Section-wise summary of the key TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) provisions in the New Income Tax Act, 2025 (effective mainly from 1 April 2025 / AY 2026-27). The updated Act aims to simplify, consolidate, and rationalise TDS/TCS rules from the legacy 1961 Act into a modernised framework while raising thresholds and removing overlapping provisions.
I. TDS (Tax Deducted at Source)— Section-wise Highlights:
Section 392 — TDS on Salary
• Consolidated provision covering salary related tax deduction.
• Covers all salary payments where tax must be deducted by the employer at prescribed rates under the new Act.
Section 393 — TDS on Other Payments
This is a consolidated TDS schedule replacing multiple old Act provisions (formerly Sections 193–194S etc.). It consists of tables detailing payment types, payer categories (“Specified Person”), thresholds, and rates.
Key entries in Section 393 schedule:
Payment Type / Nature Corresponding Old Act Reference Key Update (Threshold/Rate)
Interest (other than securities) Old Sec 194A Threshold: ₹50,000 individuals, ₹1,00,000 for senior citizens; standard rate thereafter
Dividends Old Sec 194 Threshold raised to ₹10,000
Life Insurance Payouts Old Sec 194DA Threshold raised to ₹2,50,000
Rent Payments Old Sec 194I TDS if rent > ₹50,000/month (₹6,00,000/yr)
Fees for Professional/Technical Services Old Sec 194J Threshold: ₹50,000
Insurance Commission Payments Old Sec 194D New threshold: ₹20,000; rate changes simplified
Payments to Partners New Entry (Sec 194T equivalent) 10% TDS on remuneration/commission if exceeds ₹20,000
Securitisation Trust Income Old Sec 194LBC Rate reduced: 10% (from 25–30%)
Miscellaneous / Other Payments Old Secs 194K, 194LA, 194O, 194R, 194S etc. mapped into tables TDS application preserved as per schedule
Other TDS-Related Provisions
• Removal of Higher TDS for Non-filers: Sections equivalent to 206AB have been omitted. This means no punitive higher TDS rate based solely on non-filing history.
• Consolidation & Threshold Simplification: Instead of many self-contained provisions, the Act uses a unified table under Section 393, reducing complexity.
II. TCS (Tax Collected at Source) — Major Sections:
Section 394 — TCS Collections
The new Act consolidates TCS rules (earlier scattered in Sec 206C and sub-sections) into a structured format.
Key TCS provisions under the New Act:
Area Old Act Section New Rule Summary
Sale of Goods 206C(1H) Provision removed to prevent overlap where TDS under 194Q applies.
LRS (Liberalised Remittance Scheme) & Foreign Remittances 206C(1G) Threshold raised from ₹7 L to ₹10 L; no TCS on remittances for education financed by loan.
Forest Produce & Timber 206C(1) Rates revised (e.g., timber/forest produce TCS reduced).
Higher TCS Rates for Non-filers 206CCA Omitted (no higher TCS solely for non-filers).
Procedural Clarifications — Timing and compliance aligned with new schedules; earlier ambiguous overlaps removed.
III. Common Themes Across TDS & TCS in the New Act:
a. Simplification & Consolidation
• Instead of multiple self-contained sections in the old Act, the new Act consolidates TDS in Sections 392–393 and TCS in Section 394 with annexed tables, improving readability and compliance.
b. Higher Thresholds / Relief for Taxpayers
• Thresholds for many TDS categories (rent, interest, professional fees, dividend) have been significantly increased, reducing compliance burdens for individuals and small taxpayers.
c. Overlap Removal
• TCS on sale of goods is removed to avoid overlap with TDS provisions (Section 194Q under old law).
d. De-emphasis on Non-filers Penalty
• This Act removes the punitive ‘higher TDS/TCS rate for non-filers’ concept, focusing more on substantive tax collection rather than penal provisions.
Practical Implications:
• Individuals & Senior Citizens: Improved cash flows due to higher thresholds (e.g., interest, rent).
• Professionals & Businesses: Reduced compliance frequency with higher slabs and combined schedules.
• Cross-border Transactions: More taxpayer-friendly TCS on foreign remittances under LRS.
the key TDS & TCS (and related compliance) changes that will come into effect in India from 1st April 2026 under the New Income Tax Act, 2025 and the Budget 2026-27 framework.
1) Implementation of Updated Income Tax Act, 2025 (From 1st April 2026)
✅ New Tax Compliance Framework & Forms
• The Income Tax Act, 2025 (New) will fully replace the old Income Tax Act, 1961 from 1st April 2026 for most income tax provisions.
• All statutory forms, including TDS/TCS related ones, are being renumbered/renamed.
o Example: Form 16 will be renamed Form 130, Form 26AS will become Form 168 under the new Act.
2) Practical TDS Changes Effective 1sApril 2026
🔹 New Structure & Rates Under the New Act
• The New Act’s TDS regime (e.g., Sections like 392–393) will be effective from the new tax year beginning 1 April 2026 with fresh compliance forms and codes.
• With the transition to the new Act, existing legacy sections (pre-1961 Act numbering) will mainly cease to apply.
🔹 Interest & Motor Accident Claims
• Interest granted by the Motor Accident Claims Tribunal (MACT) to individuals will be fully tax-exempt, and no TDS will be deducted on this from 1 April 2026.
🔹 CBDT Circulars Binding on TDS Payors
• Circulars/guidelines issued by the Central Board of Direct Taxes will become legally binding on taxpayers responsible for deducting TDS, increasing compliance certainty but also obligations for deductors.
3) Practical TCS Changes Effective 1 April 2026
🔹 New TCS Rates on Specific Payments
(Note: some of these were proposed in Budget 2026 and likely to kick in with the new Act.)
• TCS on overseas tour packages and foreign education/medical remittances under LRS may be set at 2%, down from the earlier higher slab rates (5–20% depending on category).
4) Important Compliance & Process Changes
a. Deadline for TDS/TCS Correction Statements
• From 1 April 2026 onwards, no TDS/TCS correction statements can be submitted if more than two years have passed since the end of the applicable financial year.
o Example: correction statements for FY 2018-19 to some of FY 2023-24 must be filed by 31 March 2026; after this, corrections would be barred.
b. ITR & Return Filing Timelines
• Under the new regime:
o ITR revisals may be allowed up to 31 March of the assessment year with a nominal fee, replacing earlier shorter windows.
o Revised timelines (like staggered filing dates such as 31 July/31 August for individuals) are proposed to ease compliance.
5) High-Level Practical Impacts for Taxpayers & Businesses
🔹 Transition to Modern Tax Administration
• The old Assessment Year concept is being replaced with a unified Tax Year system from April 2026, simplifying term usage and compliance across the board.
🔹 Enhanced Compliance Requirements
• Due to statutory backing of CBDT circulars and new mandatory TDS/TCS filing forms, businesses and deductors must update internal systems before April 2026 to:
o Ensure new form codes and section references are used.
o Reconcile old vs. new TDS/TCS credits across periods.
o Avoid mismatches due to the deadline on correction statements.
Summary of Key Takeaways (April 1, 2026 Onwards)
Area What Changes from 1 Apr 2026
TDS Regime New Act & new forms in force; motor accident interest fully exempt
TCS Regime Revised TCS rates for travel/education; simplified under new Act
Compliance Correction statements cut-off; CBDT circulars binding
Process New filing timelines, staggered due dates introduced
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