Putty powder is a surface levelling material applied before painting. Its main components are mineral fillers, cementitious binders and polymer additives. The question of formaldehyde usually comes from the additives, not the mineral base.
Where the concern comes from
Formaldehyde in interior materials is most often associated with certain resin-based adhesives. In a quality putty powder, the polymer is a redispersible powder rather than a solvent-borne resin, so the formaldehyde content is negligible.
What to check on the bag
Look for a declared standard — for interior wall putty this is typically JG/T 298. A product that declares its standard and its emission class is a product you can specify with confidence.
Practical advice
Keep the space ventilated during application and curing, and allow each coat to dry fully before the next. Emission from any mineral-based product falls away quickly once cured.