Form 130 (formerly Form 16) is the salary TDS certificate prescribed under the Income-tax Act, 2025 and Income-tax Rules, 2026. It records salary income, deductions, exemptions, tax liability, and TDS details.
Form 130 (earlier Form 16) is the salary TDS certificate prescribed under the Income-tax Act, 2025 and Income-tax Rules, 2026. It records salary income, deductions, exemptions, tax liability, and TDS details. Therefore, employers and DDOs must prepare it accurately to help employees claim the correct tax credit while filing their income tax returns.
Step 1: Understand Form 130( Old Form 16)
Form 130 replaces the old Form 16 for Tax Year 2026-27. It is issued under Rule 215(1) read with Section 395(4)(b). Moreover, it contains Part A, Part B, and Part C along with relevant annexures.
Step 2: Gather Required Details
First, collect employer information such as name, PAN, TAN, address, and contact details. Similarly, verify the employee's name, PAN, address, and employment period. Accurate data helps avoid future filing issues.
Step 3: Complete Part A
Next, enter employer and employee details correctly. Thereafter, mention the applicable tax year and employment duration. If the employee changed jobs, include the relevant salary and TDS information.
Step 4: Prepare Part B
Then, prepare the salary and TDS summary. Reconcile payroll records with quarterly TDS returns. In addition, verify receipt numbers, tax deducted, and tax deposited details.
Step 5: Complete Part C and Annexure-I
After that, calculate gross salary by including salary, allowances, bonus, incentives, and perquisites. Subsequently, apply eligible exemptions and deductions. Finally, compute taxable income, tax liability, rebate, cess, surcharge, and relief, wherever applicable.
Step 6: Verify Exemptions and Deductions
Before finalising the computation, check all exemption and deduction claims carefully. Furthermore, verify supporting documents and ensure compliance with the Income-tax Act, 2025. Do not rely on previous-year calculations.
Step 7: Calculate Taxable Income
Next, subtract eligible exemptions and deductions from gross income. Thereafter, apply the applicable tax slab rates. Additionally, adjust rebate, surcharge, and cess before comparing the liability with TDS already deducted.
Step 8: Prepare Annexure-II, If Required
Annexure-II applies to specified senior-citizen interest income cases. Therefore, use it only where applicable and ensure that the correct income category is reported.
Step 9: Reconcile TDS Returns
Before issuing Form 130, compare annual TDS figures with quarterly returns. Moreover, verify salary details, PAN, tax deducted, and tax deposited. If discrepancies exist, correct them beforehand.
Step 10: Download and Issue Form 130
Finally, generate and verify Form 130 before issuing it to employees. According to Rule 215(1), employers must issue the certificate by 15 June 2027.
Key Changes for FY 2026-27
- Form 130 replaces Form 16.
- Section 395(4)(b) governs salary TDS certificates.
- Rule 215(1) prescribes Form 130.
- Section 392 covers salary TDS provisions.
- The certificate must be issued by 15 June 2027.
Conclusion
Preparing Form 130 requires accurate salary records, proper verification of deductions, and reconciliation of TDS returns. By following a systematic process, employers can ensure compliance with the Income-tax Act, 2025. Moreover, updated Excel-based tax software can simplify calculations, improve accuracy, and help organisations issue Form 130 within the prescribed deadline.
FAQs
1. What is Form 130?
Form 130 is the salary TDS certificate that replaces Form 16 under the Income-tax Rules, 2026.
2. Which section governs Form 130?
Section 395(4)(b) of the Income-tax Act, 2025, read with Rule 215(1).
3. What is the due date for issuing Form 130?
The due date is 15 June 2027.
4. How many parts does Form 130 contain?
It consists of Part A, Part B, and Part C, along with applicable annexures.
5. Can employers prepare Form 130 using Excel software?
Yes. Updated Excel-based tax software can automate salary calculations, deductions, taxable income, and TDS reporting.
DownloadAutomated One-by-One Process to Prepare Income Tax Form 130(Old Form 16) for FY2026-27
✅ Explains the complete step-by-step procedure for preparing Form 130 (Earlier Form 16) for FY 2026-27.
✅ Covers the provisions of the Income-tax Act, 2025 and Income-tax Rules, 2026.
✅ Highlights the replacement of Form 16 with Form 130 for salary TDS certification.
✅ Provides detailed guidance on preparing Part A and Part B of Form 130.
✅ Explains how to calculate salary income, exemptions, deductions, taxable income, and tax liability.
✅ Includes instructions for verifying employee and employer details to avoid errors.
✅ Describes the process of TDS reconciliation with quarterly returns.
✅ Covers the applicability of Annexure-I and Annexure-II under Form 130.
✅ Summarises important changes introduced under the new tax compliance framework from 1 April 2026.
✅ Mentions the relevant sections and rules, including Section 392, Section 395(4)(b), and Rule 215(1).
✅ Explains the importance of checking deductions and exemptions under the Income-tax Act, 2025.
✅ Provides the prescribed Form 130 issuance deadline of 15 June 2027.
✅ Helps employers, DDOs, accountants, and payroll professionals ensure accurate compliance.
✅ Recommends using updated Excel-based tax software for faster and error-free Form 130 preparation.
