In simple words
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026. The rules on tax deducted at source (TDS) were mostly kept, but the section numbers changed.
Instead of more than thirty separate sections (194A, 194C, 194J and so on), the new Act puts almost everything into one section, 393, which has three tables:
- 393(1): payments to residents (rent, contractors, professional fees, interest, commission and so on)
- 393(2): payments to non-residents
- 393(3): payments to any person (lottery winnings, cash withdrawals, payments by a firm to its partners)
Salary moves from 192 to section 392, and TCS moves from 206C to section 394. Each row is quoted as "section 393(1), Table Sl. No. 6(i)" instead of "section 194C".
The "previous year" and "assessment year" are also replaced by a single tax year. Tax year 2026-27 runs from 1 April 2026 to 31 March 2027.
Which Act applies to a payment?
The test is the earlier of credit or payment:
- Credited or paid on or before 31 March 2026: deduct under the 1961 Act (old sections).
- Credited or paid on or after 1 April 2026: deduct under the 2025 Act (new sections).
Example. A March 2026 contractor bill was booked (credited) on 31 March 2026 and paid on 10 April 2026. TDS falls under old section 194C, because the credit came first. An April 2026 bill under the same contract falls under section 393(1), Table Sl. No. 6(i). The contract itself does not need to be amended.
Payments to residents: old vs new table
Rates are for tax year 2026-27, before surcharge and cess. "Specified person" means anyone other than an individual or HUF, plus an individual or HUF whose turnover or gross receipts in the preceding tax year exceeded ₹1 crore (business) or ₹50 lakh (profession).
| Nature of payment | Old section (1961 Act) | New section (2025 Act) | Threshold | Rate |
|---|---|---|---|---|
| Salary | 192 | 392 | Income above the basic exemption | Average slab rate |
| Taxable withdrawal of accumulated PF balance | 192A | 392(7) | See section 392(7) | 10% |
| Insurance commission | 194D | 393(1) Sl. No. 1(i) | ₹20,000 | Rates in force (see note 1) |
| Commission or brokerage | 194H | 393(1) Sl. No. 1(ii) | ₹20,000 | 2% |
| Rent paid by individuals or HUFs not covered as specified persons | 194-IB | 393(1) Sl. No. 2(i) | ₹50,000 per month or part of a month | 2% |
| Rent of plant, machinery or equipment | 194-I(a) | 393(1) Sl. No. 2(ii) | ₹50,000 per month or part of a month | 2% |
| Rent of land, building, furniture or fittings | 194-I(b) | 393(1) Sl. No. 2(ii) | ₹50,000 per month or part of a month | 10% |
| Purchase of immovable property (not agricultural land) | 194-IA | 393(1) Sl. No. 3(i) | ₹50 lakh | 1% of consideration or stamp duty value, whichever is higher |
| Joint development agreement (cash part) | 194-IC | 393(1) Sl. No. 3(ii) | Nil | 10% |
| Compensation on compulsory acquisition of land | 194LA | 393(1) Sl. No. 3(iii) | ₹5,00,000 | 10% |
| Income from mutual fund units | 194K | 393(1) Sl. No. 4(i) | ₹10,000 | 10% |
| Distributions by a business trust (InvIT or REIT) | 194LBA | 393(1) Sl. No. 4(ii) | Nil | 10% |
| Income from an investment fund (AIF) | 194LBB | 393(1) Sl. No. 4(iii) | Nil | 10% |
| Income from a securitisation trust | 194LBC | 393(1) Sl. No. 4(iv) | Nil | 10% |
| Interest on securities | 193 | 393(1) Sl. No. 5(i) | ₹10,000 | Rates in force (10%) |
| Interest from a bank, co-operative bank or post office | 194A | 393(1) Sl. No. 5(ii) | ₹1,00,000 (senior citizen), ₹50,000 (others) | Rates in force (10%) |
| Other interest paid by a specified person | 194A | 393(1) Sl. No. 5(iii) | ₹10,000 | Rates in force (10%) |
| Contractor, sub-contractor, supply of labour or manpower | 194C | 393(1) Sl. No. 6(i) | ₹30,000 single payment or ₹1,00,000 in the year | 1% (individual or HUF), 2% (others) |
| Contract work, professional fees or commission paid by individuals or HUFs not liable elsewhere | 194M | 393(1) Sl. No. 6(ii) | ₹50 lakh | 2% |
| Fees for technical services, film royalty, call centres | 194J | 393(1) Sl. No. 6(iii) | ₹50,000 | 2% |
| Professional fees, other royalty, non-compete fees | 194J | 393(1) Sl. No. 6(iii) | ₹50,000 | 10% |
| Director's fees or commission (not salary) | 194J | 393(1) Sl. No. 6(iii) | Nil | 10% |
| Dividend by a domestic company | 194 | 393(1) Sl. No. 7 | Nil (see note 2) | 10% |
| Taxable part of a life insurance payout | 194DA | 393(1) Sl. No. 8(i) | ₹1,00,000 | 2% of the income part |
| Purchase of goods by a buyer with turnover above ₹10 crore | 194Q | 393(1) Sl. No. 8(ii) | On the amount above ₹50 lakh | 0.1% |
| Senior citizens aged 75 and above (bank deducts) | 194P | 393(1) Sl. No. 8(iii) | As applicable | Rates in force |
| Business perquisites or benefits | 194R | 393(1) Sl. No. 8(iv) | ₹20,000 | 10% |
| E-commerce operator paying sellers | 194-O | 393(1) Sl. No. 8(v) | Nil (see note 3) | 0.1% of gross amount |
| Transfer of a virtual digital asset (crypto) | 194S | 393(1) Sl. No. 8(vi) | ₹50,000 or ₹10,000 (see note 3) | 1% |
Notes
- Insurance commission is deducted at the "rates in force" set by the annual Finance Act. The Income Tax Department's rate chart for tax year 2026-27 shows 5% for payees other than companies and 10% for domestic companies. Check the current chart before you deduct.
- Dividend: no TDS on dividends of up to ₹10,000 in a year paid to an individual by a non-cash mode (393(4), Sl. No. 10).
- No-deduction cases sit in section 393(4). Examples: e-commerce sellers who are individuals or HUFs with gross sales up to ₹5 lakh who have given PAN or Aadhaar, VDA payments up to ₹50,000 by small individuals or HUFs (₹10,000 for others), goods transporters owning ten or fewer goods carriages who give a declaration with PAN, and professional fees paid by an individual or HUF purely for personal purposes.
- Supply of manpower was added to the definition of "work" by the Finance Act, 2026, from 1 April 2026, so it now clearly falls under Sl. No. 6(i) at 1% or 2%.
Payments to any person: section 393(3)
| Nature of payment | Old section | New section | Threshold | Rate |
|---|---|---|---|---|
| Winnings from lottery, crossword, card games, gambling or betting | 194B | 393(3) Sl. No. 1 | ₹10,000 per single transaction | Rates in force (30%) |
| Winnings from online games | 194BA | 393(3) Sl. No. 2 | Net winnings, as prescribed | Rates in force (30%) |
| Winnings from horse races | 194BB | 393(3) Sl. No. 3 | ₹10,000 per single transaction | Rates in force (30%) |
| Commission on sale of lottery tickets | 194G | 393(3) Sl. No. 4 | ₹20,000 | 2% |
| Cash withdrawal from bank or post office accounts | 194N | 393(3) Sl. No. 5 | ₹1 crore in the year (₹3 crore for co-operative societies) | 2% |
| Salary, commission, bonus or interest paid by a firm to a partner | 194T | 393(3) Sl. No. 7 | ₹20,000 | 10% |
Payments to non-residents: section 393(2)
| Nature of payment | Old section | New section | Rate |
|---|---|---|---|
| Non-resident sportsmen, entertainers and sports associations | 194E | 393(2) Sl. No. 1 | 20% |
| Interest on approved foreign-currency loans and bonds (issued before 1 July 2023) | 194LC | 393(2) Sl. No. 2 and 3 | 5% |
| Interest on bonds listed only on an IFSC exchange | 194LC | 393(2) Sl. No. 4 | 4% (issued 1 April 2020 to 30 June 2023), 9% (from 1 July 2023) |
| Interest paid by an infrastructure debt fund | 194LB | 393(2) Sl. No. 5 | 5% |
| Business trust (InvIT or REIT) distributions | 194LBA | 393(2) Sl. No. 6 and 7 | 5% or 10% (interest), or rates in force |
| Mutual fund units, and securities held by FIIs | 196A, 196D | 393(2) Sl. No. 10 and 15 | 20%, or a lower treaty rate |
| Offshore fund units, GDRs and bonds | 196B, 196C | 393(2) Sl. No. 11 to 14 | 10% (income), 12.5% (long-term gains) |
| Any other sum chargeable to tax (the old catch-all) | 195 | 393(2) Sl. No. 17 | Rates in force, or a lower treaty rate |
Surcharge and health and education cess are added to non-resident rates. A treaty (DTAA) rate needs a tax residency certificate and the prescribed details.
Other sections that moved
| What it does | Old section | New section |
|---|---|---|
| Tax collected at source (TCS) | 206C | 394 |
| Lower or nil deduction certificate | 197 | 395(1) |
| Nil-tax declarations (Form 15G / 15H) | 197A | 393(6) |
| Cases where no TDS is needed | Scattered provisos | 393(4) and 393(5) |
| Higher TDS when the payee has no PAN | 206AA | Continues in the TDS chapter of the 2025 Act |
Old vs new TDS forms
| Purpose | Old form | New form |
|---|---|---|
| Quarterly TDS return: salary | 24Q | 138 |
| Quarterly TDS return: other payments to residents | 26Q | 140 |
| Quarterly TDS return: non-residents | 27Q | 144 |
| Quarterly TCS return | 27EQ | 143 |
| Challan-cum-statement for property, rent by individuals, 194M and VDA | 26QB, 26QC, 26QD, 26QE | 141 (one common form) |
| Nil-tax declaration | 15G, 15H | 121 (one form) |
| Application for a lower or nil deduction certificate | 13 | 128 |
Due dates. TDS deducted from April 2026 onwards is deposited by the 7th of the following month. The quarterly returns for tax year 2026-27 are due 31 July (Q1) and 31 October (Q2). Returns and corrections for FY 2025-26 and earlier stay on the old forms under the 1961 Act.
Budget 2026 changes to TCS (section 394)
The Finance Act, 2026 changed several TCS rates from 1 April 2026:
| Item | Before | From 1 April 2026 |
|---|---|---|
| Alcoholic liquor, scrap, coal, lignite and iron ore | 1% | 2% |
| Tendu leaves | 5% | 2% |
| LRS remittance for education or medical treatment, above ₹10 lakh | 5% | 2% |
| LRS remittance for other purposes, above ₹10 lakh | 20% | 20% (unchanged) |
| Overseas tour package | 5% up to ₹10 lakh, 20% above | 2% flat, no threshold |
From 1 October 2026, a resident individual or HUF buying property from a non-resident can deduct TDS with their PAN and no longer needs a TAN.
Quick checks before you deduct
- Quote the new section and table serial number on invoices, ERP tax codes and TDS working papers for anything credited from 1 April 2026.
- Update the withholding tax codes in your ERP. Many systems keep the old section as the code name, so map them, for example 194C to 393(1) Sl. No. 6(i).
- Do not change rates "because the Act changed": most rates and thresholds carried over. The big differences are the numbering, the forms and the TCS changes above.
- Keep March 2026 credits on the old sections, even if you pay in April.
Sources
- Income-tax Act, 2025 as amended by the Finance Act, 2026 (Income Tax Department)
- Section 393, Income-tax Act, 2025 (Income Tax Department) and section 402 definitions
- TDS rates for tax year 2026-27 (Income Tax Department)
- FAQs on the transition to the Income-tax Act, 2025 (CBDT)
- FAQs on Budget 2026 (CBDT)
Checked against these sources as of 26 October 2026. Rates and thresholds change with each Finance Act; always confirm the current text before you deduct.
Related
- TDS section 393 in the glossary
- SAP FI T-codes for withholding tax
- GST reverse charge and key GST rules
- Month-end journal playbook
Educational information only. This page is not tax, legal, accounting or investment advice and does not create any professional relationship. Laws, rates and thresholds change: read the official text or consult a qualified professional (CA, CS or lawyer) before you act.
Last reviewed 26 October 2026. Spotted an error? Tell us and we will correct it.