TDS in India for FY 2026-27: Meaning, Rates, Due Dates, Returns and Credit

Most people meet TDS long before they file their first return. A salary slip shows a "TDS" line. A fixed deposit pays slightly less interest than promised. A client pays a freelancer Rs 45,000 on a Rs 50,000 invoice. In each case the payer has done the same thing: kept back part of the money as tax and sent it to the government on the payee's behalf.

FY 2026-27 is the first year this happens under the Income-tax Act, 2025. How TDS works has not changed. The section numbers, form numbers and challan codes have, and that is where most mistakes this year come from.

This guide is written from both sides of the payment. If you deduct TDS (as an employer, a business, or an individual paying high rent), it covers what to deduct, when to deposit and what to file. If TDS is deducted from you, it covers how to check the credit and claim it.

---

What Does TDS Mean?

TDS (Tax Deducted at Source) means that tax is collected at the moment income is paid, by the person paying it, rather than waiting for the earner to pay at year end.

Two parties are involved:

• Deductor: the person making the payment. They deduct the tax, deposit it, file a quarterly statement and issue a certificate.
• Deductee: the person receiving the payment. They get the net amount, and the tax deducted counts as tax already paid in their name.

TDS is not an extra tax. It is an advance payment of the deductee's own income tax. If the TDS turns out to be more than the final liability, the difference comes back as a refund when the ITR is filed. If it is less, the deductee pays the balance.

Why the government uses it

TDS solves two problems for the tax department. Collection is spread through the year instead of arriving all at once with the returns. And because every deduction is reported against the deductee's PAN, the department sees income as it is paid, which makes unreported income much easier to detect. That second point matters to you as a taxpayer: whatever TDS shows against your PAN, the department already knows about.

---

Who Has to Deduct TDS?

The obligation follows the payment, not the size of the business. You are a deductor if you make a payment covered by Section 392 or 393 above the threshold and you fall into one of these groups:

The individual cases (high rent, property purchase, large contract payments) catch people out because the deductor is often a salaried person who has never thought of themselves as one. None of them needs a TAN: the tax is paid and reported in one step on Form 141, using the buyer's or tenant's PAN.

---

Which Payments Attract TDS: Old and New Sections

Every non-salary TDS provision has been collected into Section 393 and organised as tables: 393(1) for resident payees, 393(2) for non-residents, and 393(3) for certain payments to any person, such as lottery and gaming winnings and payments to partners. The old section numbers are still the easiest way to find your way around, so the table maps them.

Challans now use a numeric payment code for each type of payment in place of the old section code, for example 1027 for professional fees and 1024 for contractors other than individuals and HUFs. Our TDS payment codes guide has the full list, and the section-by-section 393 map shows the table numbers.

---

TDS Rates and Thresholds for FY 2026-27

The 2025 Act kept the rates and thresholds that applied at the end of FY 2025-26. That includes the rate cuts from 1 October 2024 and the higher thresholds from Budget 2025.

For every section on one page, see our TDS rate chart for 2026-27.

No PAN, higher rate. If the deductee does not give a valid PAN, TDS is deducted at 20% or the normal rate, whichever is higher (5% for e-commerce and goods purchases). The separate higher rate for non-filers (old Section 206AB) was omitted from 1 April 2025, so you no longer need to run a non-filer check before deducting.

Lower or nil deduction. A deductee with no tax payable for the year can give the payer a Form 121 declaration, which replaces Form 15G and 15H from 1 April 2026, for payments such as interest and dividends (Form 121 guide). A deductee whose real liability is lower than the TDS can apply for a lower or nil deduction certificate in Form 128, which replaces Form 13 (lower deduction certificate guide). Either way, the deductor needs the document before deducting, not afterwards.

---

Three Worked Examples

1. A salaried employee on the new regime

Priya earns a gross salary of Rs 18,00,000 in FY 2026-27 and has not opted out of the new regime, which is the default.

Her taxable income is above Rs 12 lakh, so the rebate does not apply. The employer recalculates during the year if Priya's salary changes, she declares income from a previous employer, or she switches regime. Salary TDS is deducted when salary is paid, not when it accrues. Employers can follow the full process in our salary TDS guide.

2. A freelancer crossing the threshold mid-year

A company pays a freelance designer Rs 40,000 in June and Rs 30,000 in September for professional services.

• June: the total paid this year is Rs 40,000, below the Rs 50,000 threshold. No TDS.
• September: the total reaches Rs 70,000. The threshold has been crossed, so TDS at 10% applies to the whole Rs 70,000, which is Rs 7,000. The company deducts all of it from the September payment and pays Rs 23,000.

This is why businesses that expect to cross a threshold often deduct from the first payment instead of taking a large deduction later.

3. A senior citizen's fixed deposit

A 68-year-old earns Rs 1,20,000 interest in the year from one bank. That is above the Rs 1,00,000 senior-citizen threshold, so the bank deducts 10%, which is Rs 12,000. If their tax for the year is nil, a Form 121 declaration given to the bank in April would have prevented the deduction. Without one, the Rs 12,000 can only be recovered as a refund through the ITR. More on this in our FD interest TDS guide.

---

When Is TDS Deducted?

For most non-salary payments, TDS is deducted at whichever comes first:

1. the date the amount is credited to the payee's account in the deductor's books (including a "provision" or "suspense" account), or
2. the date it is actually paid.

So a company that books a consultant's March invoice on 31 March but pays in April must deduct TDS in March. For salary, the trigger is payment only.

---

TDS Due Dates for FY 2026-27

Depositing the tax

Filing quarterly returns

The annual salary certificate, Form 130, is due by 15 June 2027 for FY 2026-27.

A monthly routine for deductors

1. Through the month: deduct TDS on every payment or credit that crosses a threshold. Collect the deductee's PAN when you onboard them.
2. By the 7th: deposit the previous month's TDS using the right payment code.
3. Each quarter: match challans to deductions, then file Form 138, 140 or 144 by the due date.
4. Within 15 days of the return due date: download Form 131 from TRACES and issue it to non-salary deductees.
5. By 15 June: issue Form 130 to every employee.

---

TDS Return Forms Under the Income-tax Act, 2025

The transition rule: the period decides the form, not the filing date

This is the most common error in 2026. The form depends on when the tax was deducted, not when you upload the return.

A correction to a Q3 FY 2025-26 return filed in December 2026 still goes on Form 26Q. A Q1 FY 2026-27 return must go on Form 140, even if your software still offers the old form. For step-by-step filing, see our TDS filing guide on forms, due dates and penalties.

---

TDS Certificates: Form 130, 131, 132 and 133

Non-salary certificates must be downloaded from TRACES; a certificate made in-house in a spreadsheet is not valid. An employee who changed jobs during the year gets Form 130 from each employer for their period of service. Our Form 130 guide explains what each part shows.

---

If TDS Was Deducted From You: Checking and Claiming Credit

Where to check

Form 26AS is filled from the deductor's quarterly return, not from the deduction itself. If your employer or client deducted tax but filed late, filed with your PAN wrong, or did not file at all, the credit will not appear, even if you hold a certificate.

How to claim it

1. Download Form 26AS and AIS just before you file, because they update as deductors file corrections.
2. Match every entry to your Form 130, Form 131, bank statements and invoices.
3. Report the gross income (Rs 80,000 rent, not the Rs 72,000 received after 10% TDS).
4. Claim the TDS in the tax-paid schedule of the ITR. The portal pre-fills most of it from 26AS.
5. If something is missing, ask the deductor to file a correction statement and wait for it to show before filing. If something is extra (TDS on income that is not yours), do not claim it, and report it through AIS feedback.

Our 26AS mismatch guide walks through each fix.

If the deductor deducted tax from you and never deposited it, the law protects you: the department cannot demand that tax again from you directly (old Section 205, now Section 401). The default is the deductor's to resolve, but you will need evidence of the deduction, such as a salary slip or payment advice showing it. See TDS deducted but not deposited.

---

Interest, Fees and Penalties for Deductors

The consequences carried over from the 1961 Act with the same amounts.

Example: Rs 50,000 of TDS is deducted on 10 July and deposited on 20 August instead of 7 August. That covers two months (10 July to 9 August, and part of the next), so interest is 1.5% × 2 × Rs 50,000 = Rs 1,500. If the Q2 return is filed on 30 November instead of 31 October, the late fee is 30 days × Rs 200 = Rs 6,000.

Interest and late fees must be paid before the return will process cleanly. A return filed without them generates a demand on TRACES. Details are in our guides on late deposit interest and late filing fees and penalties.

---

Common TDS Mistakes in FY 2026-27

---

Key Points to Remember

---

Where Tax Garden Helps

TDS is a monthly job, not a year-end one. Every payment over a threshold needs a deduction, every deduction needs a deposit by the 7th, and every quarter needs a return and a batch of certificates. In the first year of the 2025 Act, a wrong form or payment code is enough to trigger a demand, even when the tax was paid on time.

Tax Garden's TDS compliance service covers:

• Deduction review: which payments attract TDS, at what rate, and when the threshold is crossed
• Challans: correct payment codes under Sections 392 and 393, deposited by the 7th
• Quarterly returns: Form 138, 140, 144 and 141 filed on time, with FY 2025-26 corrections on the old forms
• Certificates: Form 130 and Form 131 issued from TRACES
• Reconciliation: challans, books and 26AS matched every quarter
• Notices: replies to short-deduction, short-payment and late-filing demands

Looking for expert help with TDS return filing? 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.

---

Sources: Income-tax Act, 2025 (Sections 392, 393, 394, 395, 401 and 427); Income-tax Rules, 2026 (Rule 215 on certificates, Rule 219 on statements and due dates); CBDT notifications on TDS payment codes; TRACES (tdscpc.gov.in); Income Tax e-Filing portal (incometax.gov.in); Income Tax Department (incometaxindia.gov.in). The salary example uses the new-regime slabs, Rs 75,000 standard deduction and 4% cess for FY 2026-27, and ignores surcharge. Sections, forms, rates and due dates can change through notifications, so check the current position on incometaxindia.gov.in before acting. This article is general information and not a substitute for professional advice.

Frequently Asked Questions

What is the meaning of TDS?

TDS means Tax Deducted at Source. The person paying salary, rent, fees, interest or other specified income deducts part of it as tax and deposits it with the government against the recipient's PAN. The recipient treats that amount as tax already paid when filing the ITR.

Is TDS an extra tax?

No. TDS is an advance payment of your own income tax. If TDS is more than your final liability, you get the difference back as a refund. If it is less, you pay the balance as self-assessment tax.

Which section covers TDS under the Income-tax Act, 2025?

Salary TDS is in Section 392, and TDS on premature EPF withdrawal is in Section 392(7). Other TDS is in Section 393: Section 393(1) for resident payees, 393(2) for non-residents and 393(3) for certain payments such as winnings and payments to partners. TCS is in Section 394. These apply to amounts paid or credited on or after 1 April 2026.

When must TDS be deposited for FY 2026-27?

By the 7th of the month after the deduction. TDS deducted in March can be deposited until 30 April. TDS on property purchase, rent paid by individuals not under audit, and large contract or professional payments by individuals is paid within 30 days of the end of the month of deduction, through the Form 141 challan-cum-statement.

What are the TDS return due dates?

31 July for April to June, 31 October for July to September, 31 January for October to December, and 31 May for January to March.

Which forms replace 24Q, 26Q and 27Q?

Form 138 replaces 24Q for salary, Form 140 replaces 26Q for resident non-salary payments, Form 144 replaces 27Q for non-residents, and Form 143 replaces 27EQ for TCS. Form 141 replaces the 26QB, 26QC, 26QD and 26QE family. The new forms apply to deductions from 1 April 2026. Returns and corrections for earlier periods still use the old forms.

What are Form 130 and Form 131?

Form 130 is the salary TDS certificate that replaces Form 16, due by 15 June after the tax year. Form 131 is the non-salary TDS certificate that replaces Form 16A, due within 15 days of the quarterly return due date. Both are generated from TRACES.

My TDS is not showing in Form 26AS. What should I do?

Ask the deductor to check that they deposited the tax and filed the return with your correct PAN, and to file a correction if needed. Credit is matched against Form 26AS, so wait for the correction to show before filing your ITR where you can.

What is the penalty for filing a TDS return late?

A fee of Rs 200 per day applies until the return is filed, capped at the TDS for that return. A penalty of Rs 10,000 to Rs 1,00,000 can also apply for not filing by the due date or for filing incorrect details. It is not levied if the return is filed within one year of the due date after paying the tax, fee and interest.

Can I stop TDS if my income is below the taxable limit?

Yes, for payments such as bank interest and dividends. From 1 April 2026, give the bank or payer a Form 121 declaration (which replaces Form 15G and 15H) at the start of the year. If you have some tax to pay but less than the TDS, apply for a lower or nil deduction certificate in Form 128. If TDS has already been deducted, claim it back as a refund in your ITR.