Major Overhaul in TDS Certificate System Under New Income-tax Act, 2025

A significant change is set to impact salaried employees, pensioners, and certain senior citizens from April 1, 2026, as Form 130 will officially replace the long-familiar Form 16 as the primary Tax Deducted at Source (TDS) certificate. This transition aligns with the implementation of the new Income-tax Act, 2025, and the Income-tax Rules, 2026.

Form 130 will serve as the mandatory annual TDS certificate, issued by employers or specified banks, providing a comprehensive record of income paid, tax deducted, and tax deposited with the government.

Key Aspects of the New Form 130:

• Replacement of Form 16: From Financial Year 2026-27 onwards (i.e., income earned after April 1, 2026), taxpayers will receive Form 130 instead of Form 16.
• Comprehensive Structure: Form 130 is designed with a more detailed structure, comprising three parts:
  • Part A: Basic details of the employer/bank and the taxpayer.
  • Part B: A summary of payments, exemptions, and deductions.
  • Part C: A detailed computation of total income, tax payable, and TDS adjustments, potentially with annexures for salary or pension/interest income.
• System-Generated: Unlike the previous Form 16, Form 130 will be exclusively system-generated through the TRACES portal. It cannot be issued manually and its accuracy will depend directly on the timely and correct filing of quarterly TDS statements by deductors.
• Applicability: It will apply to salaried employees, pensioners, and specified senior citizens (those aged 75 years and above who have authorized their bank to compute and deduct tax on interest income).
• Issuance Deadline: The new Form 130 must be issued by June 15 of the financial year immediately following the tax year for which TDS was deducted.

This change is part of a broader effort to simplify India's tax laws and enhance transparency, standardization, and accountability in tax deduction and reporting processes. Taxpayers are encouraged to familiarize themselves with the new format and its implications for their tax filings.

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Livemint Correspondent is a research contributor specializing in Income Tax Forms.