Form 16 changes: Higher standard deduction for these taxpayers, and other changes in Form 16 for FY 2024-25 (AY 2025-26)

By June 15, 2025, salaried employees should receive their Form 16 for the financial year 2024-25 from their employer. This year, Form 16 will undergo certain changes due to the changes announced in the July 2024 Budget.

Your Form 16 will change in the following three ways this year:

1. Taxes deducted from other incomes: Your Form 16 will show the tax deducted from your other sources of income and also the Tax Collected at Source (TCS) on expenditures on specified items. This will happen if you have submitted Form 12BBA to your employer.

Budget 2024 amended the income tax rules to allow salaried individuals to inform their employers of the TDS on the individual's other sources of income, as well as TCS from specified expenses of the individual. This TDS and TCS can then be adjusted against (subtracted from) the total tax deductible from the employee's salary. This would help the employee as total TDS from salary would be reduced accordingly.

Suresh Surana, a practising chartered accountant, says, "This year, Form 16 will show not only tax deducted by the employer on the salary income, but will also show tax deducted and tax collected on other sources of income such as interest on fixed deposits or tax paid as TCS on foreign travel expenditure, etc. However, this will happen only if a salaried employee has shared the details of other taxes deducted (TDS/TCS) via Form 12BAA."

Also Read: New form to reduce TDS on salary

2. Higher standard deduction from salary under new tax regime: From FY 2024-25 (AY 2025-26), the standard deduction from salary has been increased from Rs 50,000 to Rs 75,000 under the new tax regime.

In Form 16, if you have opted for the new tax regime for FY 2024-25 (AY 2025-26) for TDS on salary, you will receive a higher amount of Standard Deduction from your salary when your employer deducts tax at source. Income tax laws for FY2024-25 allow a Standard Deduction of Rs 75,000 under the new tax regime.

However, while filing ITR for FY 2024-25 (AY 2025-26), if an individual switches from the new tax regime to the old tax regime, then only standard deduction of Rs 50,000 will be allowed to be claimed from the salary income.

Also Read: Last date to receive Form 16 by salaried employees

3. Higher NPS deduction on employer's contribution: From FY 2024-25, the new tax regime allows a higher deduction from gross taxable income to the employee on the employer's contribution to NPS.

An employee can claim a deduction of up to 14% of their basic salary under Section 80CCD (2) in the new tax regime. This deduction can be claimed on the employer's contribution to the National Pension System (NPS) account of the employee. This higher deduction would reflect in your Form 16 only if you are under new tax regime for TDS from salary.

Here also, if the tax regime is switched from the new to the old tax regime while filing ITR, then the deduction will be reduced. An employee will be eligible to claim a deduction of only 10% of their basic salary under Section 80CCD (2) on the employer's contribution to NPS in the old tax regime.