Form 16 Replaced by Form 130 Under Income Tax Act 2025
India is entering a new phase in tax law. After more than six decades, the Income-tax Act, 1961 is being replaced by the Income-tax Act, 2025, effective from 1 April 2026. With this change, the government has also introduced draft Income-tax Rules, 2026, which completely restructure tax forms and compliance procedures.
One of the biggest highlights of this reform is simple but important:
Form 16 will be replaced by Form 130.
For salaried employees, employers, HR teams, and tax professionals, this is a significant change.
Why Is Form 16 Being Replaced?
The reform is part of a larger effort to simplify India’s tax system. Over time, tax compliance became complex due to multiple forms, repeated reporting, and confusing terminology.
The new framework focuses on:
- Reducing the total number of forms
- Making language clearer
- Removing duplication of information
- Making forms more technology-friendly
- Improving automation and pre-filled data
This is not just a renaming exercise. It is a structural shift in how tax compliance will work from 2026 onwards.
Form 16 vs Form 130 – What Changes?
Currently, Form 16 is the TDS certificate issued by employers to salaried employees. It contains:
- Salary details
- Tax deductions
- TDS deposited with the government
Under the new rules:
Form 16 will be replaced by Form 130.
The purpose remains similar — it will continue to serve as the salary TDS certificate. However, its format, structure, and reporting alignment will follow the new compliance system under the 2025 Act. Salary TDS changes 2026
Employees will still receive a certificate from their employer. Only the form number and structure will change.
Major Structural Changes in Tax Forms
One of the biggest reforms is the reduction in the total number of forms.
Earlier, there were nearly 399 prescribed forms. Under the draft 2026 rules, this number has been reduced to around 190.
Several commonly used forms are being renumbered, including:
- Form 13 → Form 128 (Lower or Nil TDS application)
- Form 24Q → Form 138 (Quarterly TDS return for salary)
- Form 26Q → Form 140 (TDS return for non-salary payments)
- Form 27Q → Form 144 (TDS return for non-residents)
- Form 26AS → Form 168 (Annual Tax Statement)
Audit reports, NGO compliance forms, and international tax forms have also been consolidated and renumbered.
Important Terminology Change: “Tax Year”
Another major reform is the removal of the terms:
- Previous Year
- Assessment Year
Both will now be replaced by a single term:
Tax Year
This change is expected to reduce confusion, especially for small taxpayers and first-time filers who often struggle to understand the difference between assessment year and financial year.
When Will These Changes Apply?
The new law will take effect from 1 April 2026.
However:
- Old forms will continue to apply for earlier tax years.
- The applicable form will depend on the relevant Tax Year, not just the filing date.
This means there will be a transition period where both systems may operate depending on the year involved.
What Should Employers and Professionals Do Now?
Although the rules are still in draft stage, preparation should begin early.
- Payroll software may require updates
- HR teams must understand the new form structure
- Tax professionals should start educating clients
- Businesses should review compliance processes
Early awareness will reduce confusion when the change becomes effective.
Frequently Asked Questions (FAQs)
1. Is Form 16 completely removed?
No, Form 16 is not removed immediately. It will be replaced by Form 130 under the Income Tax Act, 2025 from 1 April 2026. For earlier tax years, Form 16 will continue to apply.
2. When will Form 130 become applicable?
Form 130 will apply from 1 April 2026 onwards, based on the relevant Tax Year under the Income Tax Act, 2025.