India’s tax landscape undergoes a significant structural shift from 1 April 2026, when the Income-tax Act, 2025 (ITA 2025) replaces the Income-tax Act, 1961 (ITA 1961). The Income-tax Rules, 2026 (ITR 2026) simultaneously replace the Income-tax Rules, 1962 (ITR 1962). The provisions relating to Tax Deduction at Source (TDS) and Tax Collection at Source (TCS), which represent a critical compliance dimension for most businesses, are substantially reorganized.
Finance Act, 2026 (FA 2026) further amends ITA 2025. This note presents a comprehensive, side-by-side comparison of TDS and TCS provisions applicable for FY 2025-26 (under ITA 1961) versus FY 2026-27 (under ITA 2025 as proposed to be amended by FA 2026).
For FY 2025-26, the governing law is the Income-tax Act, 1961 (as amended by FA 2025) read with Income-tax Rules, 1962. TDS and TCS provisions fall under Chapter XVII-B, covering Sections 192 to 206CCA. For FY 2026-27, the governing law is the Income-tax Act, 2025 (as amended by FA 2026) read with Income-tax Rules, 2026. TDS and TCS provisions are consolidated under Chapter XIX-B, spanning Sections 392 to 402.
TDS Rates: FY 2025-26 vs. FY 2026-27
A. Salary & Accumulated Balances
Salary (Section 192 / Section 392(1)): TDS on salary is deducted at the average rate of tax on estimated income chargeable under salary — a position that remains unchanged between FY 2025-26 and FY 2026-27. Under ITA 2025, Government employees (excluding Union Govt) are mapped to Section Code 1001, non-Government employees to Code 1002, and Indian Government employees to Code 1003.
Accumulated Balance of Recognized Provident Fund (Section 192A / Section 392(7)): TDS applies at 10% with a threshold of ₹50,000 in both years. There is no change. The ITA 2025 Section Code for this payment is 1004.
B. Interest
Interest on Securities — Resident (Section 193 / Section 393(1) [Table: Sl. No. 5(i)]): TDS at 10% with a threshold of ₹10,000 continues unchanged in FY 2026-27. The ITA 2025 Section Code is 1019.
Interest other than Interest on Securities — Banking, Co-operative Bank, Public Company (Housing Finance) (Section 194A / Section 393(1) [Table: Sl. No. 5(ii)]): TDS at 10% applies in both years, with thresholds of ₹50,000 (general), ₹1,00,000 (senior citizens), and ₹50,000 (others), with no change. Section Codes under ITA 2025 are 1020 (senior citizens) and 1021 (others).
Interest other than Interest on Securities — Specified Persons other than Banks (Section 194A / Section 393(1) [Table: Sl. No. 5(iii)]): TDS at 10% with a threshold of ₹10,000 continues without change. The ITA 2025 Section Code is 1022.
Interest on Compensation awarded by Motor Accidents Claims Tribunal (MACT) to an Individual (Section 194A / Section 393(4)): This is a notable change introduced by FA 2026. Under FY 2025-26, TDS at 10% applied on payment above ₹50,000 on credit basis; no TDS was applicable if aggregate was ₹50,000 per annum or less. Under FY 2026-27, TDS is fully exempted (unconditional exemption) for individuals, with 10% on compensation above ₹50,000 for any person other than an individual. FA 2026 fully exempts MACT interest awarded to an individual, irrespective of amount, effective 1 April 2026.
C. Dividends
Dividend by Indian Company to Resident Shareholder (Section 194 / Section 393(1) [Table: Sl. No. 7]): Under FY 2025-26, TDS at 10% applied with a threshold of ₹10,000 for an individual shareholder, applicable where dividend was paid by non-cash mode. Under FY 2026-27, the rate remains 10% but the threshold is removed under ITA 2025 — TDS now applies from the first rupee for all resident shareholders. The ITA 2025 Section Code is 1029. Note: Under ITA 1961, TDS was required only where dividend paid to an individual by non-cash mode did not exceed ₹10,000 p.a. Under ITA 2025, TDS applies from the first rupee for all resident shareholders.
D. Rent
Rent by Specified Persons (Companies, Firms, etc.) — Plant & Machinery (Section 194-I / Section 393(1) [Table: Sl. No. 2(ii)(a)]): TDS at 2% with a threshold of ₹50,000 per month applies without change in both years. The ITA 2025 Section Code is 1008.
Rent by Specified Persons — Land / Building / Furniture / Fittings (Section 194-I / Section 393(1) [Table: Sl. No. 2(ii)(b)]): TDS at 10% with a threshold of ₹50,000 per month remains unchanged. The ITA 2025 Section Code is 1009.
Rent by Individual / HUF (not covered under 194-I) (Section 194-IB / Section 393(1) [Table: Sl. No. 2(i)]): TDS at 2% with a threshold of ₹50,000 per month continues without change.
E. Immovable Property
Consideration for Transfer of Immovable Property (other than Agricultural Land) — Resident Transferor (Section 194-IA / Section 393(1) [Table: Sl. No. 3(i)]): TDS at 1% of consideration or stamp duty value, whichever is higher, with a threshold of ₹50,00,000, remains unchanged in FY 2026-27.
Consideration for Transfer of Immovable Property — Non-Resident Transferor (Section 195 / Section 393(2) [Table: Sl. No. 17]): Rates in force with no threshold continue in both years. Under FA 2026, a resident individual or HUF is not required to obtain a TAN — TDS is to be deducted and deposited via PAN-based challan, effective 1 October 2026. The ITA 2025 Section Code is 1057.
Compensation / Enhanced Compensation on Compulsory Acquisition of Immovable Property (other than Agricultural Land) (Section 194LA / Section 393(1) [Table: Sl. No. 3(iii)]): TDS at 10% with a threshold of ₹5,00,000 remains unchanged. The ITA 2025 Section Code is 1012.
Consideration under Joint Development Agreement (Section 194-IC / Section 393(1) [Table: Sl. No. 3(ii)]): TDS at 10% with no threshold continues without change. The ITA 2025 Section Code is 1011.
F. Contractors, Professional & Technical Services
Payments to Contractors — Designated Persons (Companies, Govt., etc.) to Individual / HUF Contractor (Section 194C / Section 393(1) [Table: Sl. No. 6(i)(a)]): TDS at 1% with thresholds of ₹30,000 (single) and ₹1,00,000 (aggregate) continues unchanged. The ITA 2025 Section Code is 1023.
Payments to Contractors — Designated Persons to Others (Non-Individual / Non-HUF) (Section 194C / Section 393(1) [Table: Sl. No. 6(i)(b)]): TDS at 2% with the same thresholds of ₹30,000 (single) and ₹1,00,000 (aggregate) remains unchanged. The ITA 2025 Section Code is 1024.
Payments to Contractors / Professional Fees / Commission or Brokerage (General) — Individual / HUF Not Covered by 194C / 194H / 194J (above ₹50 lakh aggregate) (Section 194M / Section 393(1) [Table: Sl. No. 6(ii)]): TDS at 2% with a threshold of ₹50,00,000 (aggregate) remains unchanged.
Fees for Technical Services (not being Professional Services) — Specified Person (Section 194J / Section 393(1) [Table: Sl. No. 6(iii)(a)]): TDS at 2% with a threshold of ₹50,000 continues without change. The ITA 2025 Section Code is 1026.
Fees for Professional Services / Royalty (other than Film Royalty) / Director Remuneration / Non-Compete Fee (Section 194J / Section 393(1) [Table: Sl. No. 6(iii)(b)]): TDS at 10% with a threshold of ₹50,000 and no threshold for Director Remuneration remains unchanged. The ITA 2025 Section Codes are 1027 (Professional Services / Royalty) and 1028 (Director Remuneration).
Supply of Manpower Services (Section 194C / 194J / Section 393(1) [Table: Sl. No. 6(i)]): Under FY 2025-26, there was ambiguity — 1% (individual/HUF) / 2% (others) if treated as contractor; 10% if treated as technical services. Under FY 2026-27, FA 2026 removes this ambiguity — supply of manpower is expressly classified as ‘work’ (contractor payment) under Section 402(47), with TDS at 1% (individual/HUF payee) / 2% (others), effective 1 April 2026. ITA 2025 Section Codes are 1023 (individual/HUF contractor) and 1024 (others).
G. Commission & Brokerage
Commission / Brokerage (other than Insurance Commission) — Specified Person (Section 194H / Section 393(1) [Table: Sl. No. 1(ii)]): TDS at 2% with a threshold of ₹20,000 continues unchanged. The ITA 2025 Section Code is 1006.
Insurance Commission (Section 194D / Section 393(1) [Table: Sl. No. 1(i)]): TDS at 2% with a threshold of ₹20,000 remains the same. The ITA 2025 Section Code is 1005.
H. Winnings
Winnings from Lottery / Crossword Puzzle / Card Games / Other Games / Gambling / Betting (Section 194B / Section 393(3) [Table: Sl. No. 1]): TDS at 30% with a threshold of ₹10,000 per transaction remains unchanged. ITA 2025 Section Codes are 1058 (General) and 1059 (where consideration is in kind and tax paid before release).
Winnings from Online Games (Section 194BA / Section 393(3) [Table: Sl. No. 2]): TDS at 30% on net winnings (at year end / on withdrawal) continues without change. ITA 2025 Section Codes are 1060 (General) and 1061 (winnings in kind; tax paid before release).
Winnings from Horse Race (Section 194BB / Section 393(3) [Table: Sl. No. 3]): TDS at 30% with a threshold of ₹10,000 per transaction remains unchanged. The ITA 2025 Section Code is 1062.
I. Capital Market — Mutual Funds, Business Trusts, Investment Funds
Income from Units of Mutual Fund / UTI (Section 194K / Section 393(1) [Table: Sl. No. 4(i)]): TDS at 10% with a threshold of ₹10,000 continues without change. The ITA 2025 Section Code is 1013.
Distributed Income from Business Trust — Section 115UA — Residents (Section 194LBA / Section 393(1) [Table: Sl. No. 4(ii)]): TDS at 10% with no threshold remains unchanged. ITA 2025 Section Codes are 1014 (Interest), 1015 (Dividend), and 1016 (Rent from REIT).
Income from Units of Investment Fund — Section 115UB — Residents (Section 194LBB / Section 393(1) [Table: Sl. No. 4(iii)]): TDS at 10% with no threshold continues without change. The ITA 2025 Section Code is 1017.
Income from Investment in Securitisation Trust — Residents (Section 194LBC / Section 393(1) [Table: Sl. No. 4(iv)]): TDS at 10% with no threshold remains unchanged. The ITA 2025 Section Code is 1018.
J. Payments to Non-Residents
Non-Resident Sportsperson / Entertainer / Sports Association (Section 194E / Section 393(2) [Table: Sl. No. 1]): TDS at 20% with no threshold continues unchanged. The ITA 2025 Section Code is 1039.
Interest Payable in Foreign Currency — Monies Borrowed in FC by Indian Company / Business Trust (Section 194LC / Section 393(2) [Table: Sl. Nos. 2, 3, 4]): The rate structure remains unchanged. TDS at 5% applies generally; 4% for listed bonds in IFSC issued after 1 April 2020 but before 1 July 2023 (Sl. No. 4a); 9% for listed bonds in IFSC issued on or after 1 July 2023; with no threshold. ITA 2025 Section Codes are 1040 (by way of Loan Agreement and long-term bond approved by Govt), 1041 (by issue of rupee denominated bond), 1042 (for listed bonds in IFSC issued on or after 1 April 2020), and 1043 (for listed bonds in IFSC issued on or after 1 July 2023).
Interest Payable by Infrastructure Debt Fund to Non-Resident (Section 194LB / Section 393(2) [Table: Sl. No. 5]): TDS at 5% with no threshold continues without change. The ITA 2025 Section Code is 1044.
Interest on Bonds / GDRs to Non-Resident — Section 115AC (Section 196C / Section 393(2) [Table: Sl. No. 13]): TDS at 10% with no threshold remains unchanged. The ITA 2025 Section Code is 1053.
Income from Securities to Foreign Institutional Investor (FII) (Section 196D / Section 393(2) [Table: Sl. No. 15]): TDS at 20% (or treaty rate) with no threshold continues unchanged. The ITA 2025 Section Code is 1055.
Other Sums Payable to Non-Residents (not covered elsewhere) (Section 195 / Section 393(2) [Table: Sl. No. 17]): Rates in force with no threshold continue. Under FA 2026, a TAN exemption is provided for a resident individual/HUF buying immovable property from a non-resident, effective 1 October 2026. The ITA 2025 Section Code is 1057.
K. Purchase of Goods / E-Commerce
Purchase of Goods — By Buyer (Turnover > ₹10 Cr) from Resident Seller (Section 194Q / Section 393(1) [Table: Sl. No. 8(ii)]): TDS at 0.1% with a threshold of ₹50 lakh (excess amount) and buyer’s turnover exceeding ₹10 Cr remains unchanged. The ITA 2025 Section Code is 1031.
Payment by E-Commerce Operator to E-Commerce Participant (Section 194-O / Section 393(1) [Table: Sl. No. 8(v)]): TDS at 0.1% with no threshold continues without change. The ITA 2025 Section Code is 1035.
L. Virtual Digital Assets (VDA / Crypto)
Consideration for Transfer of VDA (Section 194S / Section 393(1) [Table: Sl. No. 8(vi)]): A significant change is introduced here. Under FY 2025-26, TDS at 1% applied with a threshold of ₹50,000 (specified person) / ₹10,000 (others). Under FY 2026-27, the threshold is removed — TDS at 1% now applies with no threshold on the entire consideration under ITA 2025. ITA 2025 Section Codes are 1037 (Non-Individual / non-HUF) and 1038 (Cash or kind).
M. Cash Withdrawals
Cash Withdrawals from Bank / Co-op Bank / Post Office (Section 194N / Section 393(3) [Table: Sl. No. 5]): Under FY 2025-26, TDS at 2% applied with a threshold of ₹3 Cr for co-operative banks and ₹1 Cr for others; a higher rate of 2% on amounts above ₹20 lakh and 5% on amounts above ₹1 Cr applied if return not filed for the past 3 years. Under FY 2026-27, TDS at 2% applies with a threshold of ₹3 Cr (co-op bank) and ₹1 Cr (otherwise). Notably, ITA 2025 removes the higher TDS rate for non-filers from Tax Year (TY)² 2026-27. ITA 2025 Section Codes are 1064 (Deductee is co-operative society) and 1065 (Deductee is other than co-operative society).
N. Other Payments
Life Insurance Policy Proceeds — Income Component (Section 194DA / Section 393(1) [Table: Sl. No. 8(i)]): TDS at 2% with a threshold of ₹1,00,000 remains unchanged. The ITA 2025 Section Code is 1030.
Benefit or Perquisite from Business / Profession — Specified Person (Section 194R / Section 393(1) [Table: Sl. No. 8(iv)]): TDS at 10% with a threshold of ₹20,000 continues without change. ITA 2025 Section Codes are 1033 (General) and 1034 (Cash/Kind and tax paid before release).
Payments to Lottery Ticket Distributors / Stockists (Section 194G / Section 393(3) [Table: Sl. No. 4]): TDS at 2% with a threshold of ₹20,000 remains unchanged. The ITA 2025 Section Code is 1063.
Payments under NSS / Similar Savings Schemes (Section 194EE / Section 393(3) [Table: Sl. No. 6]): TDS at 10% with a threshold of ₹2,500 continues without change. The ITA 2025 Section Code is 1066.
Salary / Remuneration / Commission / Bonus / Interest Paid by Firm to Partner (Section 194T / Section 393(3) [Table: Sl. No. 7]): TDS at 10% with a threshold of ₹20,000 remains unchanged. The ITA 2025 Section Code is 1067.
Specified Senior Citizen — Bank Computes and Deducts Total Tax on Salary + Interest (Section 194P / Section 393(1) [Table: Sl. No. 8(iii)]): Rates in force (applied by specified bank) with no threshold continue unchanged. The ITA 2025 Section Code is 1032.
Notes on TDS Rates
Section codes are four-digit numeric identifiers assigned to each type of TDS/TCS payment under ITA 2025. The same should be mentioned while filing quarterly returns.
“Specified Person” means any person other than an individual or HUF, or an individual/HUF whose business turnover exceeds ₹1 crore, or professional receipts exceed ₹50 lakh in the previous year.
“Rates in force” means the rates specified in Part II of the First Schedule to the Finance Act applicable to the relevant financial year. For resident payees, Part II specifies: interest (10%), insurance commission (2%), winnings from lotteries / horse races / online games (30%), any other income (10%). For non-resident payees, rates vary by nature of income. These rates are the same under Finance Act 2025 (FY 2025-26) and Finance Act 2026 (FY 2026-27).
TCS Rates: FY 2025-26 vs. FY 2026-27
Sale of Alcoholic Liquor for Human Consumption (Section 206C(1) / Section 394(1) [Table: Sl. No. 1]): TCS rate increases from 1% in FY 2025-26 to 2% in FY 2026-27. This rate increase is introduced by FA 2026, effective 1 April 2026. The ITA 2025 Section Code is 1068.
Sale of Tendu Leaves (Section 206C(1) / Section 394(1) [Table: Sl. No. 2]): TCS rate is reduced from 5% in FY 2025-26 to 2% in FY 2026-27. The rate reduction is introduced by FA 2026, effective 1 April 2026. The ITA 2025 Section Code is 1069.
Sale of Timber / Forest Produce (Section 206C(1) / Section 394(1) [Table: Sl. No. 3]): TCS at 2% remains unchanged. ITA 2025 Section Codes are 1070 (Sale of Timber under forest lease) and 1071 (Sale of timber by any other mode).
Sale of Scrap (Section 206C(1) / Section 394(1) [Table: Sl. No. 4]): TCS rate increases from 1% in FY 2025-26 to 2% in FY 2026-27. The rate increase is introduced by FA 2026, effective 1 April 2026. The ITA 2025 Section Code is 1073.
Sale of Minerals — Coal / Lignite / Iron Ore (Section 206C(1) / Section 394(1) [Table: Sl. No. 5]): TCS rate increases from 1% in FY 2025-26 to 2% in FY 2026-27. FA 2026 introduces the increase effective 1 April 2026. The ITA 2025 Section Code is 1074.
Sale of Motor Vehicle / Any Other Goods Exceeding ₹10 lakh (Section 206C(1F) / Section 394(1) [Table: Sl. No. 6]): TCS at 1% remains unchanged. ITA 2025 Section Codes are 1075 (Motor vehicle) and 1076–1085 (Based on goods).
Remittance under Liberalised Remittance Scheme (LRS) — For Education or Medical Treatment (Section 206C(1G) / Section 394(1) [Table: Sl. No. 7]): TCS rate is reduced from 5% on amount above ₹10 lakh in FY 2025-26 to 2% on amount above ₹10 lakh in FY 2026-27. FA 2026 introduces the rate reduction effective 1 April 2026. The ITA 2025 Section Code is 1086.
Remittance under LRS — For Purposes Other Than Education / Medical Treatment (Section 206C(1G) / Section 394(1) [Table: Sl. No. 7]): TCS at 20% on amount above ₹10 lakh remains unchanged. The ITA 2025 Section Code is 1087.
Sale of Overseas Tour Programme Package — Up to ₹10 lakh (Section 206C(1G) / Section 394(1) [Table: Sl. No. 8]): TCS rate is rationalised from a 5%/20% two-slab structure in FY 2025-26 to a flat rate of 2% in FY 2026-27. FA 2026 rationalises this to a single flat rate, effective 1 April 2026. The ITA 2025 Section Code is 1088.
Parking Lot / Toll Plaza / Mine / Quarry (Lease / Licence / Contract) (Section 206C(1C) / Section 394(1) [Table: Sl. No. 9]): TCS at 2% remains unchanged. ITA 2025 Section Codes are 1090 (Parking lot), 1091 (Toll Plaza), and 1092 (Mine/Quarry).
TDS/TCS Statements & Returns: Form-wise Cross-Reference
A significant feature of the transition to ITA 2025 is the renaming and restructuring of compliance forms. The following covers how quarterly returns, challan-cum-statements, and other filings have changed across the two regimes.
Quarterly TDS Statements
The quarterly TDS return for deduction from salary payments (previously Form 24Q under IT Rules 1962) transitions to Form 138 under IT Rules 2026. Form 24Q continues for FY 2025-26 (AY 2026-27), with Form 138 applicable for TY 2026-27 onwards under IT Rules 2026. All quarterly returns — Q1 (Apr–Jun), Q2 (Jul–Sep), Q3 (Oct–Dec), and Q4 (Jan–Mar) — are due by 31 July, 31 October, 31 January, and 31 May respectively.
The quarterly TDS return for deduction from payments other than salary to resident deductees (previously Form 26Q, covering Sections 193–194T) transitions to Form 140 under IT Rules 2026. Form 26Q continues for FY 2025-26, with Form 140 applicable for TY 2026-27 onwards.
The quarterly TDS return for deduction from payments to non-residents, including payments under Section 195 / Section 393(2), or to NOR persons (previously Form 27Q) transitions to Form 144 under IT Rules 2026. The same due dates apply. The quarterly TCS return for collection at source (previously Form 27EQ under Section 206C / Section 394) transitions to Form 143 under IT Rules 2026, with Form 27EQ continuing for FY 2025-26.
Challan-cum-Statements (Monthly / Transaction-Based)
One of the most significant simplification measures under ITR 2026 is the consolidation of multiple challan-cum-statement forms. Under IT Rules 1962, four separate forms existed: Form 26QC (TDS on rent by individual/HUF), Form 26QB (TDS on purchase of immovable property from resident), Form 26QD (TDS by individual/HUF on payments to contractors/professionals), and Form 26QE (TDS on transfer of virtual digital assets). All four are now merged into a single Form 141 under IT Rules 2026. Each is due within 30 days from the end of the month of deduction. This simplification significantly reduces compliance errors arising from selection of incorrect forms.
Additionally, the statement by exchange for VDA transactions where the exchange pays tax in lieu of the buyer (under Section 206C(1G) guidelines) — previously Form 26QF — transitions to Form 142 under IT Rules 2026, filed quarterly (same as Q TDS return dates). Exchange-level VDA reporting continues under the new rules.
Government / Book-entry Statements
The statement by Pay & Accounts Officer / Treasury Officer for tax deducted/collected and deposited without challan (book entry), previously Form 24G, transitions to Form 137 under IT Rules 2026. It is due on or before 30 April for March; by the 15th of the following month otherwise. AIN registration now takes place through Form 136 (replacing the earlier procedure under Form 24G application), which is a new dedicated form for AIN registration under IT Rules 2026. Previously, AIN application was part of Form 24G process.
Interest Reporting & Other Statements
The annual statement of interest credited on deposits by banking company / co-operative bank / public company (where interest is below threshold but PAN furnished), previously Forms 26QA (Rule 31AC), is retained in its existing form, filed annually as prescribed. It continues under the new regime. The quarterly statement of interest on deposits by banking company / co-operative bank (previously Form 26QAA, Rule 31ACA) is also retained and continues to be filed quarterly under the new regime. The quarterly statement of transactions by exchange under VDA guidelines for the alternate payer, previously Form 26QF, transitions to Form 142 under IT Rules 2026, filed quarterly.
Refund Claims
Claims for refund of excess TDS / TCS deposited to the Government (previously Form 26B) transition to Form 139 under IT Rules 2026. New Form 139 is prescribed under IT Rules 2026, and the filing timelines remain as applicable.
TDS/TCS Certificates & Declarations
The forms for issuance of TDS certificates, declarations for nil deduction, and certificates for lower/nil deduction have been renumbered under ITR 2026. Key changes are set out below.
The TDS certificate for salary (Section 203 / Section 395(4)), previously Form 16, is now Form 130 under IT Rules 2026, due by 15 June following the end of the financial year. Form 130 in ITA 2025 is a consolidated document covering Part A (tax deducted), Part B (salary details), and Part C (perquisites). A digitally signed option is now available.
The TDS certificate for payments other than salary to residents (Section 203 / Section 395(4)), previously Form 16A, is now Form 131 under IT Rules 2026, due within 15 days from the due date of the quarterly TDS return.
The TDS certificate for TDS on immovable property (Section 194-IA / Section 393(1) [Table: Sl. No. 3(i)]), previously Form 16B, is now Form 132 under IT Rules 2026, due within 15 days from the due date of the challan-cum-statement (Form 141).
The TDS certificate for payments by individual/HUF on rent (Section 194-IB / Section 393(1) [Table: Sl. No. 2(i)]), previously Form 16C, is now Form 133 under IT Rules 2026, due within 15 days from the due date of Form 141.
The TCS certificate (Section 206C / Section 395(4)), previously Form 27D, is now Form 133 / as prescribed under IT Rules 2026, due within 15 days from the due date of the quarterly TCS return. This is a new form under IT Rules 2026.
The certificate of lower / nil deduction for payees (Section 197 / Section 395(1)) and the certificate of lower / nil collection for buyer/lessee applications (Section 206C(9) / Section 395(3)), both previously on Form 13, are now Form 128 under IT Rules 2026. FA 2026 proposes a new automated / electronic process for small taxpayers to obtain lower/nil deduction certificates without approaching the Assessing Officer, effective 1 April 2026. The same automated process is proposed for TCS lower rate certificates. Form 128 covers both TDS and TCS lower rate certificates.
The application for nil/lower deduction for interest/sums payable to non-resident branch (Section 195 / Rule 29B), previously Forms 15C / 15D, is now Form 126 under IT Rules 2026, valid prior to payment and for the specified tax year.
Self-declarations for no TDS for persons below 60 years (Section 197A / Section 393(6)), previously Form 15G, and for senior citizens aged 60 and above (Section 197A / Section 393(6)), previously Form 15H, are both now consolidated into single Form 121 under IT Rules 2026, submitted at the time of credit/payment. FA 2026 further provides that the declaration under Form 121 can also be filed with the depository (for securities/units held in demat form) with effect from 1 April 2027.
Tax Deduction & Collection Account Number (TAN)
All deductors and collectors are required to obtain a TAN. The application process is substantially unchanged, but the forms have been split by entity type under ITR 2026. The single Form 49B under IT Rules 1962 for both Government and non-Government entities is now split into Form 134 (for Government entity) and Form 135 (for non-Government entity) under IT Rules 2026.
Due Dates for Deposit of TDS/TCS
The due dates for depositing TDS and TCS to the Government account remain largely unchanged under ITR 2026. Rule 218 of ITR 2026 corresponds to Rule 30 of ITR 1962 (for TDS) and Rule 37CA (for TCS).
For a Government deductor depositing with challan, the due date remains the 7th of the following month (30th April for March deductions) — unchanged under IT Rules 2026. For a Government deductor depositing without challan (book-entry), the due date is the same day as deduction — also unchanged.
For a non-Government deductor or collector in general, the due date is the 7th of the following month (30th April for March deductions) — unchanged under IT Rules 2026. For non-Government deductors in respect of rent (Section 194-IB), immovable property (Section 194-IA), contractor payments (Section 194M), and VDA (Section 194S) where challan-cum-statements are used, the due date is within 30 days from the end of the month of deduction — now mapped to Form 141 challan-cum-statement under IT Rules 2026.
For quarterly deposits (with prior Assessing Officer approval) covering salary (Section 192), commission / brokerage (Section 194H / Section 393(1) [Sl. 1]), and interest-bank (Section 194A / Section 393(1) [Sl. 5]), the due dates of 7th July / 7th October / 7th January / 30th April are retained under the same schedule.
Other Notable Changes Relating to TDS & TCS
Structural Reorganization — One Chapter, Fewer Sections: Under ITA 1961, TDS provisions were spread across 43 sections (192 to 194T). In ITA 2025, all TDS provisions are consolidated into essentially two core sections — Section 392 (salary) and Section 393 (all other payments, in tabular form) — along with Section 394 (TCS), Section 395 (certificates), Section 397 (compliance & reporting), and Section 398 (consequences of default). This consolidation reduces the risk of inadvertent omission and makes compliance research significantly more efficient.
Elimination of ‘Assessment Year’ — Introduction of ‘Tax Year’: All TDS and TCS provisions now reference ‘Tax Year’ instead of the dual concepts of ‘Previous Year’ and ‘Assessment Year’. This eliminates confusion in determining the year of credit for TDS deducted.
No-PAN Higher Deduction — Rate Rationalised: Under ITA 1961 (Section 206AA), if a deductee fails to furnish PAN, TDS was required at the higher of: applicable rate, ‘rates in force’, or 20%. Under ITA 2025 (Section 397(2)(b)(i)), the 20% default is replaced by 5% for certain specified transactions (purchase of goods at Section 393(1) [Table: Sl. No. 8(ii)] and e-commerce payments at Sl. No. 8(v)), and 20% for all other cases. The higher-rate-for-non-filers provisions (Sections 206AB and 206CCA) were omitted with effect from 1 April 2025 (under FA 2025) and are not carried forward into ITA 2025.
Deposit of TDS — Challan Consolidation for Special Cases: The four separate challan-cum-statement forms (Forms 26QB, 26QC, 26QD, 26QE) used for transaction-specific TDS (immovable property, rent by individual/HUF, contractor/professional payments by individual/HUF, and VDA) have been consolidated into a single Form 141 under ITR 2026. This simplification reduces compliance errors arising from selection of incorrect forms.
Processing of TDS Statements: Section 399 of ITA 2025 (corresponding to Section 200A of ITA 1961) provides for centralised processing of TDS/TCS statements. A new provision (sub-section 399(3)) specifically enables centralised processing for statements filed by persons other than deductors. The intimation period remains one year from the end of the tax year in which the statement is filed.
Consequences of Default — No Change in Interest Rates: Interest for non-deduction or late deduction continues at 1% per month (or part thereof) from the date the tax was deductible to the date of deduction. Interest for late deposit after deduction continues at 1.5% per month from the date of deduction to the date of actual payment. These rates are unchanged under Section 398(3) of ITA 2025.
Credit for TDS / TCS — No Change in Principle: Rule 203 of ITR 2026 (corresponding to Rules 37BA / 37-I of ITR 1962) continues to provide that credit for TDS/TCS shall be given for the tax year in which the income is assessable. The principles for TDS credit in the case of income spread over multiple years and TCS credit for lease / licence arrangements are also carried forward.
Information Reporting for Foreign Remittances: Forms 15CA and 15CB (for information on payments to non-residents) are replaced by Forms 145 and 146 respectively under ITR 2026. Form 145 has four parts (A/B/C/D) covering different remittance scenarios. Form 146 now mandates the Unique Document Identification Number (UDIN) from ICAI for authenticity verification.
TDS on Salary — Key Provisions Retained: The framework for TDS on salary (Section 392) remains substantively the same as Section 192. The employee may furnish information about other income, losses (house property only), and other TDS/TCS credits in Form 122 (corresponding to Form 12BB). The employer is required to collect evidence of claims in Form 124. The Form 16 equivalent (Form 130) now consolidates salary certificate and perquisite statement.
Deposit — Transitional Considerations: The governing Act for TDS purposes is determined by the date on which the ‘earlier of credit or payment’ occurs. Any payment / credit on or before 31 March 2026 is governed by ITA 1961 and old form numbers must be quoted. Any payment / credit on or after 1 April 2026 is governed by ITA 2025 and new section references and form numbers must be used. Deductors should update ERP and payroll systems accordingly.
Scope Limitations
This note is prepared for general information purposes only and is based on the Income-tax Act, 1961 (as amended by Finance Act, 2025), Income-tax Rules, 1962, Income-tax Act, 2025, Income-tax Rules, 2026, Finance Act, 2026 and related official publications as available at the time of preparation. This note does not constitute professional advice. Tax positions may depend on individual facts and circumstances. In case of any conflict, the statutory provisions shall prevail.
Frequently Asked Questions (FAQs)
Q1. What is the key difference between TDS provisions under ITA 1961 and ITA 2025? Under ITA 1961, TDS provisions were spread across 43 separate sections (Sections 192 to 194T). Under ITA 2025, all TDS provisions are consolidated into essentially two core sections — Section 392 (salary) and Section 393 (all other payments, in tabular form). This consolidation makes compliance research significantly more efficient and reduces the risk of inadvertent omissions.
Q2. From when does the Income-tax Act, 2025 come into effect for TDS and TCS purposes? The Income-tax Act, 2025, read with Income-tax Rules, 2026, comes into effect from 1 April 2026. Any payment or credit on or before 31 March 2026 continues to be governed by ITA 1961 and the old form numbers must be used. Any payment or credit on or after 1 April 2026 is governed by ITA 2025 and the new section references and form numbers must be used.
Q3. Are TDS rates changing significantly from FY 2025-26 to FY 2026-27? Most TDS rates remain unchanged between FY 2025-26 and FY 2026-27. Key notable changes include: TDS on MACT interest is fully exempted for individuals under FA 2026; TDS on dividends to resident shareholders now applies from the first rupee (threshold removed); TDS on VDA transfers now applies on the entire consideration with no threshold; and higher TDS rate for non-filers (Sections 206AB and 206CCA) has been removed with effect from 1 April 2025.
Q4. Which TCS rates have changed in FY 2026-27? Finance Act 2026 introduces several TCS rate changes effective 1 April 2026. TCS on sale of alcoholic liquor increases from 1% to 2%. TCS on sale of tendu leaves is reduced from 5% to 2%. TCS on sale of scrap and minerals (coal, lignite, iron ore) increases from 1% to 2%. TCS on LRS remittances for education/medical treatment is reduced from 5% to 2% (on amounts above ₹10 lakh). TCS on overseas tour packages is rationalised to a flat rate of 2% (removing the earlier 5%/20% two-slab structure).
Q5. What is the new Form 141 under ITR 2026? Form 141 under IT Rules 2026 is a consolidated challan-cum-statement that replaces the four separate forms previously required — Form 26QB (TDS on immovable property from resident), Form 26QC (TDS on rent by individual/HUF), Form 26QD (TDS by individual/HUF on contractor/professional payments), and Form 26QE (TDS on VDA transfers). All four are now merged into this single form, simplifying compliance and reducing errors.
Q6. What happens to Forms 15CA and 15CB for foreign remittances under ITA 2025? Forms 15CA and 15CB, which are used for reporting information on payments to non-residents, are replaced by Forms 145 and 146 respectively under ITR 2026. The new Form 145 has four parts (A/B/C/D) covering different remittance scenarios. Form 146 now mandates the Unique Document Identification Number (UDIN) from ICAI for authenticity verification.
Q7. Have interest rates for TDS default changed under ITA 2025? No. The interest rates for defaults remain unchanged under Section 398(3) of ITA 2025. Interest for non-deduction or late deduction continues at 1% per month (or part thereof). Interest for late deposit after deduction continues at 1.5% per month from the date of deduction to the date of actual payment.
Q8. What is a “Section Code” under ITA 2025 and why does it matter? Section codes are four-digit numeric identifiers assigned to each type of TDS/TCS payment under ITA 2025. Unlike ITA 1961 where each payment type had its own section number, ITA 2025 consolidates all payments under a few sections and uses these codes to distinguish between payment types. These codes must be mentioned while filing quarterly TDS/TCS returns for TY 2026-27 onwards.
Q9. What is the TDS treatment for supply of manpower services under ITA 2025? FA 2026 removes the ambiguity that existed under ITA 1961. Supply of manpower services is now expressly classified as ‘work’ (contractor payment) under Section 402(47) of ITA 2025. Accordingly, TDS applies at 1% (for individual/HUF payee) and 2% (for others), effective 1 April 2026. This removes the earlier uncertainty about whether such payments should be treated as contractor payments (2%) or technical services (10%).
Q10. Do TDS deposit due dates change under ITA 2025? The due dates for depositing TDS and TCS remain largely unchanged under ITR 2026. Rule 218 of ITR 2026 corresponds to Rule 30 of ITR 1962 (for TDS) and Rule 37CA (for TCS). The key change is that Forms 26QB, 26QC, 26QD, and 26QE are replaced by Form 141, which must be filed within 30 days from the end of the month of deduction for the relevant special cases.
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