Income-tax Act, 2025: What Changes for Salary TDS and Payroll
Published: 03 Nov 2026 · Updated: 03 Nov 2026 · Author: NeevHR team
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026, and the Income-tax Rules, 2026 replaced the 1962 Rules. For payroll, most of the work is the same; what changes is the vocabulary: 'tax year' instead of 'previous year', new section numbers and new form numbers. This guide maps the old references to the new ones so payslips, declarations, challans and certificates use the right names.
Old and new form numbers for payroll
The Income Tax Department publishes the full list of forms under the Income-tax Rules, 2026 with the 1962 form each one replaces. These are the ones a payroll team uses.
| Purpose | Up to Tax Year 2025-26 (1962 Rules) | From Tax Year 2026-27 (2026 Rules) |
|---|---|---|
| Salary TDS certificate to the employee | Form 16 | Form 130 (certificate under section 395) |
| Quarterly statement of TDS on salary | Form 24Q | Form 138 (statement under section 397(3)(b)) |
| Perquisites and profits in lieu of salary | Form 12BA | Form 123 |
| Employee's claims for deductions and exemptions | Form 12BB | Form 124 (section 392(5)(b)) |
| Income from a previous employer or other heads, for salary TDS | Form 12B and 12BAA | Form 122 (section 392(4)(a)) |
| TDS certificate other than salary | Form 16A | Form 131 |
| Quarterly TDS statement other than salary | Form 26Q | Form 140 |
| Annual Information Statement | Form 26AS | Form 168 |
| Application for TAN | Form 49B | Form 134 and 135 (section 397) |
| Lower or nil deduction certificate | Form 13 | Form 128 (section 395(1)) |
Section numbers payroll documents refer to
Section numbers in the form descriptions are taken from the department's form list. Check any section you quote in a letter or policy against the Act itself.
| Topic | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| TDS on salary | Section 192 | Section 392 |
| Employee's evidence of claims | Section 192(2D) | Section 392(5)(b) |
| TDS certificates | Section 203 | Section 395 |
| TAN and quarterly statements | Sections 203A and 200(3) | Section 397 |
| The year income is taxed in | Previous year and assessment year | Tax year |
What stays the same
- The employer still estimates the year's salary income, applies the regime the employee chooses, and deducts tax evenly over the remaining months.
- Salary TDS is still deposited monthly: by the 7th of the following month, and by 30 April for tax deducted in March.
- Employees still declare investments and rent at the start of the year and give proof before the last months, now on Form 124 instead of Form 12BB.
- Quarterly statements and an annual certificate to each employee continue, under the new form numbers.
Challans and payment codes
Deposits for Tax Year 2026-27 are made under the Income-tax Act, 2025, so choose the salary code for section 392 on e-Pay Tax rather than the old section 192 code. The quarterly Form 138 statement carries the challan details, so each challan must match the deductions it covers.
Checklist for payroll from April 2026
- 1
Rename documents
Payslips, declaration forms, letters and policies should say Form 130, Form 124 and Form 123, and 'tax year', for 2026-27 onwards.
- 2
Keep two sets for one year
Certificates and corrections for Tax Year 2025-26 still use Form 16 and Form 24Q; only 2026-27 onwards uses the new forms.
- 3
Check payment codes
Salary TDS deposited for 2026-27 uses the section 392 codes; reconcile each challan before the quarterly statement.
- 4
Re-collect declarations
Ask employees to submit claims on Form 124 for Tax Year 2026-27.
- 5
Update your software
The Form 138 file format and the Form 130 layout are new; confirm your payroll system generates them.
Sources
- Income Tax Department: Forms as per Income-tax Rules, 2026 (old and new form numbers)
- Income Tax Department e-filing: TDS compliance
- Income Tax Department
Last reviewed 03 Nov 2026. Rules change by notification; check the source before you act.