Income tax (TDS), declarations and Form 16
Each payroll projects the year's salary under the employee's regime and deducts the tax still due, spread over the months left. Employees declare and compare the two regimes, and payroll accepts or rejects their proofs. Form 16 Part B, 12BA, 12BB and the 24Q data come from the same figures.
PLANSFrom Growth
The problem it solves
- TDS is worked out in a spreadsheet, and March takes a large cut from salaries to make up for the year.
- Employees do not know which regime saves them more, and ask payroll to work it out for each of them.
- Proofs arrive by email in January, and nobody can say which were accepted.
- Form 16 and the quarterly return are typed up again from the payroll register.
How it works
- The tax year is ready as data: slabs for both regimes, rebate, surcharge, cess, standard deduction and the deduction limits. Payroll checks it against the budget each year.
- At the start of the year each employee opens My Tax Declaration, on the web or in the app, and chooses a regime. They declare investments, rent, home loan interest and a previous employer's salary. Compare Regimes shows the tax under each.
- Every payroll adds what was paid so far, this month and the regular salary for the months left. It works out the year's tax and deducts what is still due, divided by the months left. The working is on the payslip.
- Before the proof cut-off, employees attach proofs and submit them. Payroll accepts, partly accepts or rejects each line with a note, then verifies the declaration.
- From the cut-off date only accepted amounts count, so the last months' tax moves up or down by itself.
- Each quarter, record the challans you deposited and prepare the Form 24Q data. At year end, print Form 16 Part B, 12BA and 12BB for everyone.
Everything it does
Tax years as data
- 2025-26 and 2026-27 loaded. New regime: 0 % up to 4 lakh, then 5 % steps to 30 % above 24 lakh. Old regime by age band (below 60, 60 to 79, 80 and above)
- Standard deduction 75,000 (new) and 50,000 (old). Rebate (new): up to 12 lakh income, at most 60,000, with marginal relief. Rebate (old): up to 5 lakh, at most 12,500
- Surcharge 10, 15 and 25 % above 50 lakh, 1 crore and 2 crore, with marginal relief. The old regime adds 37 % above 5 crore. Cess 4 %
- Deductions in the old regime: 80C group to 1.5 lakh, 80CCD(1B) 50,000, 80D, 80DD, 80DDB, 80E, 80G. Also 80TTA, 80U, home loan interest to 2 lakh and LTA
- From 2026-27 the new section numbers and forms (Form 16 is Form 130, 24Q is Form 138), with the old number beside them
- Create the Next Year copies slabs and limits for you to check
Monthly TDS
- Default regime for those who have not chosen: new
- HRA exemption month by month: 50 % of Basic plus DA in metro cities, 40 % elsewhere, rent above 10 % of salary
- Employee PF and VPF counted in 80C. Employer NPS deducted up to 14 % (new) or 10 % (old) of Basic plus DA. Professional tax deducted in the old regime
- Perquisite on concessional staff loans added to salary
- Previous employer's salary, PF, PT and TDS, and other income declared, taken in
- No PAN: at least 20 % of taxable income
- Taxable income rounded to the nearest 10 rupees; tax to the rupee
Declarations and proofs
- One declaration per employee and year, listing every section with its limit and examples
- Rent month by month with landlord name and PAN; PAN needed above 1 lakh a year
- Regime locked once proofs are submitted, except for payroll
- Each line: Accepted, Partly Accepted or Rejected, with an HR note
- Proofs count only after the cut-off date: 15 January in the loaded years
Forms and records
- Form 16 Part B, Form 12BA and Form 12BB as PDF, one employee or everyone in the year
- TDS Challans: BSR code, serial, deposit date, tax, surcharge, cess, interest and fee, shown beside the TDS deducted that month
- Form 24Q data in Excel: Annexure I each quarter, Annexure II in the fourth, with warnings for missing PAN or challans
- Final TDS in the full and final, with leave encashment exempt up to 25 lakh and gratuity up to 20 lakh
- Statutory Cost Summary compares TDS deducted with the challans
Who uses it
EmployeeChooses the regime, declares, compares the two regimes and submits proofs on the web or in the app.
Payroll officerChecks proofs, records challans, prepares the 24Q data and prints Form 16.
Payroll ManagerKeeps the tax years right and sets the proof cut-off.
FinanceMatches the challans with the TDS deducted before the return.
Where you use it
- Web: HRMS > Tax and Statutory. It holds My Tax Declaration, Tax Declarations and Proofs, TDS Challans and Form 24Q / 138 Data. It also holds Statutory Forms and Returns, and Configuration > Income Tax Years
- The SmartMy HRMS app: the employee's declaration, regime comparison and proofs. Also Tax proofs for payroll to check (built and in testing, not in the app stores yet)
- The tax working is on the payslip screen; the PDF payslip shows income tax year to date, not the working
- Not built: the 24Q return file for upload (FVU), Form 16 Part A (download it from TRACES) and challan payment. There is no link to TRACES or the income tax portal
What you control
Settings
- Default regime: new
- Proofs Count Only After: 15 January 2026 and 15 January 2027 in the loaded years
- HRA: 50 % in metros, 40 % elsewhere; rent above 10 %; metro cities: 4 up to 2025-26, 8 from 2026-27
- Landlord PAN needed above 1,00,000 a year
- Employer NPS deduction: 14 % (new), 10 % (old)
- On the Entity: TAN, Person Responsible for TDS, designation and Place (Form 16)
Approvals
- Tax proof verification: one chain per Entity; payroll by default, or the levels you set. The last level verifies, a rejection sends the proofs back.
Notifications
- Tax Declaration Open: on the first day of the financial year, to employees with a salary and no declaration. In-app, by email and to the app; waits for quiet hours
- Tax Proofs Due: 14 days before the proof cut-off, to employees with a declaration and no proofs submitted. In-app, by email and to the app; waits for quiet hours
- Tax Proofs Verified: to the employee when payroll verifies, in-app, by email and to the app, at once
Questions
Does it file our 24Q return?
No. It prepares the 24Q data in Excel, with Annexure I and, in the fourth quarter, Annexure II. You key it into the return utility and file it yourself.Is Form 16 complete?
It prints Part B for everyone paid in the year. Part A comes from TRACES after your last quarterly return is processed.What happens when the budget changes the slabs?
Tax years are data. Create the next year from the last one, then correct the slabs, rebate or limits on the form. No code changes are needed.Can an employee change regime in the middle of the year?
Yes, until the proofs are submitted. After that only payroll can change it, and the following payrolls recalculate the tax.Does it pay the TDS challan?
No. You pay it on the bank or income tax portal, then record the challan so the system can match it with the TDS deducted.What if an employee has no PAN?
The tax is at least 20 % of taxable income, and the 24Q data shows PANNOTAVBL with a warning.Related features
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See your own month run in it.
Tell us how many people you have, how you take attendance and how your salary is structured. We will show you SmartMy HRMS set up that way.