, reconciles Part A deposits from filed challans, and flags any shortfall or missing PAN before you distribute.