TDS under the Income-tax Act, 2025: what changed from 1 April 2026
On 1 April 2026 the Income-tax Act, 2025 replaced the Income-tax Act, 1961. For a business that deducts TDS, the work is the same (deduct, deposit, file quarterly), but the section numbers, the form numbers and some wording have changed. This guide sets out what changed, based on the Act as published in the Gazette and on the Income Tax Department's e-filing portal (sources at the end), and how TallyBook handles both laws side by side.
The new Act in brief
- The Income-tax Act, 2025 (No. 30 of 2025) received assent on 21 August 2025 and came into force on 1 April 2026 (section 1(3)).
- It uses "tax year": the twelve months of the financial year starting 1 April (section 3). The year 2026-27 is the first tax year under the new Act.
- TDS on salary is in section 392. TDS on other payments is in section 393, as tables instead of separate sections: 393(1) for payments to residents, 393(2) for payments to non-residents and 393(3) for payments to any person. TCS is in section 394.
Old sections and where they are now
Common payments, from the table in section 393(1) "For payments to resident". Thresholds and rates are as printed in the Act; the Finance Act, 2026 did not change these rows.
| Payment | 1961 Act | 2025 Act, section 393(1) | Rate | Threshold |
|---|---|---|---|---|
| Contractors (paid by a "designated person") | 194C | Sl. No. 6(i) | 1% to an individual or HUF; 2% to others | ₹30,000 for a single payment, or ₹1,00,000 in the year |
| Professional or technical fees | 194J | Sl. No. 6(iii) | 2% for technical services (and call centres, film royalty); 10% otherwise | ₹50,000 |
| Commission or brokerage (paid by a "specified person") | 194H | Sl. No. 1(ii) | 2% | ₹20,000 |
| Rent (paid by a "specified person") | 194-I | Sl. No. 2(ii) | 2% for plant, machinery or equipment; 10% for land, building or furniture | ₹50,000 for a month or part of a month |
| Interest other than on securities, paid by others than banks | 194A | Sl. No. 5(iii) | Rates in force | ₹10,000 |
| Purchase of goods (by a "buyer") | 194Q | Sl. No. 8(ii) | 0.1% of the amount above ₹50 lakh | ₹50 lakh |
Two definitions in section 402 decide whether you must deduct at all: a "specified person" is anyone other than an individual or HUF, or an individual or HUF whose turnover in the preceding tax year was above ₹1 crore (business) or ₹50 lakh (profession); a "buyer" for purchase of goods is one whose turnover in the preceding tax year was above ₹10 crore. The Finance Act, 2026 also adds "supply of manpower" to the meaning of "work" for contractor TDS. Check your own case with your CA.
New form numbers
The Income-tax Rules, 2026 renumbered the TDS and TCS statements. From the Department's Form Mapping Guide and e-filing user manuals:
| What it is | Old form | New form |
|---|---|---|
| Quarterly TDS statement, payments to residents other than salary | 26Q | 140 |
| Quarterly TDS statement, salary | 24Q | 138 |
| Quarterly TDS statement, payments to non-residents | 27Q | 144 |
| Quarterly TCS statement | 27EQ | 143 |
| TDS on property, rent by individuals and similar (challan-cum-statement) | 26QB, 26QC, 26QD, 26QE | 141 |
The e-filing manuals give the due dates for Forms 138 and 140 as 31 July, 31 October and 31 January for the first three quarters, and 31 May after the year for the last.
The changeover: old or new law?
The Department's TDS compliance FAQ says the Act that applies depends on when the earlier of credit or payment happens. If a bill was credited to the party's account on or before 31 March 2026, the 1961 Act applies, even if you pay in April. If both happen on or after 1 April 2026, the 2025 Act applies. For salary, the FAQ says the payment date decides: March salary paid on 31 March 2026 is under the old Act, April salary paid on 30 April 2026 under the new one.
The same FAQ says corrections for periods under the old Act continue in the old Act's forms and formats. That the January to March 2026 quarter itself is filed in Form 26Q, with Form 140 starting from the first quarter of 2026-27, is stated in the Department's Form 140 FAQ on incometaxindia.gov.in, which we could only see quoted in search results, not open; confirm it with your CA or the TDS return utility before filing.
TCS changes worth knowing
Under section 394(1) as amended by the Finance Act, 2026, TCS on scrap is 2% (it was 1%), and timber and other forest produce is also 2%, from 1 April 2026. The Budget release on PIB described this as rationalising TCS on liquor, scrap and minerals to 2%.
How TallyBook handles both Acts
Since version 0.2.0:
- Each TDS and TCS nature of payment carries two sections: its 1961 section and its 2025 section with the new rates from 1 April 2026. For example, Payments to Contractors shows 194C before that date and 393(1) Sl. No. 6(i) after it.
- The section is chosen by the voucher date. Vouchers dated up to 31 March 2026 keep the 1961 sections, so old reports and returns do not change.
- Scrap and timber TCS use 2% from 1 April 2026.
- The quarterly TDS report is titled Form 140 for 2026-27, and Form 26Q for earlier periods.
- If you alter a voucher, TDS Details opens again with the earlier deduction filled in.
Setup, deduction and challans are covered step by step in TDS on payments in TallyBook. Salary TDS by regime is in payroll, salary TDS and gratuity.
Sources
- The Income-tax Act, 2025 (No. 30 of 2025), Gazette of India: sections 1, 3, 392, 393, 394 and 402
- The Finance Act, 2026, Gazette of India: amendments to sections 393, 394 and 402
- PIB, 1 April 2026: Income-tax Act, 2025 comes into force
- PIB: Union Budget 2026-27 direct tax proposals (TCS at 2% on liquor, scrap and minerals)
- Income Tax Department e-filing portal: TDS compliance FAQs (which Act applies; old forms for old periods)
- Income Tax Department: Form Mapping Guide (old to new form numbers)
- e-filing user manual: Form 140 and Form 138
We could not open pages on incometaxindia.gov.in while writing this, so the new numbers of TDS certificates (the old Form 16 and 16A) are not covered here; check them there or with your CA. The section mapping above comes from the Act text, not from a mapping tool.
Frequently asked questions
What replaced section 194C and the other 194 sections?
From 1 April 2026, TDS on payments to residents is in the table in section 393(1) of the Income-tax Act, 2025. For example, payments to contractors are Sl. No. 6(i), professional or technical fees Sl. No. 6(iii) and commission Sl. No. 1(ii). Salary is in section 392.
Does Form 140 replace Form 26Q?
Yes. Form 140 is the quarterly statement of TDS on payments to residents other than salary under the new rules. Form 138 replaces 24Q for salary.
Which Act applies to a bill booked in March 2026 and paid in April 2026?
The 1961 Act. The Income Tax Department says the earlier of credit or payment decides, and here the credit was before 1 April 2026.
Do I file the January to March 2026 quarter in Form 140?
It should be a Form 26Q: periods under the 1961 Act stay with the old forms. The e-filing FAQ says this for corrections; for the original statement we saw it only quoted from the Department's Form 140 FAQ, so confirm with your CA or the return utility.
Do I need to change my TDS natures in TallyBook?
No. From version 0.2.0 each nature carries both its 1961 section and its 2025 section with the new rates, and TallyBook picks one by voucher date. Review the rates and thresholds before use.
Can TallyBook create the Form 140 file?
No. It gives a quarterly working summary titled Form 140 for 2026-27. Prepare the statement with the official utility or through your CA.
Related: TDS on payments · Payroll, salary TDS and gratuity
TallyBook is an independent product made by Techardent Labs and is not affiliated with, endorsed by or connected to Tally Solutions Pvt. Ltd. TallyPrime and Tally are trademarks of their owner. Tax rules change often; confirm current rates, limits and due dates on the official portals or with your Chartered Accountant.