TDS and TCS Changes FY 2026-27: Complete Guide to Sections 392-394 and Forms 130, 138, 140, 144

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Every TDS and TCS reference your business uses has changed effective April 1, 2026. Section numbers, form names, and TCS rates are all different under the Income Tax Act 2025. Returns filed with old references will be rejected by the CPC.

FY 2026-27 is the first full financial year under the Income Tax Act 2025, which replaced the Income Tax Act 1961 on April 1, 2026. For every business that deducts TDS or collects TCS, four changes matter most. The section numbers have been renumbered into Sections 392, 393, and 394. The TDS return forms have been renamed (Form 24Q is now Form 138, Form 26Q is now Form 140, Form 27Q is now Form 144). The salary TDS certificate Form 16 has been replaced by Form 130. A firm 2-year correction window now applies to all TDS and TCS statements.

This guide consolidates every change your accounts and payroll team needs to act on before filing the Q1 FY 2026-27 return in July 2026.

Looking for expert help with TDS and TCS compliance under Income Tax Act 2025 for Indian businesses? The team at Tax Garden helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.

At a Glance: What Changed and What Did Not

Changed:

Every TDS section number. The old 192 to 206CA range is now consolidated under Sections 392, 393, and 394.
TDS return form names. Form 24Q, 26Q, 27Q, and 27EQ are now Form 138, Form 140, Form 144, and Form 144A.
Salary TDS certificate. Form 16 is replaced by Form 130.
TCS rate on scrap and specified minerals (raised to up to 2%).
TCS rate on overseas tour packages (simplified to a flat 2%).
Correction statement window. A strict 2-year limit now applies from the end of the financial year of the original return.

Largely unchanged:

TDS rates on most common payments (contractor, rent, professional, interest, commission).
TAN registration. Existing TANs continue to be valid.
Due dates for quarterly TDS returns and annual issue of TDS certificates.
Thresholds (Rs. 50 lakh, Rs. 50,000 per month, Rs. 2.4 lakh per year, and others).
Higher TDS and TCS for non-filers of ITR (renumbered, but the same policy logic applies).

New TDS Section Structure: Sections 392, 393, and 394

The Income Tax Act 2025 consolidated the scattered TDS provisions of the 1961 Act into a cleaner three-section framework.

Section 392: TDS on Resident Payments

Section 392 now covers every TDS obligation on payments made to residents. Salary, interest, rent, contractor payments, professional fees, dividend, commission, and all other categories previously spread across Sections 192 to 194T sit here. Sub-sections within 392 carry forward the payment-specific rates and thresholds from the 1961 Act.

Section 393: TDS on Non-Resident Payments

Section 393 consolidates the old 195, 196, and 196A through 196D into a single non-resident TDS provision. This covers TDS on payments to foreign contractors, dividend to non-residents, royalty, fees for technical services, and remittances to foreign companies.

Section 394: TDS and TCS Procedural Provisions

Section 394 houses the machinery provisions: TAN, certificates, returns, corrections, penalties, and interest. These previously sat across the 200 series. The new 2-year correction window (detailed below) is anchored here.

For the exact old-to-new mapping of every payment type, see our dedicated TDS and TCS section mapping guide.

New TDS Return Forms: 138, 140, 144, and 144A

The quarterly return form names your team has used for two decades have all changed.

Purpose	Old Form (1961 Act)	New Form (2025 Act)	Quarterly Due Dates
Salary TDS return	Form 24Q	Form 138	31 Jul, 31 Oct, 31 Jan, 31 May
Resident non-salary TDS return	Form 26Q	Form 140	31 Jul, 31 Oct, 31 Jan, 31 May
Non-resident TDS return	Form 27Q	Form 144	31 Jul, 31 Oct, 31 Jan, 31 May
TCS return	Form 27EQ	Form 144A	15 Jul, 15 Oct, 15 Jan, 15 May

Due dates are unchanged. Only the form names, underlying section references, and certain utility dropdown values have been updated.

Form 138 Replaces Form 24Q

Form 138 is the quarterly return you file for TDS on salary. It carries forward Annexure I (challan details) and Annexure II (employee-wise salary and tax details for Q4). Every section reference inside the return now points to Section 392 instead of the old 192 / 192A.

Form 140 Replaces Form 26Q

Form 140 is the return every business files most often. If you pay contractors (old Section 194C), professionals (194J), rent (194I), commission (194H), or interest (194A), those deductions are reported in Form 140 quarterly. The "nature of payment" dropdown has been replaced with new sub-section references under Section 392.

Form 144 Replaces Form 27Q

If you make payments to non-residents (dividend, interest, contract payments, royalty, fees for technical services), Form 144 replaces Form 27Q. The DTAA benefit claim section has been retained with minor format updates for the new Act references.

Form 144A Replaces Form 27EQ

TCS returns are now filed in Form 144A. The 15th-of-the-following-month due-date pattern continues for the four quarters.

Form 130 Replaces Form 16

For salaried employees, the most visible change is the TDS certificate. Form 16 has been replaced by Form 130 from FY 2025-26 onwards. Employers must issue Form 130 to every employee by June 15, 2026.

Form 130 is more granular than Form 16. It has separate sections for old-regime and new-regime tax computation, expanded perquisite valuation, and deductions mapped to new-Act section numbers. For the complete structure and what employees should verify, see our Form 130 guide for salaried employees.

Form 16A (the TDS certificate for non-salary payments to residents) continues under the same name, but with updated section references and challan code fields.

Looking for expert help with TDS return filing for Form 138 Form 140 and Form 144 under new Income Tax Act? The team at Tax Garden helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.

TCS Rate Changes: Scrap, Minerals, and Overseas Tour Packages

The most substantive TCS rate changes effective April 1, 2026 affect three specific categories.

Scrap Sale

Under the 1961 Act, TCS on sale of scrap was 1%. Under the Income Tax Act 2025, the rate has been revised upward to up to 2%, with the exact percentage depending on the buyer type and the specific scrap category. Businesses in metal trading, automobile dismantling, and manufacturing scrap sales should update their invoicing and TCS collection from April 1, 2026.

Specified Minerals

Sale of specified minerals (coal, lignite, iron ore, and others listed in the old Section 206C(1)) was previously subject to 1% TCS. The rate has been revised to up to 2%, aligning the treatment with scrap sales.

Overseas Tour Packages

This is the most welcome simplification. Under the old framework, TCS on overseas tour packages was tiered: 5% for amounts below Rs. 7 lakh and 20% above Rs. 7 lakh (tightened after October 2023). Under the 2025 Act, this has been replaced by a flat 2% TCS on the entire value, removing the tiered structure.

Travel agents, tour operators, and corporate travel desks should reconfigure their billing systems to apply the flat 2% rate on all overseas package bookings from April 1, 2026 onwards.

TCS on Foreign Remittance Under LRS

TCS on outward foreign remittance under the Liberalized Remittance Scheme continues. The Rs. 10 lakh annual threshold and the rate structure are preserved under the new Act's corresponding provision within the Section 394 framework. Education and medical remittances retain their reduced rates.

The New 2-Year Correction Window

This is the compliance change most businesses have missed. Under the 1961 Act, there was no hard statutory limit on how long after filing a TDS return you could file a correction statement. Corrections were routinely filed two, three, or even five years after the original return.

Under the Income Tax Act 2025, correction statements must be filed within 2 years from the end of the financial year in which the original return was filed.

In practice:

A TDS return originally filed in July 2026 (Q1 FY 2026-27) must have any correction statement filed by March 31, 2029.
After the 2-year window closes, the return is frozen. You cannot add missed deductees, correct PAN errors, revise challan references, or update section mappings.
Deductees who discover a TDS credit mismatch after the window closes have no route to fix it on your side.

What This Means for Your Compliance Process

Reconcile every quarter, not annually. Match Form 26AS feedback with your TDS ledger within one month of each quarterly return.
Verify PAN and section references before filing. An invalid PAN creates a higher TDS liability (20% under the prevailing rules) that can only be recovered through a correction statement. Catch it early.
Maintain a correction calendar. If you identify any error in an old TDS return, map the 2-year statutory deadline and file the correction well before it expires.
Act on deductee complaints immediately. If a vendor or employee flags missing TDS credit, the fix is only possible within the 2-year window.

What to Do Before Filing Your Q1 FY 2026-27 Return

Your first TDS return under the new Act is due July 31, 2026 (for April to June 2026 deductions). Before filing:

Update your accounting software. Tally, Zoho Books, Busy, Marg, and other major packages have released TDS updates mapping old sections to Sections 392 and 393. Install the latest patch and test with a sample TDS entry before running live payroll or vendor payments.
Update challan payment codes. The challan 281 format is being replaced with a new numeric payment-code framework. See our new TDS payment codes guide for the 1001 to 1092 mapping across payment types.
Train your team on the new form names. Payroll and accounts staff should mentally substitute Form 24Q with Form 138, Form 26Q with Form 140, and Form 27Q with Form 144. Update every internal checklist, vendor communication template, and audit query reference.
Update vendor and employee communications. Notice templates, Form 16A covering letters, TDS deduction advice emails, and rent payment agreements should reference the new Act and new section numbers.
Prepare to issue Form 130 by June 15, 2026. Your payroll team should know it is no longer "Form 16". Coordinate with your TRACES portal user to verify the FY 2025-26 Form 130 download availability.

Rate Chart Reference

For the complete section-wise TDS rate chart under the new Act (Sections 392 and 393 for the most common business payments), see our TDS rate chart for FY 2026-27.

Looking for expert help with 2-year TDS correction statement window under Income Tax Act 2025? The team at Tax Garden helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.

Common Mistakes to Avoid

Filing Q1 FY 2026-27 return with old form names. The CPC will reject a return submitted as Form 26Q for April to June 2026 deductions. It must be Form 140.
Mixing old and new section references. Every row in the new return must use the new Section 392 / 393 sub-section references. Do not write "194C" or "194J" in the section field.
Issuing Form 16 to employees for FY 2025-26. You must issue Form 130. Employees filing ITR with the old Form 16 format will face verification friction.
Ignoring the 2-year correction window. Tag every TDS return in your filing system with its correction-expiry date (two years from end of FY). After that date, no fix is possible.
Applying the old TCS rate on scrap and minerals. The rate is now up to 2%, not 1%. Revisit your invoicing logic for metal trading, scrap dealing, and mineral sales.
Using the tiered rate on overseas tour packages. The rate is a flat 2% from April 1, 2026. No Rs. 7 lakh threshold, no 20% band.
Assuming deadlines have changed. They have not. The quarterly due dates (31 Jul, 31 Oct, 31 Jan, 31 May for TDS and 15 Jul, 15 Oct, 15 Jan, 15 May for TCS) are unchanged.

How Tax Garden Handles the Transition for You

Migrating to the new Act is not a one-time change. It is roughly three months of parallel work: verifying old-section mappings against the new structure, reconfiguring challan codes, reconciling Q4 FY 2025-26 filings under the old Act against Q1 FY 2026-27 filings under the new, and fielding deductee queries during the transition.

Tax Garden's tax compliance service covers:

TDS deduction calculation and monthly challan payments under the new numeric payment codes.
Quarterly filing of Form 138, Form 140, and Form 144.
Issue of Form 130 and Form 16A with correct Section 392 and 393 references.
TCS registration, collection, and quarterly Form 144A filing at the revised rates.
Correction statement filing, tracked against the 2-year statutory window.
Monthly reconciliation of Form 26AS against your books, so mismatches surface early.

Frequently Asked Questions

Which TDS return form do I file for contractor payments in FY 2026-27?

Form 140, which replaces Form 26Q. The quarterly due dates remain 31 July, 31 October, 31 January, and 31 May.

Do I need a new TAN under the Income Tax Act 2025?

No. Your existing TAN continues to be valid. The Act renumbered sections and forms but did not change the TAN framework.

When must I issue Form 130 to employees for FY 2025-26?

By June 15, 2026. Form 130 replaces Form 16 and must be issued to every employee whose salary TDS was deducted under the old Section 192 (now within Section 392).

What is the TCS rate on overseas tour packages under the new Act?

A flat 2% on the full package value. The earlier tiered 5% / 20% structure has been removed.

How long do I have to file a TDS correction statement?

Two years from the end of the financial year in which the original return was filed. For Q1 FY 2026-27 returns filed in July 2026, any correction must be filed by March 31, 2029.

Are TDS rates on contractor or rent payments changing?

No. The rates remain unchanged. Only the section reference changes. Old 194C and 194I are now sub-sections within Section 392. The 1% / 2% / 10% rates continue.

What happens if I accidentally file using Form 26Q for FY 2026-27?

The CPC will reject the return because Form 26Q does not exist for periods starting April 1, 2026. You must refile using Form 140 before the due date to avoid late-fee exposure.

Does the 2-year correction window apply to returns filed under the old Act?

Corrections to returns filed before April 1, 2026 continue under the transitional rules of the 1961 Act. However, the CBDT has indicated that the 2-year window will apply prospectively to all TDS and TCS statements going forward. Either way, keeping a tight quarterly reconciliation is the safer habit.