Form 16, A new circular from the Central Board of Direct Taxes (CBDT) contains the updated guidelines for salary tax deductions under section 192 of the Income Tax Act of 1961. The changes made to the Finance Acts of 2024 and 2023 are also included.
With effect from July 1, 2023, the Income-tax (Fifth Amendment) Rules, 2023, have modified Form No. 16, which will be used for the 2024–2025 assessment year and any future assessments. According to the CBDT circular, Form No. 16 has been further altered by the Income-Tax (Eighth Amendment) Rules, 2024, effective from October 15, 2024.
In accordance with section 192 of the Income Tax Act of 1961, the Central Board of Direct Taxes (CBDT) has issued a circular detailing the revised rules for salary tax deductions. The changes made by the Finance Acts of 2024 and 2023 were also included in the circular. Tax returns for the financial year 2024–2025 (assessment year 2025–2026) will be subject to the CBDT circular, dated February 20, 2025.
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Changes in Form 16, Now more details of tax deduction will be available
Form 16 has recently undergone several modifications related to tax deductions and benefits. This will make it easier to understand the various taxes, deductions, and salary exemptions. The new Form 16 may be helpful if you struggle with tax filing.
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New column in Form 24Q, Now TDS/TCS reporting will be better
Form 24Q now has a new column called 388A. This column will provide information on additional TDS/TCS deductions to facilitate tax reporting for both employers and employees.
“Individuals are subject to Tax Collected at Source (TCS) for certain transactions, such as overseas remittances, purchasing expensive cars, and paying for foreign tour packages,” states by expert, with reference to the revisions in Form 16 and Form 24Q. Their total tax obligation, which includes interest, profits, rent, and pay, can be reduced by the TCS paid over the year. But in the past, businesses were unable to take TCS into account when determining the Tax Deducted at Source (TDS) on an employee’s pay. Employees suffered because they had to pay full TDS on their pay cheques even though they paid a sizable amount of TCS, which made cash flow difficult.
The same issue applied to TDS deducted by other payers, like on FDR interest and dividends, she adds. “Although employees could declare such income to their employers for TDS deduction, there was no provision for employers to account for TDS already deducted by other payers.”
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“In Budget 2024, the Government amended the Income Tax Act to allow employers to consider such TDS and TCS in the salary TDS calculations for financial year 2024-2025, benefiting many employees. To implement these changes, the formats of Form 16 and Form 24Q (Salary TDS return form) were updated in October 2024 to include sections for disclosing the TCS and TDS considered by employers,” said by another expert.
The updated formats of Form 16 and Form 24Q are included in the salary circular dated February 20, 2025, applicable for the Financial Year 2024-2025, along with a note explaining the changes, she adds.
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Tax on salary and perquisites, what has changed?
Important changes about salary and benefit taxes have been provided in the latest CBDT circular.
- New update in the definition of salary
Section 17(1) of the Income Tax Act has recently been modified in accordance with the Finance Act 2023.
The Central Government’s payment to the “Agniveer Corpus Fund” will now be included in the salary as well.
Agniveers who are enrolled in the Agneepath scheme will be affected by this.
This contribution will qualify for a tax advantage under section 80CCH.
- New update in the definition of perquisites
Now, some of the company’s benefits will now be considered perquisites and subject to taxes.
accommodations provided by your work that are free of rent.
Any discounted pricing is offered for the residential facility.
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New rates of surcharge in the old tax system, who will pay how much tax?
The calculation that follows will be used to determine the surcharge on your income if you paid taxes under the previous tax regime:
- Income between ₹50 lakh and ₹1 crore – 10%
- Income between ₹1 crore and ₹2 crore – 15%
- Income between ₹2 crore and ₹5 crore (excluding dividends and certain capital gains) – 25%
- Income above ₹5 crore (excluding dividends and certain capital gains) – 37%
- Income above ₹2 crore (including dividends and certain capital gains), not falling in the above categories – 15
It is crucial that you keep up with these changes if you are a salaried taxpayer. Form 16 and 24Q changes will simplify and clarify tax filing. You must adjust your tax planning based on the new surcharge rates if you were under the previous tax regime. Will you alter your tax planning now that you have the updated information?
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