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This new CBDT circular, released on February 20, 2025, makes changes in Form 16 and Form 24Q, expands definition of ‘salary’ to include Agniveer fund contribution, tweaks perquisite taxation, and updates surcharge rates.
This new CBDT circular incorporates modifications from both the Finance Acts of 2024 and 2023 and will be applicable for the assessment year 2025-26.
The Central Board of Direct Taxes (CBDT), India’s apex body on income tax, has issued fresh guidelines on tax deductions from salaries under Section 192 of the Income Tax Act, 1961. This new circular, released on February 20, 2025, incorporates modifications from both the Finance Acts of 2024 and 2023 and will be applicable for the financial year 2024-25 (assessment year 2025-26).
One of the major highlights is the revision of Form 16, which serves as a TDS certificate for salaried employees. The CBDT stated:
– “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.”
What’s New in Form 16?
Form 16 has undergone key modifications aimed at making tax deductions and benefits more transparent. The idea is to provide employees with a clearer breakdown of their taxable salary, exemptions, and deductions, ultimately simplifying tax filing.
For the uninitiated, Form 16 consists of two parts:
– Part A covers quarterly TDS details, along with the employer’s PAN and TAN information. Employers can download this from the TRACES portal.
– Part B is an attachment to Part A, prepared by the employer, detailing the salary structure and deductions under Chapter VI-A.
Employers must issue Form 16 to employees before June 15 of the assessment year following the financial year in which the salary was paid.
New Addition to Form 24Q
Another significant update is the introduction of column 388A in Form 24Q, which allows employers to account for other TDS and TCS deductions in salary calculations. This move is expected to ease tax reporting for both companies and employees.
Mousami Nagarsenkar, partner at Deloitte India, told the Financial Express, “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 2024-25, 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.”
Key Changes in Salary, Perquisite Taxation And Surcharge
The recent CBDT circular also brings updates on salary definitions, taxable perks, and surcharge rates.
1. Salary Definition Now Includes Agniveer Corpus Fund Contributions
The Finance Act 2023 amended Section 17(1) of the Income Tax Act, expanding the definition of “salary”. Now, the central government’s contribution to the Agniveer Corpus Fund (for those enrolled in the Agneepath scheme) is considered part of salary, offering tax benefits under Section 80CCH.
2. More Perquisites Now Taxable
Certain employee benefits, like rent-free accommodation or subsidised residential facilities, will now be taxed as perquisites. Employers and employees need to factor in these changes while planning their tax liabilities.
3. Updated Surcharge Rates in the Old Tax Regime
For those opting for the old tax regime, surcharge rates have been adjusted:
– Income between Rs 50 lakh and Rs 1 crore – 10%
– Income between Rs 1 crore and Rs 2 crore – 15%
– Income between Rs 2 crore and Rs 5 crore (excluding dividends & certain capital gains) – 25%
– Income above Rs 5 crore (excluding dividends & certain capital gains) – 37%
– Income above Rs 2 crore (including dividends & certain capital gains) – 15%
What Does This Mean for You?
These changes are significant for salaried taxpayers. The new Form 16 format aims to make tax filing more transparent, while the updates to Form 24Q ensure that employers can better incorporate TDS and TCS deductions. Additionally, with the revised surcharge rates and perquisite taxation, employees must plan their finances accordingly.
With FY 2024-25 tax filings or ITR coming up from April 1, 2025, taxpayers must review their Form 16, check for new deductions, and plan taxes accordingly.
