Payroll year-end has a cruel structure. The work that determines whether it goes smoothly happens in December and January. The consequences arrive in May and June, when the deadlines are fixed and the corrections are expensive.
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Most companies discover this the same way: an employee's Form 16 doesn't match their Form 26AS, and by then the return has been filed, and fixing it means a correction statement, which takes time you don't have because it's 14 June.
This is what to do and when so June is uneventful.
The Dates That Don't Move
Anchor the whole exercise on these.
Q4 TDS return: 31 May. For the January-to-March quarter.
Form 16: 15 June. For every employee you deducted TDS from.
Form 16A: within 15 days of the quarterly return due date for non-salary deductees.
Monthly TDS deposit: 7th of the following month, with March having its own treatment.
Two things make Q4 different from every other quarter, and both matter:
Q4 carries Annexure II, the full-year salary computation for each employee. The department uses this to generate Part B of Form 16. So Q4 isn't just another return; it's the source data for every Form 16 you issue.
Part A of Form 16 is system-generated from your filed return data on TRACES. You cannot prepare it manually. If your Q4 filing has wrong PANs or challan mismatches, Part A will be wrong, and you must file a correction statement before you can generate a correct Form 16.
That's the chain that catches people: filing errors in May become Form 16 errors in June, and correcting them means going back through the return.
December: The Month That Decides Everything
The highest-value payroll work in the year happens now, and almost nobody does it.
Run a projection per employee
For each employee, compare TDS deducted so far against tax that will actually be due on their full-year income.
This is the single most useful hour in the payroll calendar. Discrepancies found in December can be spread across January, February, and March. The same discrepancy found in March lands in one payslip, and an employee losing an unexpected ₹40,000 from their March salary will remember it.
Look for the usual suspects:
- Employees who joined mid-year, where previous-employer income wasn't included
- Anyone with a salary revision that didn't trigger a recomputation
- Bonuses paid without the annual tax being redistributed
- Employees whose declared investments diverge from what they'll actually prove
Chase investment proofs now, not in February
Employees declare intended investments in April and prove them in January or February. The gap between declared and actual is where the March shock comes from.
Collecting proofs in December gives you three months to adjust. Collecting them in February gives you one. Same information, radically different employee experience.
Confirm regime choices held
The new regime is the default. If someone declared old regime in April and never filed the required option, or if their circumstances changed, now is when you find out rather than in June.
January to March: Close Cleanly
Reconcile every quarter that already filed
Don't wait for Q4 to check Q1 through Q3. For each quarter, confirm:
- TDS deducted equals TDS deposited equals TDS filed
- Challans map correctly to the return
- No PAN errors
Errors in earlier quarters flow into Annexure II and then into Form 16. Fixing Q1 in February is routine; discovering it in June is not.
Validate every PAN
Employee management software helps maintain accurate employee records, reducing payroll errors caused by incorrect PAN details or outdated employee information. A wrong PAN means the employee's TDS credit doesn't appear in their Form 26AS. They'll discover it when they file, and they'll be right to be annoyed, because their money was deducted and credited to nobody.
Validate the full list. It's mechanical, and it prevents the most common Form 16 complaint.
Handle the March deposit correctly
March TDS has different treatments from other months. Confirm your date rather than assuming the 7th applies.
Close perquisites and one-offs
Company car, accommodation, interest-free loans, ESOPs exercised during the year. These need valuing and including in the annual computation. Payroll configured only for cash components misses them, and the omission surfaces as under-deduction.
Same for off-cycle payments: settlements, corrections, bonuses paid outside the regular run. Confirm they're in the annual figures.
Reconcile the other statutes
PF: every month's ECR filed, both shares, and the payable account cleared each month.
ESI: returns filed, contributions deposited.
Professional Tax: per state, on that state's calendar. If you operate in multiple states, reconcile each separately. A single aggregate PT figure hides a missed state.
LWF: where applicable. The most forgotten item in Indian payroll, precisely because it's small.
April to May: Filing Q4
Build Annexure II carefully
This is the full-year salary computation per employee, and it becomes Form 16 Part B. Reconcile it against your payroll register before filing, not after.
Check specifically:
- Gross salary matches the register
- Exemptions and deductions match what you actually applied
- The regime applied per employee is the one they declared
- Previous-employer income included for mid-year joiners
- TDS totals match the challans
Reconcile challans against the return
Payroll accounting software simplifies reconciliation between payroll records, statutory payments, and general ledger accounts during year-end closing. Challan mismatch is the most common cause of return rejection, and it's mechanical to catch. Every challan should map to the right quarter and the right amount.
File by 31 May
The late fee is ₹200 per day from the day after the due date, capped at the TDS amount for the quarter. It's automatic and non-waivable; no officer has discretion to reduce it. A return filed more than a year late attracts an additional penalty of ₹10,000 to ₹1,00,000.
June: Issuing Form 16
Wait for Q4 to process
Part A downloads from TRACES only after Q4 is processed. If you filed on 31 May, allow processing time before you can generate anything.
This is why filing Q4 on the last day is risky. If processing reveals an error, you're now inside two weeks of the Form 16 deadline with a correction statement to file first.
Check Part A against your records
Part A shows quarter-wise TDS deducted and deposited against challan details. If it doesn't match your payroll records, the return had errors, and a correction statement is required before you can issue a correct Form 16.
Issue by 15 June
Complete Form 16, both parts, to every employee from whom TDS was deducted, including those who left during the year.
Exited employees are routinely missed. They're not in your current employee list, and nobody's chasing you until they file their return and find no Form 16. Include them.
The Correction Window That Closed
Worth knowing because it changes the calculus: corrections are restricted to two years from the end of the financial year.
Errors used to be fixable more or less indefinitely. Now they expire. An uncorrected mistake becomes permanent, and the employee's tax credit stays wrong forever.
That makes the reconciliation habit worth more than it used to be. What you don't catch within two years, you can't fix.
What Changed on 1 April 2026
If your process documentation predates this, it's stale.
The Income Tax Act, 2025 replaced the 1961 Act effective 1 April 2026. Salary TDS moved from Section 192 to Section 392; non-salary TDS is Section 393.
Forms renumbered. Form 138 replaces Form 24Q for salary returns. Form 140 replaces 26Q, Form 139 replaces 27Q.
The computation method, rates, slabs, and exemption limits are unchanged. The deadlines are broadly the same. It's the references and forms that moved, and periods before 1 April 2026 still use the old ones, including for corrections.
The Failures That Actually Happen
No December projection. The shortfall lands in March, in one payslip, and the employee finds out on payday.
Investment proofs collected in February. One month to absorb a full year's variance.
PANs are never validated. Employee credit missing from Form 26AS, discovered at filing.
Earlier quarters never reconciled. Errors compound into Annexure II.
Exited employees skipped for Form 16.
Multi-state PT aggregated. One state's missed payment is invisible inside a combined figure.
Q4 filed on 31 May with no processing buffer. An error found in June with two weeks to fix it.
Prerequisites forgotten. Under-deduction all year.
The Calendar, Compressed
December: run per-employee projections; chase investment proofs; confirm regime declarations.
January: collect proofs; adjust remaining months; reconcile Q1 to Q3; validate PANs.
February to March: close perquisites and off-cycle payments; reconcile PF, ESI, PT by state, and LWF; handle March deposit timing.
April: build and reconcile Annexure II; reconcile challans.
By 31 May: file the Q4 return, ideally with a buffer.
Early June: download Part A; check against records; file a correction statement if needed.
By 15 June: issue Form 16 to everyone, including leavers.
Conclusion
Year-end payroll is decided in December, not June. Run a projection per employee comparing TDS deducted against tax actually due, and chase investment proofs three months earlier than you currently do. That single change converts a March shock into a manageable adjustment. The chain that catches people runs. Q4 filing errors become the wrong Form 16 Part A, which is system-generated from your return data and can't be fixed manually. So validate PANs, reconcile challans, and reconcile Q1 through Q3 before Q4 is built, because Annexure II inherits all of it. File Q4 before 31 May with room for processing, not on the deadline. Issue Form 16 by 15 June to everyone, including employees who left. And reconcile professional tax by state, because one aggregate figure hides a missed state until an inspector finds it. Note the correction window is now two years. What you don't catch, you eventually can't fix.
