If your team's mental model is "194C contractor 1% / 2%, 194J professional 10%, 194H commission 2%, 194Q purchase of goods 0.1%", that vocabulary still describes the right rates. But the form filing, the challan, and your TDS software all now reference Section 393 + a four-digit payment code (1023 onwards) instead.
The Income Tax Act 2025 takes effect from 1 April 2026. The headline change for finance teams, accounts payable, and tax professionals: every TDS section in the familiar 194 series is now a numeric payment code under Section 393.
This is the master converter guide: a complete mapping of every legacy TDS section (194C, 194J, 194H, 194Q, 194A, and others) to its new Section 393 payment code. Use this to navigate the transition, update your software, and file Q1 FY 2026-27 returns under the new Act.
Related guides on individual TDS sections:
- TDS on Contractor Payments: Section 194C (1% / 2%)
- TDS on Professional & Technical Fees: Section 194J (2% / 10%)
- TDS on Commission & Brokerage: Section 194H (2%)
- TDS on Purchase of Goods: Section 194Q (0.1%)
- TDS on Interest: Section 194A (10%)
- TDS Rate Chart 2026-27: All Sections and Thresholds
Looking for expert help with TDS section 393 payment codes 194C 194J 194Q new income tax act 2025? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Why Did TDS Sections Change?
The Income Tax Act 1961 accumulated TDS provisions over six decades. By the time the Act was retired, 25+ standalone non-salary TDS sections existed (194 to 194T, with sub-clauses), with numbering gaps, overlapping triggers, and inconsistent threshold structures. Every Finance Act that added a new TDS category had to insert a new section number.
The 2025 Act consolidates all of this:
| Section | What It Covers |
|---|---|
| Section 392 | Salary TDS (was Section 192 in the 1961 Act) |
| Section 393 | All non-salary TDS (was 194A through 194T) |
| Section 394 | TCS (Tax Collected at Source; was Section 206C) |
Each nature of payment now has a four-digit payment code: 1001 to 1004 for salary and EPF under Section 392, and 1005 onwards for Section 393.
Substantively, Tax Year 2026-27 rates and thresholds are carried over from the 194-series (as revised by Finance Act 2025), with a few targeted Finance Act 2026 changes such as supply of manpower being treated as contract work. The renaming is structural, not a new tax.
Complete TDS Mapping: Old vs New Section 393
Here is the complete mapping table for the most frequently used TDS sections:
| Legacy Section | New Section | Payment Code | Nature of Payment | Rate | Threshold |
|---|---|---|---|---|---|
| 194C | 393(1) Sl.6(i) D(a) | 1023 | Contractor to Individual/HUF | 1% | Rs 30,000 single / Rs 1,00,000 aggregate |
| 194C | 393(1) Sl.6(i) D(b) | 1024 | Contractor to Others | 2% | Rs 30,000 single / Rs 1,00,000 aggregate |
| 194J(a) | 393(1) Sl.6(iii) D(a) | 1026 | Technical Services | 2% | Rs 50,000 |
| 194J(b) | 393(1) Sl.6(iii) D(b) | 1027 | Professional Services | 10% | Rs 50,000 |
| 194H | 393(1) Sl.1(ii) | 1006 | Commission / Brokerage | 2% | Rs 20,000 |
| 194Q | 393(1) Sl.8(ii) | 1031 | Purchase of Goods | 0.1% | Turnover + purchase limits |
| 194I(a) | 393(1) Sl.2(ii) D(a) | 1008 | Rent to Machinery | 2% | Rs 50,000/month |
| 194I(b) | 393(1) Sl.2(ii) D(b) | 1009 | Rent to Land & Building | 10% | Rs 50,000/month |
| 194A | 393(1) Sl.5(ii) D(a) | 1020 | Interest to Senior Citizen | 10% | Rs 1,00,000 |
| 194A | 393(1) Sl.5(ii) D(b) | 1021 | Interest to Non-Senior | 10% | Rs 50,000 |
| 193 | 393(1) Sl.5(i) | 1019 | Interest on Securities | 10% | Rs 10,000 |
| 194 | 393(1) Sl.7 | 1029 | Dividend | 10% | Rs 10,000 |
| 194D | 393(1) Sl.1(i) | 1005 | Insurance Commission | 2% (non-company), 10% (company) | Rs 20,000 |
| 192A | 392(7) | 1004 | EPF Withdrawal | 10% | Rs 50,000 |
| 194K | 393(1) Sl.4(i) | 1013 | Income from mutual fund units | 10% | Rs 10,000 |
| 194LA | 393(1) Sl.3(iii) | 1012 | Compensation on compulsory acquisition of immovable property | 10% | Rs 5,00,000 |
| 194LBA | 393(1) Sl.4(ii) | 1014 / 1015 / 1016 | Interest / dividend / rent distributed by REIT or InvIT to resident unit holders | 10% | Nil |
Quick Lookup by Payment Type
Use this quick guide to find the old section number and new Section 393 payment code for your transaction type:
| Payment Type | Old Section | New Code | Rate |
|---|---|---|---|
| Contractor (individual/HUF) | 194C | 1023 | 1% |
| Contractor (company/partnership) | 194C | 1024 | 2% |
| Professional fees (doctors, advocates, CA) | 194J | 1027 | 10% |
| Technical services (IT, engineering) | 194J | 1026 | 2% |
| Commission/brokerage | 194H | 1006 | 2% |
| Purchase of goods (retail, wholesale) | 194Q | 1031 | 0.1% |
| Rent (machinery/equipment) | 194I | 1008 | 2% |
| Rent (land/building) | 194I | 1009 | 10% |
| Interest (senior citizen deposits) | 194A | 1020 | 10% |
| Interest (other deposits) | 194A | 1021 | 10% |
| Dividend income | 194 | 1029 | 10% |
| Insurance commission | 194D | 1005 | 2% (non-company) / 10% (company) |
| Mutual fund income | 194K | 1013 | 10% |
For detailed rules on each payment type, see the related guides above.
What Changed: Rate-Wise Separate Section Codes
Under the Income Tax Act 1961, sections were simple and consolidated: 194C, 194A, 194H, 194I, 194J, 194Q were each single sections.
Now under ITA 2025, they are referred to in a tabular format: 393(1) [Table: Serial No. 6], 393(1) [Table: Serial No. 5], etc.
Most importantly: where multiple rates existed within the same section, they are now divided into separate entries with separate codes.
1. Contractor Payments to Old Section 194C → New Section 393
| Aspect | Old Act (1961) | New Act (2025) |
|---|---|---|
| Section | 194C | 393(1) Sl.6(i) |
| Code | None (Single section) | 1023 (Individual/HUF @ 1%) / 1024 (Others @ 2%) |
| Rate Structure | 1% on individuals, 2% on others | Same rates, separate codes |
Takeaway: Same section, but separate codes based on entity type and rate. Correct code selection is critical for challan and return filing.
2. Professional & Technical Fees to Old Section 194J → New Section 393
| Aspect | Old Act (1961) | New Act (2025) |
|---|---|---|
| Section | 194J | 393(1) Sl.6(iii) |
| Code | None | 1026 (Technical @ 2%) / 1027 (Professional @ 10%) |
| Rate Structure | 2% technical, 10% professional | Same rates, separate codes |
Takeaway: Clear bifurcation based on nature of payment and rate. Using the wrong code will trigger validation errors.
3. Rent to Old Section 194I → New Section 393
| Aspect | Old Act (1961) | New Act (2025) |
|---|---|---|
| Section | 194I | 393(1) Sl.2(ii) |
| Code | None | 1008 (Machinery @ 2%) / 1009 (Land/Building @ 10%) |
| Rate Structure | 2% machinery, 10% other rent | Same rates, separate codes |
Takeaway: Again, separate section codes for separate rates based on rental property type.
New Section 393: The Umbrella TDS Provision
Section 393 of the Income Tax Act, 2025 consolidates all non-salary TDS deduction provisions into one section with a tabular structure.
Why This Consolidation?
- Under the old act, TDS provisions were unnecessarily divided into many sections
- Inserting TDS for new transaction types was difficult and complicated section numbering
- The new structure ensures easy reference and future insertion of new TDS categories without creating new section numbers
How Section 393 Works
Section 393(1) contains a table with serial numbers (Sl. 1, 2, 3, etc.), and each row specifies:
- Nature of payment
- Rate of TDS
- Threshold
- Payment code (4-digit number)
Payments are now classified by nature and rate, not by a single section number.
Applicability Timeline
- From 1 April 2026: Section 393 applies. Old section numbers (194C, 194J, etc.) are not valid.
- Up to 31 March 2026: Old Income Tax Act 1961 applies. Continue using 194C, 194J, etc.
Form Changes: What Certificates to Issue
For tax deducted or collected from 1 April 2026 (Tax Year 2026-27), issue the new forms. Certificates for FY 2025-26 are still issued on the old forms, even after 1 April 2026:
| Old Form | New Form | Purpose | Old form still used for |
|---|---|---|---|
| Form 16 | Form 130 | Salary TDS certificate | Tax deducted up to 31 March 2026 |
| Form 16A | Form 131 | Non-salary TDS certificate | Tax deducted up to 31 March 2026 |
| Form 27D | Form 133 | TCS certificate | Tax collected up to 31 March 2026 |
Critical: Issuing Form 16 for TY 2026-27 is non-compliant. Issue Form 130 instead.
Practical Step-by-Step: What to Do Now
Step 1: Update Your ERP and TDS Software
Every FVU (Form Value Unit) code has been reassigned. Audit your accounting software, payroll software, and TDS compliance tools before filing the first quarterly return for TY 2026-27 (Q1 of Tax Year 2026-27, due by 31 July 2026).
Action items:
- Verify that your TDS software can generate Section 393 payment codes
- Update master data to reflect new code assignments
- Test with a trial return before filing live
Step 2: Update Your Internal Reference Documents
Create a cross-reference table for your team:
| Old Section | New Section Reference | Payment Code(s) |
|---|---|---|
| 194C | 393(1) Sl.6(i) | 1023, 1024 |
| 194J | 393(1) Sl.6(iii) | 1026, 1027 |
| 194H | 393(1) Sl.1(ii) | 1006 |
| 194Q | 393(1) Sl.8(ii) | 1031 |
| 194I | 393(1) Sl.2(ii) | 1008, 1009 |
| 194A | 393(1) Sl.5(ii) | 1020, 1021 |
Step 3: Train Your Finance Team
- Correct code selection becomes critical; using the wrong code will trigger validation errors
- Ensure AP and finance teams understand the new structure before Q1 filing
- Consider a dry run with sample transactions to verify software behavior
Step 4: Update Challan References
TDS challans now require:
- Section 393 (not 194C, 194J, etc.)
- Payment Code (e.g., 1027 for professional fees @ 10%)
- Not the old section number
Example Challan:
- Old: Section 194J, Rate 10%, Amount Rs 50,000, Tax Rs 5,000
- New: Section 393, Payment Code 1027, Rate 10%, Amount Rs 50,000, Tax Rs 5,000
Step 5: Keep FY 2025-26 Returns on the Old Sections
Ensure all FY 2025-26 quarterly returns (Q1 to Q4) use the old section numbers (194C, 194J, etc.). Do not mix old and new section numbers in the same financial year.
Common Mistakes to Avoid
1. Using Old Section Numbers in Q1 FY 2026-27 Challans
Mistake: Filing TDS challans under Section 194C in April 2026.
Impact: Validation error. The challan or return is rejected on the income tax portal.
Fix: Use Section 393 + correct payment code (1023 or 1024 for contractor).
2. Choosing the Wrong Payment Code
Mistake: Issuing professional fee TDS under code 1026 (technical @ 2%) instead of 1027 (professional @ 10%).
Impact: TDS under-deducted. Deductee receives lower TDS credit. Compliance mismatch in return filing.
Fix: Classify nature of payment correctly. Technical = 1026, Professional = 1027.
3. Issuing Old Form 16 for TY 2026-27
Mistake: Issuing Form 16 to employees for salary earned in FY 2026-27.
Impact: Non-compliant certificate. Employee cannot file ITR using Form 16 for new year.
Fix: Issue Form 130 for all salary certificates from TY 2026-27 onwards.
4. Not Updating Software Masters Before Filing
Mistake: Filing quarterly returns with old section numbers in software after 1 April 2026.
Impact: Portal rejects the return. Filing delayed. Penalties apply if not corrected by deadline.
Fix: Update software and test before 1 April 2026. File a test return in March if possible.
5. Confusing Payment Code with Rate
Mistake: Thinking payment code = rate (e.g., "1023 means 1.023% tax").
Impact: Misclassification and under/over-deduction.
Fix: Understand that payment codes are arbitrary identifiers. Check the section 393 table for the correct rate.
Key Takeaways for Finance Teams
| Change | Implication |
|---|---|
| New Section Numbers | Sections 392 (salary), 393 (non-salary), 394 (TCS) replace all old TDS sections |
| Payment Codes | Every TDS category now has a 4-digit payment code (1001 onwards) |
| Form Changes | Form 16 → Form 130, Form 16A → Form 131, Form 27D → Form 133 |
| Tax Year | Assessment Year (AY) is replaced by Tax Year (TY) from 1 April 2026 |
| Code Selection | Multiple rates = multiple section codes. Correct code selection is critical |
| Effective Date | 1 April 2026 (applies to transactions from this date) |
| Rates Carried Over | Rates and thresholds largely carried over; structure changed, not substance |
What Happens If You Use the Wrong Code?
- Validation errors at portal submission
- Return rejection until corrected
- Penalties if not filed by deadline
- Compliance notices if TDS and return don't match
- Deductee mismatch if your TDS doesn't match the form 131 they received
Important: Verify Before Acting
The rates, thresholds, and payment codes provided here are based on the Income Tax Act, 2025 as of August 2026. Verify the current codes on incometax.gov.in or consult a CA before acting, as new notifications or amendments may be issued before or after 1 April 2026.
Bookmark this page to you'll need it when filing TDS returns for TY 2026-27, updating your software, and explaining the changes to your finance team and deductees.
For specific questions on how your business is affected, consult your CA or tax advisor. Tax Garden handles all TDS compliance under the new Act, including code selection, challan generation, and form issuance, so your finance team can focus on operations.
Sources: Income Tax Act, 2025; CBDT notifications; Finance (No. 2) Act 2024 memorandum (194D, 194H rates); Saral.pro; GoForFiling; TaxGuru. Rates and section numbers verified as of August 2026. This article is general guidance and not a substitute for professional tax advice.
