Form 16 and 24Q formats revised! New tax deduction rules you must know
The Central Board of Direct Taxes (CBDT) has issued a new circular, which states the new rules for tax deduction from salary under section 192 of the Income Tax Act, 1961. It also includes the changes made in the Finance Act 2024 and 2023.
“The Form No. 16 has been amended vide the Income-tax (Fifth Amendment) Rules, 2023, w.e.f. 1-7-2023 and shall be applicable for the assessment year 2024-25 and subsequent assessment years. Form No. 16 (has been further modified vide the Income-Tax (Eighth Amendment) Rules, 2024, w.e.f. 15- 10-2024,” the CBDT circular said.
This circular has been issued on 20 February 2025 and it will be applicable to the tax returns of the financial year 2024-25 (i.e. assessment year 2025-26).
1. Changes in Form 16 – Now more details of tax deduction will be available!
Now some new changes have been made in Form 16 related to tax deduction and perquisites. In this, the information about different taxes, deductions and exemptions on salary will be more clear. If you have trouble filing taxes, the new Form 16 can make things easier.
2. New column in Form 24Q – Now TDS/TCS reporting will be better
Now a new column named 388A has been added to Form 24Q. Information about other TDS/TCS deductions will be given in this column to make tax reporting easier for both companies and employees.
On the changes in Form 16 and Form 24Q, Mousami Nagarsenkar, Partner, Deloitte India, says, “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. The TCS paid during the year can be offset against their overall tax liability, including salary, rent, interest, and dividends. However, employers previously couldn’t consider TCS when calculating Tax Deducted at Source (TDS) on an employee’s salary. This caused hardship for employees who, despite paying significant TCS, still faced full TDS on their salaries, leading to cash flow challenges.”
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.”
“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,” says Nagarsenkar.
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.
3. Tax on salary and perquisites – what has changed?
In the new circular of CBDT, some important updates have been given regarding tax on salary and perks.
(i) New update in the definition of salary
Under the Finance Act 2023, now section 17(1) of the Income Tax Act has been amended.
Now the salary will also include the contribution made by the Central Government to the “Agniveer Corpus Fund”.
This will be applicable for Agniveers enrolled under the Agneepath scheme.
Tax benefit on this contribution will be available under section 80CCH.
(ii) New update in the definition of perquisites
Now some benefits given by the company will also come under the purview of perquisites, which will be taxed.
Rent-free accommodation that you have received from the employer.
Residential facility provided at any concessional rate.
4. New rates of surcharge in the old tax system – who will pay how much tax?
If you pay tax under the old tax regime, the surcharge on your income will be calculated as follows:
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%
Conclusion
If you are a salaried taxpayer, it is important that you stay updated with these changes. Changes in Form 16 and 24Q will make tax filing clearer and easier. If you are in the old tax regime, you will have to plan your taxes according to the new surcharge rates. So now that you have got the new update, will you change your tax planning?