Form 130 from TRACES: why the new salary TDS certificate must go out unchanged

For years, many payroll teams did the same thing every June. They downloaded Form 16 Part A from TRACES, generated Part B from their own payroll, stitched the two into one PDF, put the employee's PAN as the password and mailed it out. From tax year 2026-27 that habit has to stop. The new certificate, Form 130 from TRACES, is valid only in the form TRACES generates it, and the first batch is due by 15 June 2027.

This post explains what changed, why merging is now out, and what to do with the salary computation you have always sent.

What Form 130 is

The Income-tax Act, 2025 and the Income-tax Rules, 2026 apply from 1 April 2026. Salary TDS moved to section 392, the quarterly return became Form 138, and the salary TDS certificate became Form 130. Form 16 continues only for 2025-26 and earlier years.

Form 130 has three parts:

The big difference from Form 16 is Part C. Under the old system, Part B (the salary computation) was the employer's own document. Under the new system the salary computation is part of the certificate that TRACES generates.

Form 130 from TRACES is the only valid form

Rule 215(1) of the Income-tax Rules, 2026 says the certificate is issued after "generating and downloading the same" from the portal specified by the Director General of Income-tax (Systems), which is TRACES. Rule 215(4) lets the deductor sign it digitally.

The guidance note on Forms 130 to 133, issued in April 2026, is blunter: the certificate "is valid only if it is generated from the TRACES portal", and the downloaded certificate carrying the deductor's signature, digital or physical, "is only valid". The department's FAQ on Form 130 adds that a certificate prepared through any other mode is not a legal or valid TDS certificate.

Put simply: if you open the PDF and change it, it stops being Form 130. That includes merging pages into it, adding your logo, or rebuilding it in your payroll software.

What about the Form 16 Part A merge?

For 2025-26 and earlier years, the old rules still apply. CBDT Circular 4/2013 requires Part A to be generated through TRACES and authenticated by the employer, by hand or with a digital signature. Circular 2/2007 allows a digitally signed certificate only if, once signed, its contents are not open to change.

So a Form 16 Part A merge is acceptable only if the merged file is signed again with the employer's digital signature certificate, with Part A's content and certificate number untouched. A merged file that is merely password-protected is not signed. If your software cannot re-sign, send Part A and Part B as two files. It is a small change and it removes a real objection an employee's tax adviser could raise.

Your own salary computation statement still has a place

Employees like a detailed break-up: the monthly salary, the HRA working, the perquisite values, the regime chosen, and what was declared in Form 124. Form 130 Part C is a summary, and some of that detail will not be there.

Nothing stops you sending your own salary computation statement. Just keep it separate:

1. Send the TRACES Form 130 exactly as downloaded and signed.
2. Send your computation as a second file, titled clearly, for example "Salary computation by the employer (for information; not Form 130)".
3. Send Form 123, the statement of perquisites, as its own file where it applies.
4. Never combine the three into one PDF.

If the two disagree, the employee should treat Form 130 as the record, because that is what matches the department's data and the pre-filled return.

Form 130 Part C depends on your Q4 return

Because TRACES builds Form 130 Part C from the salary details filed in the Q4 Form 138 statement (Annexure II), the quality of the certificate now depends on the quality of the return. Wrong regime flags, a missed previous-employer income, a deduction keyed in the wrong row: all of these will show up in the certificate, and the only fix is a correction statement followed by a fresh download.

That shifts work from June to May. The Q4 Form 138 is due by 31 May 2027. Plan to finish salary details, declarations and proofs well before then, and run the file through Protean's validation utility early. We explained that file in the Form 138 FVU file post.

A worked example: the zero-tax quarters

Take Kavita, a quality engineer at a 420-person castings company in Rajkot. Her monthly salary is ₹62,000, and under the new regime there is no TDS from April to September. In October she gets a ₹1,80,000 performance bonus, and TDS starts.

Many payroll systems skip deductee rows with no tax in the quarterly return, which the Form 138 format allows. The effect: in Kavita's Form 130 Part B, the amounts paid for Q1 and Q2 will show as nil, even though she was paid ₹3,72,000 in those six months. Her tax is right and Part C shows her full salary, but the quarter-wise summary looks odd and she may ask about it.

If you want Part B to show every quarter, include zero-tax rows in the quarterly returns. If you prefer to skip them, tell employees in advance why Part B will look incomplete.

Form 130 due date and a June 2027 plan

The Form 130 due date for tax year 2026-27 is 15 June 2027. Working backwards:

• January to March 2027: collect investment proofs, close Form 124 declarations, settle perquisite values (ESOPs, cars, loans).
• April to May 2027: prepare Q4 Form 138 with Annexure II, validate, file well before 31 May.
• Early June 2027: request the Form 130 files on TRACES, download, run the TRACES converter and sign with the employer's digital signature.
• By 15 June 2027: distribute, with the computation statement and Form 123 as separate files.

Distributing the files

The usual way to send certificates in bulk is to match each TRACES PDF to the employee by PAN. The converter's file names usually start with the PAN, but we found no official TRACES document that promises this naming. A safer process checks the PAN in the file name against the PAN printed inside the certificate, and holds the file back for a person to check if the two disagree. A certificate sent to the wrong employee is both a tax problem and a personal-data breach under the DPDP Act, which we covered in the DPDP Act post for HR.

Delivery through the employee self-service portal, where each person downloads their own unchanged file after signing in, avoids most of the email and password questions altogether.

A short checklist

1. Tell payroll and IT that Form 130 files are never edited, merged or rebuilt.
2. Rename your own document to make clear it is not Form 130.
3. Decide on zero-tax rows in the quarterly return before Q3 is filed.
4. Bring the Q4 Form 138 timetable forward.
5. Check the digital signature certificate of the authorised signatory is valid till June 2027.
6. Match files by PAN, and check the PAN inside the file too.

Vatsin Payroll follows this split: for Form 130 years it delivers the TRACES file unchanged with the employer's computation as a separate "not Form 130" statement, and for Form 16 years it merges only where the merged file is signed again. Whichever tool you use, ask your CA to look at your June process once before the first Form 130 season.