Key Takeaways
- From April 1, 2026, the Income Tax Act 2025 replaces the 1961 Act.
- All TDS provisions consolidate under Section 392 (salary) and Section 393 (all other payments).
- Three rate cuts: rent by individuals/HUF (2%), life insurance proceeds (2%), e-commerce payments (0.1%).
- Form 138 replaces Form 24Q; Form 140 replaces Form 26Q.
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What Changed: The New Income Tax Act 2025
The Income Tax Act 2025 came into effect on April 1, 2026, replacing the Income Tax Act 1961. For TDS, the key structural change is consolidation. Your TDS software, challans, and returns must now reference the new section numbers to avoid processing errors.
- Section 392: Covers TDS on salary and premature PF withdrawals.
- Section 393: Consolidates all other payments (formerly 193 through 194T).
TDS Rate Chart for FY 2026-27
The following chart summarises the most common payment types. All rates apply to resident payees with a valid PAN.
| Category | Old / New Ref. | Rate | Annual Threshold |
|---|---|---|---|
| Salary | 192392 | Slab | Exemption Limit |
| Premature PF | 192A392 | 10% | ₹50,000 |
| Bank Interest | 194A393 | 10% | ₹50,000 / ₹1L (Sr) |
| Contractor (Indiv) | 194C393 | 1% | ₹1L Agg. |
| Contractor (Others) | 194C393 | 2% | ₹1L Agg. |
| Insurance Maturity | 194DA393 | 2% | ₹1,00,000 |
| Rent (Land/Bldg) | 194I(b)393 | 10% | ₹50k / month |
| Rent (Indiv/HUF) | 194IB393 | 2% | ₹50k / month |
| Professional Fees | 194J393 | 10% | ₹50,000 |
| E-commerce | 194O393 | 0.1% | ₹5,00,000 |
No PAN / Invalid PAN: If the deductee does not furnish a valid PAN, TDS must be deducted at 20% or the applicable rate, whichever is higher.
What Changed in Rates for FY 2026-27
Three rates were significantly reduced by the Finance Act 2025 to improve business liquidity:
- Rent paid by individuals/HUF: Reduced from 5% to 2%.
- Life insurance maturity proceeds: Reduced from 5% to 2%.
- E-commerce operator payments: Reduced from 1% to 0.1% (significant relief for platform sellers).
New: TDS on partner payments (Section 194T/393): Partnership firms and LLPs must deduct TDS at 10% on salary, remuneration, or interest paid to partners if the aggregate exceeds ₹20,000 in the financial year.
Filing Deadlines & Due Dates
Monthly Challan Deposits
TDS deducted in any month must be deposited to the government by the 7th of the following month, except for March.
April – February
7th of Next Month
March Deduction
April 30th
Quarterly Return Deadlines
For Q1 FY 2026-27 and beyond, ensure you are using the new form numbers.
| Quarter | Form 138 / 140 Due Date |
|---|---|
| Quarter 1 | July 31, 2026 |
| Quarter 2 | Oct 31, 2026 |
| Quarter 3 | Jan 31, 2027 |
| Quarter 4 | May 31, 2027 |
Common Compliance Pitfalls
- Wrongful Section Mapping: Ensure your ERP references Section 393. Using "194C" for a Q1 2026 return triggers immediate rejection.
- Contractor vs. Professional: Mistaking a contractor (1-2%) for a professional (10%) remains the most common error for SMEs.
- Aggregate Thresholds: For contractors, remember the dual threshold: ₹30,000 for a single invoice OR ₹1,00,000 cumulatively for the year.
Frequently Asked Questions
Do I need to file a fresh TDS return for Q4 FY 2025-26 in the new format?
No. Q4 FY 2025-26 covers Jan–March 2026, when the old Act was still in force. Use the old Form 24Q/26Q. The new Form 138/140 applies only to Q1 FY 2026-27 and beyond.
What happens if I deduct at the old rate of 5% for rent?
Over-deduction doesn't trigger a penalty for the deductor, but creates cash flow issues for the payee who must claim a refund during their final tax filing.
Does Section 194T apply to all partnership firms?
Yes. All partnership firms and LLPs must deduct 10% TDS on partner salary/remuneration/interest once the aggregate exceeds ₹20,000 in a financial year.
What is the penalty for late TDS return filing?
₹200 per day under Section 234E until the return is filed, capped at the TDS amount in the return. Plus 1.5% per month interest on late-deposited TDS.
Disclaimer: This guide is for general informational purposes and is current as of April 2026. TDS rates, thresholds, and table references should be confirmed against the latest CBDT circulars before applying them to live transactions.
