Complete Compliance Handbook on Income Tax Form No. 123 for Salary Perquisites

Form No. 123, which has replaced Form 12BA under the updated Income-tax framework, is a crucial document that employers must issue to certain employees to disclose the value of perquisites, fringe benefits, amenities and profits in lieu of salary. This statement continues to be relevant under the revised provisions of the Income-tax Act, 2025 and related Rules, and remains mandatory wherever specified monetary thresholds are crossed.

This guide explains the legal background, coverage, content, timelines and practical compliance aspects of Form No. 123, along with clarifying FAQs in a restructured and user-friendly manner.

Important: All statutory references such as Section 392(5)(a), Section 192, Rule 204(2) and nomenclature like Form No. 123, Form 130 are to be followed strictly as per law.

1.1 Statutory Basis

Form No. 123 is a statutory statement prescribed under:

  • Section 392(5)(a) of the Income-tax Act, 2025, read with
  • Rule 204(2) of the **Income-tax Rules, 2026`.

It is linked to the TDS provisions that correspond to Section 192 of the Income Tax Act 1961, now aligned with the new section structure under the Income-tax Act, 2025.

1.2 Change in Form Number and Corresponding Provisions

Historically, perquisite details were reported in Form 12BA. With the overhaul of the Income-tax law and Rules, the following mapping now applies:

  • Name of form as per I.T. Rules, 1962: 12BA
  • Name of form as per I.T. Rules, 2026: 123
  • Corresponding section of I.T. Act, 1961: 192
  • Corresponding section of I.T. Act, 2025: 392(5)(a)
  • Corresponding Rule of I.T. Rules, 1962: 26A
  • Corresponding Rule of I.T. Rules, 2026: 204(2)

Note: The form number and legal references have changed, but the underlying objective—transparent reporting and certification of perquisite valuation—remains substantially similar.

2. What is Form No. 123 and When is it Required?

2.1 Definition and Purpose

Form No. 123 is a detailed statement prepared and issued by an employer to an employee. Its primary purposes are:

  • To set out the nature and value of:
    • perquisites,
    • other fringe benefits or amenities, and
    • profits in lieu of salary,
      enjoyed by the employee during the relevant tax year.
  • To provide a certified break-up of both monetary and non-monetary perquisites.
  • To act as a supporting document for the assessee when:
    • computing income under the head “Salaries”, and
    • filing the income tax return (ITR).

In essence, Form No. 123 functions as a perquisite valuation certificate accompanying the TDS records, giving clarity on how taxable benefits have been quantified.

2.2 Threshold for Issue

An employer is obligated to issue Form No. 123 only where:

  • The salary paid or payable to the concerned employee during a tax year exceeds ₹1,50,000.

Employees below this threshold are generally outside the mandatory coverage of Form No. 123. However:

Practical point: If no perquisites or profits in lieu of salary are provided (i.e., the value is effectively Nil), employers typically need not prepare Form No. 123, even if salary crosses the monetary limit. The obligation applies “where applicable”.

3. Structure of Form No. 123

Form No. 123 is divided into two main parts and a declaration, each serving a distinct purpose in the reporting and certification process.

3.1 Part A – Employer and Employee Particulars

Part A captures basic but legally significant details:

  1. Employer Details

    • Name of the employer
    • Address
    • PAN
    • TAN
    • Contact information

  2. Employee Details

    • Name of the employee
    • Designation
    • PAN
    • Category/type of employee (e.g., Director, or individual holding substantial interest where the employer is a company)
    • Income from salary excluding perquisites
    • Contact information