TDS Under the New Income-Tax Act, 2025: What Changes for FY 2026-27

For the first time in over six decades, India's income-tax law has a new spine. The Income-Tax Act, 2025 takes effect from 1 April 2026 — for the tax year 2026-27 — and replaces the Income-tax Act, 1961. For most of the law this is a re-drafting and re-numbering exercise rather than a change in substance, and Tax Deducted at Source (TDS) is the clearest example of that principle.

The good news for businesses, payroll teams and fellow professionals: you do not have to relearn your TDS rates. The rates and thresholds applicable for FY 2026-27 are, by and large, carried forward from the position settled by the Finance Act, 2025. What changes is where the law lives and what it is called.

The one-line summary: Same rates, new address. Salary TDS now sits in Section 392; every other deduction is consolidated under Section 393. TCS moves to Section 394.

The structural shift: from a maze to three clean tables

Under the 1961 Act, TDS was spread across more than thirty separate sections — 192 to 196D — each with its own language, provisos and explanations. The 2025 Act replaces that maze with two provisions. Section 392 deals exclusively with deduction on salaries (the old Section 192, including premature EPF withdrawal). Section 393 houses everything else in a tabular format, organised into three tables by the status of the payee:

• Section 393(1) — payments to residents (interest, dividend, commission, rent, contractor and professional fees, purchase of goods, e-commerce, virtual digital assets, and more).

• Section 393(2) — payments to non-residents (the old Section 195 territory).

• Section 393(3) — payments to any person regardless of status, such as cash withdrawals and partner payments by a firm.

Within each table, every type of payment carries a serial number. The nature of payment, the payer, the threshold and the rate now read off a single, structured provision rather than thirty cross-referenced ones.

What stays the same (and why that matters)

For day-to-day compliance in FY 2026-27, the operative numbers are unchanged. A contractor payment to a company is still 2%. Professional fees are still 10%. Rent on land and building is still 10%. Salary TDS is still deducted at slab rates. The thresholds rationalised last year continue to apply. This continuity is deliberate: the 2025 Act was drafted to simplify and consolidate, not to re-open settled rate policy. Your TDS working papers, rate logic and deduction discipline carry forward intact.

What genuinely changes for deductors

• Section references. Over time, return utilities, challans, certificates and internal SOPs will speak the language of Sections 392/393 rather than "194C / 194J / 195". The economic obligation is identical; the citation changes.

• Terminology. Expect "tax year 2026-27" to replace the familiar "FY 2026-27 / AY 2027-28" framing.

• Forms renumbering. Forms 15G and 15H are merged into a single Form No. 121 (under Section 393(6), allowing a declaration that tax on estimated total income will be nil). The Form 26AS / Annual Information Statement is issued as Form No. 168 for the tax year 2026-27.

Practical takeaway: Nothing in your April 2026 deduction needs to change in amount. What needs attention is documentation hygiene — updating templates, return-filing software mappings and client notes to the Section 392 / 393 / 394 framework and the new form codes once the Rules are notified.

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Comparison chart — key TDS sections (FY 2026-27)

The chart below maps the commonly used TDS provisions from their familiar 1961 section numbers to their new home under the Income-Tax Act, 2025, with the rate and threshold for the tax year 2026-27.

Old Act 1961	New Act 2025	Nature of payment	Threshold (Rs)	Rate
192	Sec 392	Salary	Basic exemption limit	Slab rates
192A	Sec 392	Premature EPF withdrawal	50,000	10%
193	393(1) Sl.5(i)	Interest on securities	10,000 p.a.	10%
194A	393(1) Sl.5(ii)	Interest - bank / co-op / post office	50,000 (1,00,000 senior citizen)	10%
194	393(1) Sl.7	Dividends	10,000	10%
194D	393(1) Sl.1(i)	Insurance commission	20,000	2% / 10%
194H	393(1) Sl.1(ii)	Commission / brokerage	20,000	2%
194-I(a)	393(1) Sl.2(ii)	Rent - plant & machinery	50,000 per month	2%
194-I(b)	393(1) Sl.2(ii)	Rent - land, building & furniture	50,000 per month	10%
194C	393(1) Sl.6(i)	Payment to contractors	30,000 single / 1,00,000 aggregate	1% (Ind/HUF), 2% (others)
194J(a)/(b)	393(1) Sl.6(iii)	Professional / technical fees	50,000 per service	10% / 2%
194K	393(1) Sl.4(i)	Income from units (mutual funds)	10,000	10%
194Q	393(1) Sl.8(ii)	Purchase of goods	50,00,000 in a year	0.10%
194R	393(1) Sl.8(iv)	Benefit / perquisite	20,000	10%
194-O	393(1) Sl.8(v)	E-commerce participant	5,00,000 (Ind/HUF)	0.10%
194S	393(1) Sl.8(vi)	Transfer of virtual digital asset	10,000 (50,000 specified)	1%
194N	393(3) Sl.5	Cash withdrawal	1 crore (3 crore co-op society)	2% / 5%
194T	393(3) Sl.7	Partner remuneration / interest by firm	20,000 aggregate p.a.	10%
195	393(2)	Any sum paid to a non-resident	Not applicable	Rate in force / DTAA rate, if lower

TCS — the parallel move

Tax Collected at Source follows the same pattern. With effect from 1 April 2026, the TCS provisions earlier housed under Section 206C are consolidated under Section 394 of the 2025 Act. Rates carry forward — for example, 1% on sale of a motor vehicle above ₹10 lakh, and 20% on LRS remittances for non-specified purposes above ₹10 lakh.

What deductors should do before 1 April 2026

• Treat FY 2026-27 deduction rates and thresholds as unchanged — no re-pricing of TDS is required.

• Update document templates, TDS-return software section mappings and internal SOPs to the Section 392 / 393 / 394 framework once the Rules and utilities are notified.

• Refresh self-declaration and certificate workflows for the renumbered forms: 15G/15H → Form 121; Form 26AS / AIS → Form 168.

• Brief payroll and vendor-payment teams on the "tax year" terminology so internal communication stays aligned with the statute.

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