Form 16 Explained: How to Read It & File Taxes

Part A: The TDS Certificate

Part A is the official TDS certificate generated from the TRACES portal. It is a standardised format that contains:

• Employer details — name, address, TAN (Tax Deduction Account Number), and PAN of the employer
• Employee details — your name, PAN, and period of employment during the financial year
• Summary of tax deducted and deposited — quarterly breakdown of TDS deducted from your salary and deposited with the government (challan details, BSR code, date of deposit)
• Total tax deducted and deposited — aggregate TDS for the financial year

The most critical check is to match the total TDS in Part A with your Form 26AS. If these do not match, your employer may not have deposited the TDS. This is rare with large companies but can happen with smaller employers. The TDS credit you receive is based on Form 26AS, not Form 16.

Part B: Salary Breakup and Tax Computation

Part B is where the real detail lives. It is prepared by your employer (not generated from TRACES) and contains your complete salary and tax computation. Here is what each section means:

1. Gross Salary (Section 17(1))

This includes your basic salary, dearness allowance (DA), HRA, special allowances, bonus, commission, and any other salary component. It is the total salary before any exemptions or deductions. Verify this against your annual salary slips total. Use our Income Tax Calculator to model how this gross salary translates to tax under both regimes.

2. Allowances Exempt under Section 10

These are salary components that are fully or partially exempt from tax. The most common ones are:

• HRA exemption (Section 10(13A)) — the most significant exemption for most salaried employees. Computed as the minimum of (a) actual HRA received, (b) rent paid minus 10% of basic salary, (c) 50% of basic for metro cities or 40% for non-metro. Only available under the Old Regime.
• LTA (Leave Travel Allowance) — exempt for actual travel expenses within India, claimable twice in a block of four years. Only under Old Regime.
• Standard deduction — ₹75,000 flat deduction available under both Old and New Regime for FY 2025-26.

3. Deductions under Chapter VI-A

This section shows deductions you claimed through investment proofs submitted to your employer:

• Section 80C — up to ₹1.5 lakh (EPF, PPF, ELSS, life insurance, tuition fees)
• Section 80D — health insurance premium (₹25K self + ₹25K/₹50K parents)
• Section 80CCD(1B) — additional ₹50,000 for NPS self-contribution
• Section 80CCD(2) — employer NPS contribution (available in both regimes)
• Section 24(b) — home loan interest up to ₹2 lakh

If you did not submit proofs to your employer for all your investments, the Form 16 will show lower deductions. You can still claim the full deductions when filing your ITR — just ensure you have the supporting documents.

4. Tax Computation

The final section shows the step-by-step tax computation: gross total income minus deductions equals taxable income, tax on that income, surcharge (if applicable), health and education cess (4%), and finally the total tax liability. The TDS deducted is shown against this liability.

For FY 2025-26 under the New Regime, the slabs are: 0-4L nil, 4-8L at 5%, 8-12L at 10%, 12-16L at 15%, 16-20L at 20%, 20-24L at 25%, above 24L at 30%. Section 87A rebate makes income up to ₹12 lakh effectively tax-free. Under the Old Regime, the slabs are: 0-2.5L nil, 2.5-5L at 5%, 5-10L at 20%, above 10L at 30%.

How to Use Form 16 to File Your ITR

When filing ITR on the e-filing portal, most of the pre-filled data comes from Form 26AS and AIS. However, you should use Form 16 Part B to verify the pre-filled figures and manually enter any deductions that were not captured. Here is the mapping:

• Gross salary in ITR → matches "Gross Salary" in Form 16 Part B
• Exempt allowances → matches "Allowances exempt under Section 10"
• Standard deduction → ₹75,000 (auto-filled in ITR)
• Chapter VI-A deductions → enter your actual deductions, not just what Form 16 shows (you may have additional investments)

Multiple Form 16s (Job Change)

If you switched jobs during FY 2025-26, each employer issues a separate Form 16 covering their employment period. When filing ITR, you must add the salary and TDS from all Form 16s. A common issue: if you did not declare your previous employer's income to the new employer, your new employer may have under-deducted TDS. The shortfall must be paid as self-assessment tax before filing.

To understand how your total CTC translates to in-hand pay across employers, use our Salary Calculator. For the complete filing process after reading your Form 16, follow our step-by-step ITR filing guide.