TDS Rates: The term ‘TDS’ refers to ‘Tax Deduction at source’. It is a mechanism wherein a person responsible to pay a sum of specified nature shall deduct an amount towards TDS and pay it to the credit of Central Government. Various TDS rates on various incomes have been prescribed under the Income-tax Act. This write up covers all such rates.
| Particulars | TDS Rates (in %) |
| 1. In the case of a person other than a company | |
| 1.1 where the person is resident in India- | |
| Section 192: Payment of salary | Normal Slab Rate |
| Section 192A: Payment of accumulated balance of provident fund which is taxable in the hands of an employee. | 10 |
| Section 193: Interest on securities | |
| a) any debentures or securities for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act; | 10 |
| b) any debentures issued by a company where such debentures are listed on a recognised stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and any rules made thereunder; | 10 |
| c) any security of the Central or State Government;[i.e. 8% Savings (Taxable) Bonds, 2003 and 7.75% Saving (Taxable) Bonds, 2018, Floating Rate Savings Bonds, 2020 (Taxable) or any other notified security] | 10 |
| d) interest on any other security | 10 |
| Section 194: Income by way of dividend | 10 |
| Section 194A: Income by way of interest other than “Interest on securities” | 10 |
| Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort, or from gambling or betting of any form or nature whatsoever. | 30 |
| Section 194BA: Income by way of winnings from any online game | 30 |
| Section 194BB: Income by way of winnings from horse races | 30 |
| Section 194C: Payment to contractor/sub-contractor | |
| a) HUF/Individuals | 1 |
| b) Others | 2 |
| Section 194D: Insurance commission | 5 |
| Section 194DA: Payment in respect of life insurance policy | 2 |
| Section 194EE: Payment in respect of deposit under National Savings scheme | 10 |
| Section 194F: Payment on account of repurchase of unit by Mutual Fund or Unit Trust of IndiaNote: The provisions of this section are not applicable with effect from 01-10-2024 | 20 |
| Section 194G: Commission, etc., on sale of lottery tickets | 2 |
| Section 194H: Commission or brokerage | 2 |
| Section 194-I: Rent | |
| a) Plant & Machinery | 2 |
| b) Land or building or furniture or fitting | 10 |
| Section 194-IA: Payment on transfer of certain immovable property other than agricultural land | 1 |
| Section 194-IB: Payment of rent by individual or HUF not liable to tax audit | 2 |
| Section 194-IC: Payment of monetary consideration under Joint Development Agreements | 10 |
| Section 194J: Fees for professional or technical services:i) sum paid or payable towards fees for technical servicesii) sum paid or payable towards royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films;iii) Any other sumNote: With effect from June 1, 2017 the rate of TDS would be 2% in case of payee engaged in business of operation of call center. | 2210 |
| Section 194K: Income in respect of units payable to resident person | 10 |
| Section 194LA: Payment of compensation on acquisition of certain immovable property | 10 |
| Section 194LBA(1): Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders. | 10 |
| Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)] | 10 |
| Section 194LBC: Income in respect of investment made in a securitisation trust (specified in Explanation of section 115TCA) | 10 |
| Section 194M: Payment of commission (not being insurance commission), brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J.Tax shall be deducted under Section 194M with effect from 1/09/2019 when aggregate of sum credited or paid during a financial year exceeds Rs. 50 lakh. | 2 |
| Section 194N: Cash withdrawal during the previous year from one or more account maintained by a person with a banking company, co-operative society engaged in business of banking or a post office:i) in excess of Rs. 1 crore#ii) in excess of Rs. 20 lakhs** for those persons who have not filed return of income (ITR) for three previous years immediately preceding the previous year in which cash is withdrawn, and the due date for filing ITR under section 139(1) has expired. The deduction of tax under this situation shall be at the rate of:a) 2% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 20 lakhs during the previous year; orb) 5% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 1 crore during the previous year.# The threshold limit of Rs. 1 crore is increased to Rs. 3 croresif the withdrawal of cash is made by co-operative society. | 22/5 |
| Section 194-O: Payment or credit of amount by the e-commerce operator to e-commerce participant | 0.1 |
| Section 194P: Deduction of tax by specified bank in case of senior citizen having age of 75 or more | Tax on total income as per rate in force |
| Section 194Q: Payment for purchase of goods of the aggregate value exceeding Rs. 50 lakhsNote: TDS is deductible on sum exceeding Rs. 50 lakhs | 0.1 |
| Section 194R: Deduction of tax in case any benefit or perquisite is provided and aggregate value of such benefit/perquisite exceeds Rs. 20,000Note: Benefit or perquisite should be arising from business or the exercise of a profession by such resident. | 10 |
| Section 194S: Payment on transfer of Virtual Digital AssetNote: No tax shall be deducted under this provision in the following circumstance:• If the consideration is payable by any person (other than a specified person) and its aggregate value does not exceed Rs. 10,000 during the financial year.• if the consideration is payable by a specified person and its aggregate value does not exceed Rs. 50,000 during the financial year.Specified person means:(a) An individual or a HUF, whose total sales, gross receipts or turnover does not exceed Rs. 1 crore in case of business or Rs. 50 lakhs in case of a profession, during the financial year immediately preceding the financial year in which virtual digital asset is transferred;(b) An individual or a HUF who does not have any income under the head profits and gains of business or profession. | 1 |
| Section 194T: Payments of any sum in the nature of salary, remuneration, commission, bonus or interest to a partner of the firm.Note:(1) This provision is effective from 01-04-2025(2) No deduction if aggregate of such sum paid/payable does not exceed Rs. 20,000 during the financial year. | 10 |
| Any Other Income | 10 |
| 1.2 where the person is not resident in India*- | |
| Section 192: Payment of Salary | Normal Slab Rate |
| Section 192A: Payment of accumulated balance of provident fund which is taxable in the hands of an employee. | 10 |
| Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort or from gambling or betting of any form or nature whatsoever. | 30 |
| Section 194BA: Income by way of winnings from any online game | 30 |
| Section 194BB: Income by way of winnings from horse races | 30 |
| Section 194E: Payment to non-resident sportsmen/sports association | 20 |
| Section 194EE: Payment in respect of deposits under National Savings Scheme | 10 |
| Section 194F: Payment on account of repurchase of unit by Mutual Fund or Unit Trust of IndiaNote: The provisions of this section are not applicable with effect from 01-10-2024 | 20 |
| Section 194G: Commission, etc., on sale of lottery tickets | 2 |
| Section 194LB: Payment of interest on infrastructure debt fund | 5 |
| Sec. 194LBA(2): Payment of the nature referred to in Section 10(23FC)(a) | 5 |
| Section 194LBA(2): Payment of the nature referred to in Section 10(23FC)(b) | 10 |
| Section 194LBA(3): Payment of the nature referred to in section 10(23FCA) by business trust to unit holders | 30 |
| Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)]. | 30 |
| Section 194LBC: Income in respect of investment made in a securitisation trust (specified in Explanation of section115TCA) | 30 |
| Section 194LC: Payment of interest by an Indian Company or a business trust in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds (including long-term infrastructure bond) | 5 or 4* or 9*** In case where interest is payable in respect of Long-term Bond or Rupee Denominated Bond listed on recognised stock exchange located in IFSC** Where money borrowed from a source outside India by issuing a long-term bond or rupee-denominated bond on or after 01-04-2023, which is listed only on a recognised stock exchange located in an IFSC |
| Section 194LD: Payment of interest on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or a Qualified Foreign Investor | 5 |
| Section 194N: Cash withdrawal during the previous year from one or more account maintained by a person with a banking company, co-operative society engaged in business of banking or a post office:i) in excess of Rs. 1 croreii) in excess of Rs. 20 lakhs** for those persons who have not filed return of income (ITR) for three previous years immediately preceding the previous year in which cash is withdrawn, and the due date for filing ITR under section 139(1) has expired. The deduction of tax under this situation shall be at the rate of:a) 2% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 20 lakhs during the previous year; orb) 5% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 1 crore during the previous year. | 22/5 |
| Section 194T: Payments of any sum in the nature of salary, remuneration, commission, bonus or interest to a partner of the firm.Note:(1) This provision is effective from 01-04-2025(2) No deduction if aggregate of such sum paid/payable does not exceed Rs. 20,000 during the financial year. | 10 |
| Section 195: Payment of any other sum to a Non-resident | |
| a) Income in respect of investment made by a Non-resident Indian Citizen | 20 |
| b) Income by way of long-term capital gains referred to in Section 115E in case of a Non-resident Indian Citizen, | 12.5 |
| c) Income by way of long-term capital gains referred to in sub-clause (iii) of clause (c) of sub-Section (1) of Section 112 | 12.5 |
| d) Income by way of long-term capital gains as referred to in Section 112A exceeding Rs. 1,25,000 | 12.5 |
| e) Income by way of short-term capital gains referred to in Section 111A | 20 |
| f) Any other income by way of long-term capital gains [not being long-term capital gains referred to in sections 10(33), 10(36)]: | 12.5 |
| g) Income by way of dividend from a unit in International Financial Services Centre | 10 |
| h) Income by way of dividend [Other than (g)] | 20 |
| i) Income by way of interest payable by Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency (not being income by way of interest referred to in Section 194LB or Section 194LC) | 20 |
| j) Income by way of royalty payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern where such royalty is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book on a subject referred to in the first proviso to sub-section (1A) of Section 115A of the Income-tax Act, to the Indian concern, or in respect of any computer software referred to in the second proviso to sub-section (1A) of Section 115A of the Income-tax Act, to a person resident in India | 20 |
| k) Income by way of royalty [not being royalty of the nature referred to point h) above] payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy | 20 |
| l) Income by way of fees for technical services payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy | 20 |
| m) Any other income | 30 |
| Section 196A: Income in respect of units of non-resident | 20 |
| Section 196B: Income from units referred to in section 115AB(1)(i) | 10 |
| Section 196B: Long-term capital gain on transfer of units referred to in section 115AB, | 12.5 |
| Section 196C: Income by way of interest or dividends in respect of bonds or GDR referred to in section 115AC | 10 |
| Section 196C: Long-term capital gain arising from transfer of bonds or GDR referred to in section 115AC | 12.5 |
| Section 196D: Income of foreign Institutional Investors from securities (not being dividend or capital gain arising from such securities)Note: Tax shall be deducted at the rate provided under DTAA if same is lower than the existing TDS rate of 20%. | 20 |
| Section 196D(1A): Income in respect of securities referred to in section 115AD(1)(a) payable to specified fund [referred to in clause (c) of Explanation to section 10(4D)] Note: Since recipient of income is a specified fund, surcharge & health and education cess shall be nil. | 10 |
| 2. In the case of a company- | |
| 2.1 where the company is a domestic company- | |
| Section 193: Interest on securities | |
| a) any debentures or securities for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act; | 10 |
| b) any debentures issued by a company where such debentures are listed on a recognised stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and any rules made thereunder; | 10 |
| c) any security of the Central or State Government;[i.e. 8% Saving (Taxable) Bonds, 2003 and 7.75% Saving (Taxable) Bonds, 2018, Floating Rate Savings Bonds, 2020 (Taxable) or any other notified security] | 10 |
| d) interest on any other security | 10 |
| Section 194: Dividend | 10 |
| Section 194A: Income by way of interest other than “Interest on securities” | 10 |
| Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort or from gambling or betting of any form or nature whatsoever. | 30 |
| Section 194BA: Income by way of winnings from any online game | 30 |
| Section 194BB: Income by way of winnings from horse races | 30 |
| Section 194C: Payment to contractor/sub-contractor | |
| a) HUF/Individuals | 1 |
| b) Others | 2 |
| Section 194D: Insurance commission | 10 |
| Section 194DA: Payment in respect of life insurance policyw.e.f. 1/9/2019, the tax shall be deducted on the amount of income comprised in insurance pay-out | 2 |
| Section 194EE: Payment in respect of deposit under National Savings scheme | 10 |
| Section 194F: Payment on account of repurchase of unit by Mutual Fund or Unit Trust of IndiaNote: The provisions of this section are not applicable with effect from 01-10-2024 | 20 |
| Section 194G: Commission, etc., on sale of lottery tickets | 2 |
| Section 194H: Commission or brokerage | 2 |
| Section 194-I: Rent | |
| a) Plant & Machinery | 2 |
| b) Land or building or furniture or fitting | 10 |
| Section 194-IA:Payment on transfer of certain immovable property other than agricultural land | 1 |
| Section 194-IC:Payment of monetary consideration under Joint Development Agreements | 10 |
| Section 194J: Fees for professional or technical services:iv) sum paid or payable towards fees for technical servicesv) sum paid or payable towards royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films;vi) Any other sumNote: With effect from June 1, 2017 the rate of TDS would be 2% in case of payee engaged in business of operation of call center. | 2210 |
| Section 194K : Income in respect of units payable to resident person | 10 |
| Section 194LA: Payment of compensation on acquisition of certain immovable property | 10 |
| Section 194LBA(1): Business trust shall deduct tax while distributing, any interest received or receivable by it from a SPV or any income received from renting or leasing or letting out any real estate asset owned directly by it, to its unit holders. | 10 |
| Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)] . | 10 |
| Section 194LBC: Income in respect of investment made in a securitisation trust (specified in Explanation of section115TCA) | 10 |
| Section 194M: Payment of commission (not being insurance commission), brokerage, contractual fee, professional fee to a resident person by an Individual or a HUF who are not liable to deduct TDS under section 194C, 194H, or 194J.Tax shall be deducted under Section 194M with effect from 1/09/2019 when aggregate of sum credited or paid during a financial year exceeds Rs. 50 lakh. | 2 |
| Section 194N: Cash withdrawal during the previous year from one or more account maintained by a person with a banking company, co-operative society engaged in business of banking or a post office:iii) in excess of Rs. 1 croreiv) in excess of Rs. 20 lakhs** for those persons who have not filed return of income (ITR) for three previous years immediately preceding the previous year in which cash is withdrawn, and the due date for filing ITR under section 139(1) has expired. The deduction of tax under this situation shall be at the rate of:a) 2% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 20 lakhs but not exceeding Rs. 1 crore during the previous year; orb) 5% from the amount withdrawn in cash if the aggregate of the amount of withdrawal exceeds Rs. 1 crore during the previous year. | 22/5 |
| Section 194-O: Payment or credit of amount by the e-commerce operator to e-commerce participant | 0.1 |
| Section 194P: Deduction of tax by specified bank in case of senior citizen having age of 75 or more | Tax on total income as per rate in force |
| Section 194Q: Payment to resident for purchase of goods of the aggregate value exceeding Rs. 50 lakhsNote: TDS is deductible on sum exceeding Rs. 50 lakhs | 0.1 |
| Section 194R: Deduction of tax in case any benefit or perquisite is provided and aggregate value of such benefit/perquisite exceeds Rs. 20,000Note: Benefit or perquisite should be arising from business or the exercise of a profession by such resident. | 10 |
| Section 194S: Payment on transfer of Virtual Digital AssetNote: No tax shall be deducted under this provision in the following circumstance:• If the consideration is payable by any person (other than a specified person) and its aggregate value does not exceed Rs. 10,000 during the financial year.• if the consideration is payable by a specified person and its aggregate value does not exceed Rs. 50,000 during the financial year.Specified person means:(a) An individual or a HUF, whose total sales, gross receipts or turnover does not exceed Rs. 1 crore in case of business or Rs. 50 lakhs in case of a profession, during the financial year immediately preceding the financial year in which virtual digital asset is transferred;(b) An individual or a HUF who does not have any income under the head profits and gains of business or profession. | 1 |
| Any Other Income | 10 |
| 2.2 where the company is not a domestic company*- | |
| Section 194B: Income by way of winnings from lotteries, crossword puzzles, card games and other games of any sort or from gambling or betting of any form or nature whatsoever. | 30 |
| Section 194BA: Income by way of winnings from any online game | 30 |
| Section 194BB: Income by way of winnings from horse races | 30 |
| Section 194E: Payment to non-resident sports association | 20 |
| Section 194G: Commission, etc., on sale of lottery tickets | 2 |
| Section 194LB: Payment of interest on infrastructure debt fund | 5 |
| Section 194LBA(2): – Payment of the nature referred to in Section 10(23FC)(a) | 5 |
| Section 194LBA(2): Payment of the nature referred to in Section 10(23FC)(b) | 10 |
| Section 194LBA(3): Business trust shall deduct tax while distributing any income received from renting or leasing or letting out any real estate asset owned directly by it to its unit holders. | 35 |
| Section 194LBB: Investment fund paying an income to a unit holder [other than income which is exempt under Section 10(23FBB)]. | 35 |
| Section 194LBC: Income in respect of investment made in a securitisation trust (specified in Explanation of section115TCA) | 35 |
| Section 194LC: Payment of interest by an Indian Company or a business trust in respect of money borrowed in foreign currency under a loan agreement or by way of issue of long-term bonds (including long-term infrastructure bond) | 5 or 4* or 9*** In case where interest is payable in respect of Long-term Bond or Rupee Denominated Bond listed on recognised stock exchange located in IFSC** Where money borrowed from a source outside India by issuing a long-term bond or rupee-denominated bond on or after 01-04-2023, which is listed only on a recognised stock exchange located in an IFSC; |
| Section 194LD:Payment of interest on rupee denominated bond of an Indian Company or Government securities to a Foreign Institutional Investor or a Qualified Foreign Investor | 5 |
| Section 195: Payment of any other sum | |
| a) Income by way of long-term capital gains referred to in sub-clause (iii) of clause (c) of sub-Section (1) of Section 112 | 12.5 |
| b) Income by way of long-term capital gains as referred to in Section 112A exceeding Rs. 1,25,000 | 12.5 |
| c) Income by way of short-term capital gains referred to in Section 111A | 20 |
| f) Any other income by way of long-term capital gains [not being long-term capital gains referred to in sections 10(33), 10(36) and 112A] | 12.5 |
| d) Income by way of dividend from a unit in International Financial Services Centre | 10 |
| e) Income by way of dividend [Other than (d)] | 20 |
| f) Income by way of interest payable by Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency (not being income by way of interest referred to in Section 194LB or Section 194LC) | 20 |
| g) Income by way of royalty payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 31st day of March, 1976 where such royalty is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book on a subject referred to in the first proviso to sub-section (1A) of Section 115A of the Income-tax Act, to the Indian concern, or in respect of any computer software referred to in the second proviso to sub-section (1A) of Section 115A of the Income-tax Act, to a person resident in India | 20 |
| h) Income by way of royalty [not being royalty of the nature referred to in point f) above] payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy— | |
| A. where the agreement is made after the 31st day of March, 1961 but before the 1st day of April, 1976 | 50 |
| B. where the agreement is made after the 31st day of March, 1976 | 20 |
| i) Income by way of fees for technical services payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy— | |
| A. where the agreement is made after the 29th day of February, 1964 but before the 1st day of April, 1976 | 50 |
| B. where the agreement is made after the 31st day of March, 1976 | 20 |
| j) Any other income | 35 |
| Section 196A: Income in respect of units of non-resident | 20 |
| Section 196B: Income from units referred to in section 115AB(1)(i) | 10 |
| Section 196B: Long-term capital gain on transfer of units referred to in section 115AB | 12.5 |
| Section 196C: Income by way of interest or dividends in respect of bonds or GDR referred to in section 115AC | 10 |
| Section 196C: Long-term capital gain arising from transfer of bonds or GDR referred to in section 115AC | 12.5 |
| Section 196D(1): Income of foreign Institutional Investors from securities (not being dividend or capital gain arising from such securities)Note: Tax shall be deducted at the rate provided under DTAA if same is lower than the existing TDS rate of 20%. | 20 |
| Section 196D(1A): Income in respect of securities referred to in section 115AD(1)(a) payable to specified fund [referred to in clause (c) of Explanation to section 10(4D)]Note: Since recipient of income is a specified fund, surcharge & health and education cess shall be nil. | 10 |
“This document contains the provisions of the Income-tax Act, 1961, as amended by the Finance Act, 2026.”
[As amended by Finance Act, 2026]
TDS Compliance Important FAQ
1. What is the fundamental rule for determining which Act governs TDS obligations during the transition?
The Act governing TDS depends on when the “earlier of the event of credit or payment” occurs. If the earlier event occurs on or before 31st March, 2026, the Income tax Act, 1961 will be applicable. However, if the earlier event occurs on or after 1st April , 2026, the provisions of the Income Tax Act, 2025 shall be applicable.
Example: Professional fees credited in March, 2026 in books. However, payment is made in April, 2026. In this situation, provisions of the Income Tax Act, 1961 will be applicable and TDS must be deducted in March, 2026.
Advance payment made in March, 2026. However, it is credited in books in April, 2026. In this situation, provisions of the Income Tax Act, 1961 will be applicable and TDS must be deducted in March, 2026.
2. If a deductor has an ongoing contract with monthly payments, how does the deductor handle the switch from the old Act to the new Act?
The deductor applies the old Act for all payments/credits up to and including 31st March, 2026, and will apply the new Act for payments/credits from 1st April, 2026 onwards. There is no need to amend the contract merely because the new Act is commencing on 1st April, 2026 . The deductor is required to apply the applicable TDS provision based on the date of credit or payment, whichever is earlier.
Example: M/s. Xyz Ltd. has a monthly housekeeping contract with M/s. ABC Cleaning Services. Payments for March 2026 (credited on 31.03.2026) → TDS obligation shall be under Section 194C of old Act. Payment for April 2026 (credited on 30.04.2026) → TDS obligations shall be under Section 393(1) [Table: Sl. No. 6(i)] of the new Act. Rates and thresholds remain the same under both the Acts.
3. Has there been any change in the rates of TDS under the new Act?
No. The TDS rates and monetary thresholds for all categories of payments have been retained as they are under the Income Tax Act, 1961. The consolidation of TDS provisions under Section 393 is a simplified tabular presentation and not a change in TDS rates or tax policy.
4. What happens if a deductor erroneously deducts TDS quoting the old Act section number for a payment made after 01.04.2026?
Although the substantive provisions —such as the applicable rate and threshold —remain unchanged, citing the old section number (for example, Section 194C instead of Section 393(1) [Table: Sl. No. 6(i)]) may lead to processing errors at the time of filing the TDS return. In such cases, the deductor may be required to submit a correction statement to rectify the section reference.
5. A company makes payment to a contractor on 28 March 2026. Which Act governs TDS in this situation?
The TDS provisions of the Income Tax Act, 1961 shall apply, since the triggering event —being the payment or credit of income, whichever is earlier —occurred prior to 1 April 2026. The commencement of the Income Tax Act, 2025 does not affect liabilities or obligations that arose under the 1961 Act in respect of tax years beginning before 1st April, 2026.
6. Interest income is credited in the account of payee on 31 March 2026 but paid in April 2026. Which Act will govern the TDS on such interest payments?
The TDS provisions of the Income Tax Act, 1961 shall apply, since the triggering event —being the payment or credit of income, whichever is earlier —occurred prior to 1 April 2026. The subsequent date of deposit of TDS or payment of interest does not alter the governing law once the triggering event has occurred.
7. Are tax deductors required to modify their ERP and payroll systems after commencement of Income Tax Act, 2025?
Yes. Systems are required to be updated to reflect new section numbering, terminology, and reporting requirements under the Income Tax Act, 2025.
8. If tax was deducted in March 2026 but the deposit is made in May 2026, will there be a late deposit consequence?
Yes. The due date for depositing the tax deducted in the month of Ma rch 2026 is 30th April, 2026. In this situation, the TDS is deposited in May 2026 and this delay will attract interest liability @ 1.5% per month from the date of deduction to the date of actual payment.
9. What is the Challan -cum-TDS statement mechanism and how does it operate during the transition?
Under the old Act, certain specified transactions required the deductor to file a TDS-cum-Challan statement (Forms 26QB, 26QC, 26QD, and 26QE) instead of the regular quarterly TDS return. These apply to:
(i) Form 26QB — TDS on purchase of immovable property (Section 194 -IA);
(ii) Form 26QC — TDS on rent by individual/HUF (Section 194 -IB);
(iii) Form 26QD — TDS on payments by individuals/HUFs to contractors and professionals (Section 194M);
(iv) Form 26QE — TDS on transfer of virtual digital assets (Section 194S).
For transactions where the event of credit or payment occurred on or before 31st March, 2026, these Forms under the old Act continue to apply.
For transactions where the event of credit or payment occurred on or after 1st April, 2026, the Challan -cum-TDS statement is required to be filed under the new Act . As per Income Tax Rules, 2026 a common form i.e. Form No. 141 can be used for any of the above four type of transactions.
10. Will the e -TDS/TCS return preparation utility (RPU) support both old and new formats?
Yes. The Government will ensure that the return preparation utilities and the
TRACES portal support both old format returns (for periods up to March 2026) and new
format returns (for periods from April 2026 onwards) during the transition period.
11. If a deductor discovers an error in a TDS return for Q3 of FY 2025 -26 (October –December 2025), can a correction be filed after 01.04.2026?
Yes. Corrections to TDS returns for periods governed by the old Act can be filed even after the new Act has come into force. Such correction statements can be furnished within a period of two years from the end of the tax year in which the original stateme nt was due.
12. Will revised or correction TDS returns for periods prior to 31.03.2026 be filed under the old or new Act?
Revised or correction TDS returns relating to periods governed by the Income Tax Act, 1961 must continue to be filed under the old Act framework, even if such revision is made after 1st April, 2026. The form numbers and formats applicable to the old Act will apply for such corrections.
13. If a deductor fails to issue Form 16A for Q4 of FY 2025 -26 within the due date, which Act governs the penalty?
The penalty for failure to issue certificates for FY 2025 -26 is governed by the Income Tax Act, 1961. Under Section 272A(2)(g) of the old Act, a penalty of Rs. 500 per day for the period of default can be levied. Since this relates to a compliance for a period covered by the old Act, the penalty provisions under the old Act shall apply.
14. What happens if a deductor fails to deduct TDS on a payment or credit made before 31.03.2026?
The deductor is treated as an “assessee in default” under Section 201(1) of the
old Act. The consequences include:
(i) Recovery of the TDS amount from the deductor;
(ii) Interest at 1% per month for failure to deduct (from date deductible to date of deduction) and 1.5% per month for failure to deposit (from date of deduction to date of actual payment);
(iii) Penalty under Section 271C of the old Act (equal to the amount of tax not deducted);
These proceedings can be initiated even after 01.04.2026 by virtue of Section 536(2)(c) and (d) of the Income Tax act, 2025.
15. Is there any change in the time -limits for passing an order deeming the deductor as assessee -in-default under the new Act?
No. The time -limit for passing an order deeming the deductor as assessee -in-default under the new Act remains same as provided in the old Act. Under Section 398(5) of the Income Tax Act, 2025, such order shall not be made after the later of: (i) six years from the end of the tax year in which tax was deductible or collectible; or (ii) two years from the end of the tax year in which the correction statement is delivered.
16. Where the deductor has not deducted the tax and If the deductee has paid tax directly on the income, is the deductor still liable?
Under Section 398(2) of the new Act (corresponding to the proviso to Section 201(1) of the old Act), the deductor shall not be deemed to be an assessee -in-default if the deductee has furnished a return of income, considered the amount on which tax was dedu ctible while computing the income, and paid the tax due thereon subject to furnishing a certificate to this effect in the prescribed form (Form 26A ). However, the deductor remains liable for interest for the period of delay. This provision is same under both the Acts.
17. If tax is not deducted or not deposited by the due date, what is the consequence for the deduct or under the new Act?
There will be multiple consequences for not deducting the tax or not depositing the TDS by the due date. The deductor may be treated as an “assessee in default” which may lead to the recovery of the TDS amount along -with interest from the deductor. The deductor may also be liable for penalty in the cases of non -deduction of TDS and for prosecution proceedings in cases of deduction but non -deposition within due date.
Besides above, as per Section 35(b) of the Income Tax Act, 2025 (corresponding to Section 40(a)(ia) of the old Act), 30% of any sum payable to a resident on which tax was deductible but not deducted or not deposited by the due date of filing the return, shall be disallowed while computing business income.
Example: M/s. ABC Traders pays Rs. 5 lakhs as professional fees in Tax Year 2026 -27 but does not deduct tax. In computing business income for TY 2026 -27, Rs. 1.5 lakhs (30% of Rs. 5 lakhs) will be disallowed under Section 35(b).
18. What is the position for TCS compliance during the transition period?
The provisions relating to Tax Collected at Source (TCS) have been consolidated under Section 394 of the Income Tax Act, 2025. The same transition principles —such as the trigger for debit/receipt shall apply equally to TCS.
Accordingly, for amounts debited or received on or before 31 March 2026 TCS provisions shall continue to be governed by the provisions of the erstwhile Act. Similarly, for amounts debited or received on or after 1 April 2026 TCS provisions shall be governed by Section 394 of the Income Tax Act, 2025.
19. An employer pays salary for the month of March 2026 on 31 March 2026, and salary for the month of April 2026 on 30 April 2026. Considering the transition from the Income Tax Act, 1961 to the Income Tax Act, 2025, how should tax be deducted at source (TDS) on these salary payments?
Under the TDS provisions relating to salary, tax is required to be deducted at the time of payment. Thus, TDS on salary shall be governed by different Acts, based on the date of payment of salary, as explained below:
• Salary for March 2026 paid on 31 March 2026 will be governed by the Income Tax Act, 1961, since the payment was made before the new Act came into force.
• Salary for April 2026 paid on 30 April 2026 will be governed by the Income Tax Act, 2025, as the payment was made on or after 1 April 2026.
20. How should employers handle TDS on salary during the transition from FY 2025 -26 to Tax Year 2026 -27?
Employers must handle salary TDS as follows:
(i) For salary pertaining to FY 2025 -26 (paid up to March 2026): TDS obligations shall be in accordance to Section 192 of the old Act;
(ii) For salary pertaining to Tax Year 2026 -27 (paid from April 2026 onwards): TDS obligations shall be in accordance to Section 392(1) of the new act;
(iii) The employer must reset the TDS computation from 1st April, 2026 for the new tax year, considering projected income, deductions, and tax regime for TY 2026 -27.
21. If an employee submits an investment declaration for TY 2026 -27, should it reference old Act or new Act provisions?
The investment declaration for Tax Year 2026 -27 should reference the provisions of the Income Tax Act, 2025. For instance, deductions under Section 80C of the old Act will now be referenced as the Schedule XV read with section 123 of the Income Tax Act, 2025. The employer’s payroll system should be updated to reflect the new section numbering from April 2026.
22. How will a deductee claim credit for tax deducted under the old Act in the return for AY 2026 -27?
Tax deducted on income pertaining to FY 2025 -26 will be reflected in Annual Information Statement (AIS) for AY 2026 -27. The deductee will claim this credit in the return of income for AY 2026 -27 filed under the old Act. The old section numbers will appear in AIS for the period up to March 2026.
23. If tax was deducted in March 2026 under the old Act but deposited by the deductor after 01.04.2026, will the deductee still get credit?
Yes. The TDS credit is linked to the year in which the income is assessable, not the date of TDS deposit. Even if the deductor deposits the TDS after 1st April 2026, the credit will be reflected against AY 2026 -27 in AIS, provided the deductor correctly files the TDS return for Q4 of FY 2025 -26.
24. How will TDS credit be handled where tax was deducted in both March 2026 (old Act) and April 2026 (new Act)?
The credits will be mapped to different assessment periods:
(i) Tax deducted in March 2026 → Credit in AY 2026 -27 (covered by I.T. Act, 1961);
(ii) Tax deducted in April 2026 → Credit in Tax Year 2026 -27 (covered by I.T. Act, 2025).
The e -filing system and Annual Information Statement ( AIS for AY 2026 -27 and Form No. 168 for TY 2026 -27) will automatically segregate the credits based on the TDS return filed by the deductor.
25. Will there be two separate AIS statements — one for AY 2026 -27 and another for Tax Year 2026 -27?
Yes. The Annual Information Statement will be generated separately for each assessment/tax year. The statement for AY 2026 -27 will be in AIS and will reflect TDS/TCS along -with other information relating to FY 2025 -26 under the old Act.
However, the Annual Information Statement for Tax Year 2026 -27 will be in Form No. 168 and will reflect information for FY 2026 -27 under the new Act. Both the statements will be accessible on e -filing portal.
