The TDS regime has just gone through its single biggest structural change in over six decades. With effect from 1 April 2026, the Income Tax Act 2025 replaces the Income Tax Act 1961 for all transactions, and over fifty separate TDS sections (194, 194A, 194C, 194J, 194Q and the rest of the 194-series) have been consolidated into a single umbrella provision — Section 393. At the same time, the Finance Act 2025 has revised thresholds for a number of sections, scrapped the higher-rate-for-non-filer regime (Section 206AB / 206CCA), withdrawn the TCS on sale of goods (Section 206C(1H)), and replaced four PAN-based return forms with a single consolidated Form 141.
If you are a CA in practice, an accounts head, or a salaried professional trying to make sense of what your Form 26AS will look like next year, this guide walks through every meaningful change — structural, procedural and computational — in one place.
Why the TDS landscape changed for FY 2026-27
The Income Tax Act 1961 had accumulated, over six decades, more than fifty separate TDS sections. Each had its own number, its own threshold logic, its own rate and its own carve-outs. Form 26AS, the TRACES portal, and every CA practice software has carried this complexity for years. Three drivers pushed the change:
- Structural simplification. The Income Tax Act 2025 is a rewrite of the 1961 Act. As part of the rewrite, the legislative drafters consolidated all TDS provisions into one section organised as tables and serial numbers, instead of dozens of standalone sections.
- Threshold rationalisation. Many TDS thresholds (Rs 5,000 dividends, Rs 5,000 interest, Rs 30,000 professional fees) had been static for fifteen-plus years. The Finance Act 2025 doubled or substantially raised most thresholds to reduce nuisance deduction on small payments.
- Removal of compliance overhang. Section 206AB (introduced in 2021) required every deductor to check, for every deductee, whether the deductee had filed returns in the last two years. The administrative cost vastly exceeded the revenue it produced, and the Finance Act 2025 has removed it.
Section 393 — The new umbrella for all TDS
Section 393 of the Income Tax Act 2025 consolidates what were previously over fifty separate sections of the 1961 Act. Instead of searching across sections 192 to 196D, deductors now refer to a single Section 393, organised across six tables. Each row in these tables carries:
- A serial number (Sl. No.) which is the new statutory reference;
- A description of the payment type;
- The applicable rate and threshold;
- A numeric payment code (1001 through 1067) used in the TDS return.
So what was previously “deducted u/s 194C at 1%” is now reported as “deducted u/s 393(1), Table Sl. No. 6(i), payment code 1017 at 1%”. The economic substance has not changed; the legal reference and reporting tag have.
The new act applies to transactions where the earlier of credit or payment occurs on or after 1 April 2026. Anything dated before this cut-off — including credit entries passed on 31 March 2026 for FY 2025-26 — continues to be governed by the Income Tax Act 1961. There is no retrospective reclassification of older deductions.
Old Section 194 series → New Section 393 mapping
The table below maps the most commonly used legacy sections to the new Section 393 reference and the current FY 2026-27 rate and threshold. Most deductors will still call these by their old numbers during the transition; the legacy number is shown alongside for that reason.
| Legacy section | New Sec 393 ref | Payment type | Rate (FY 2026-27) | Threshold (FY 2026-27) |
|---|---|---|---|---|
| 194 | Sec 393 | Dividend (other than 115-O) | 10% | Rs 10,000 per FY (was Rs 5,000) |
| 194A | Sec 393 | Interest — non-bank | 10% | Rs 10,000 per FY (was Rs 5,000) |
| 194A | Sec 393 | Bank / PO interest — senior citizen | 10% | Rs 1,00,000 per FY (was Rs 50,000) |
| 194A | Sec 393 | Bank / PO interest — others | 10% | Rs 50,000 per FY (was Rs 40,000) |
| 194B | Sec 393 | Lottery / gambling winnings | 30% | Rs 10,000 per single transaction |
| 194BA | Sec 393 | Net winnings from online gaming | 30% | No threshold |
| 194BB | Sec 393 | Horse race winnings | 30% | Rs 10,000 per single transaction |
| 194C | Sec 393(1) Tbl 6(i) · code 1017 | Contractor | 1% (Indv/HUF) or 2% (Co/Firm) | Rs 30,000 single or Rs 1,00,000 aggregate |
| 194D | Sec 393 | Insurance commission | 2% | Rs 20,000 per FY (was Rs 15,000) |
| 194DA | Sec 393 | Life insurance proceeds (taxable) | 2% | Rs 1,00,000 |
| 194G | Sec 393 | Lottery ticket commission | 2% | Rs 20,000 per FY (was Rs 15,000) |
| 194H | Sec 393 | Commission / brokerage | 2% | Rs 20,000 per FY (was Rs 15,000) |
| 194I(a) | Sec 393 | Rent — plant and machinery | 2% | Rs 50,000 per month |
| 194I(b) | Sec 393 | Rent — land / building / furniture | 10% | Rs 50,000 per month |
| 194-IA | Sec 393 | Sale of immovable property (resident seller) | 1% | Sale consideration Rs 50 lakh and above |
| 194-IB | Sec 393 | Rent paid by Indv / HUF (no audit) | 2% | Rs 50,000 per month |
| 194J(a) | Sec 393 | Technical services / royalty | 2% | Rs 50,000 per FY (was Rs 30,000) |
| 194J(b) | Sec 393 | Professional fees | 10% | Rs 50,000 per FY (was Rs 30,000) |
| 194K | Sec 393 | Mutual fund income | 10% | Rs 10,000 per FY (was Rs 5,000) |
| 194LA | Sec 393 | Compulsory acquisition compensation | 10% | Rs 5,00,000 per FY (was Rs 2,50,000) |
| 194LBA | Sec 393 | Business trust income (REIT / InvIT) | 10% | As prescribed |
| 194LBC | Sec 393 | Securitisation trust income | 10% (rationalised from 25% / 30%) | No threshold |
| 194M | Sec 393 | Indv / HUF contractor or professional fees (no audit) | 2% | Rs 50 lakh aggregate per FY |
| 194N | Sec 393 | Cash withdrawal — ITR filed | 2% | Above Rs 1 crore (in a FY) |
| 194N | Sec 393 | Cash withdrawal — ITR not filed | 2% above Rs 20 lakh, 5% above Rs 1 crore | Threshold reset for non-filers |
| 194O | Sec 393 | E-commerce operator to seller | 0.1% | Rs 5 lakh per seller per FY |
| 194Q | Sec 393 | Purchase of goods (buyer) | 0.1% | Rs 50 lakh aggregate per FY |
| 194R | Sec 393 | Benefits or perquisites | 10% | Rs 20,000 per FY |
| 194S | Sec 393 | Crypto / virtual digital asset | 1% | Rs 50,000 (specified persons) / Rs 10,000 (others) |
| 194T (new) | Sec 393 | Firm payment to partner (remuneration, bonus, commission, interest) | 10% | Rs 20,000 aggregate per partner per FY |
Section 195 (TDS on payments to non-residents) continues as a distinct provision under the new Act with its own rate matrix and DTAA interaction. Our TDS Calculator already reflects the consolidated Section 393 references plus the Section 195 rate matrix for cross-border payments.
Finance Act 2025 threshold and rate amendments
Independent of the Section 393 consolidation, the Finance Act 2025 made several substantive amendments to TDS rates and thresholds effective from FY 2025-26 (and continuing into FY 2026-27). The headline changes:
- Threshold doubled or substantially raised for over a dozen sections including 194 (dividend), 194A (interest), 194D, 194G, 194H, 194J, 194K, 194LA. The single largest beneficiary is the senior citizen: bank / post office interest threshold is now Rs 1,00,000 per FY versus the earlier Rs 50,000.
- Rent threshold shifted to per-month basis. Sections 194I and 194-IB now apply if rent exceeds Rs 50,000 in any single month, instead of the earlier aggregate-for-the-year basis of Rs 2,40,000.
- 194LBC rate rationalised from 25% (individual) / 30% (others) to a single 10% for income distributed by a securitisation trust.
- 194T introduced by the Finance Act 2024 with effect from 1 April 2025: TDS at 10% on aggregate payments above Rs 20,000 per partner per FY by a firm to its partners (covers salary, bonus, commission, interest and any other remuneration).
Removed provisions — what is gone for FY 2026-27
Three provisions that have caused compliance pain for years are now history:
Section 206AB / 206CCA — higher TDS / TCS on non-filers
Introduced in 2021, Section 206AB required every deductor to check, for every deductee, whether the deductee had filed returns in the previous two assessment years. If not, TDS had to be deducted at twice the standard rate (or 5%, whichever was higher). Section 206CCA mirrored this on the TCS side. Both sections are removed by the Finance Act 2025 with effect from 1 April 2025. Deductors no longer need to use the Income-tax Department’s compliance utility to check filer status before each deduction.
Section 206C(1H) — TCS on sale of goods
Section 206C(1H) required sellers with turnover above Rs 10 crore to collect TCS at 0.1% on sale consideration above Rs 50 lakh received from a buyer in the financial year. With Section 194Q (TDS on purchase of goods) already in force on the buyer’s side, the seller-side TCS had become redundant. Section 206C(1H) is withdrawn with effect from 1 April 2025. Only the buyer’s Section 194Q applies for goods transactions above the threshold.
Section 206AA continues
One often-misread point: Section 206AA — higher TDS (20%) where the deductee has not furnished a valid PAN — continues unchanged. This was never about return-filing status; it is about PAN, and it remains in force.
TDS return form changes — the new Form 141
The biggest practical change for FY 2026-27 is on the return-filing side. Four PAN-based TDS forms used for one-off deductions have been consolidated:
- Form 26QB — TDS u/s 194-IA on sale of property,
- Form 26QC — TDS u/s 194-IB on rent paid by individuals / HUF,
- Form 26QD — TDS u/s 194M on contractor / professional payments by individuals / HUF, and
- Form 26QE — TDS u/s 194S on virtual digital assets by specified persons,
are replaced from FY 2026-27 by a single consolidated Form 141. The TAN-based quarterly returns (Form 24Q for salary, Form 26Q for non-salary resident, Form 27Q for non-resident, Form 27EQ for TCS) continue as separate filings.
Reporting impact
From FY 2026-27 onwards, every quarterly TDS return must show the payment code (1001 to 1067) against each deduction line, in addition to the rate. Deductors and CA software vendors need to update their masters to map each natural payment description to the new code. Form 26AS rendering on the TRACES portal will continue to show both the legacy section number and the new Sec 393 reference during the transition period.
Due dates unchanged
The TDS deposit and return-filing due dates are unchanged by the new Act:
- TDS deposited by the 7th of the following month (30th April for March deductions);
- Quarterly TDS return (24Q / 26Q / 27Q / 27EQ) by the 31st of the month following the quarter end (15th May for the March quarter for some forms);
- Form 16 / 16A / 27D within the prescribed timelines after the relevant due dates.
Form 141, where applicable, must be filed within 30 days of the end of the month in which the deduction was made, with payment to the credit of the Central Government within the same timeline.
Practical compliance checklist for FY 2026-27
A short, sequenced checklist for any CA office or finance team transitioning to the new regime:
- Stop checking 206AB compliance from 1 April 2025 onwards. Update internal SOPs and remove the higher-rate-for-non-filer check.
- Reverse the 206C(1H) TCS workflow. If your client has been collecting TCS on goods sales, the obligation ends from 1 April 2025; pending demand or collection adjustments should be cleared at FY-end.
- Refresh threshold masters in accounting software. Most of the threshold revisions (Rs 5,000 to Rs 10,000 for interest / dividend, Rs 15,000 to Rs 20,000 for commission / professional, Rs 30,000 to Rs 50,000 for 194J, etc.) take effect from 1 April 2025. Confirm that Tally, Zoho, QuickBooks or whichever software is in use has been patched.
- Update rent compliance with the per-month threshold. Rent above Rs 50,000 in any single month triggers TDS even if the annual aggregate is below the old Rs 2.4 lakh threshold — particularly relevant for high-rent commercial property where monthly billing is irregular.
- Set up Section 194T workflow for every partnership firm. The 10% TDS on payments to partners covers remuneration, interest, bonus and commission, and applies aggregate-per-partner over Rs 20,000 in a year. Quarterly TDS return must report partner-wise.
- Map natural payment heads to Sec 393 payment codes (1001-1067) for FY 2026-27 returns. This is a one-time chart-of-accounts update.
- Switch one-off filings from 26QB / 26QC / 26QD / 26QE to Form 141 for any deduction event on or after 1 April 2026.
- Update letterhead / TDS certificates / vendor purchase orders to refer to Sec 393 alongside the legacy section, so vendors and contractors are not confused when reconciling Form 26AS.
Frequently Asked Questions
Does my old TDS deducted under Section 194C in FY 2025-26 need to be reclassified?
No. The Income Tax Act 2025 applies to transactions where the earlier of credit or payment occurs on or after 1 April 2026. Any deduction dated before this cut-off remains governed by the Income Tax Act 1961 and continues to be reported under the legacy section.
Will Form 26AS still show “Section 194C” for transactions during the transition?
For the transition period, the TRACES portal is expected to display both the legacy section and the new Sec 393 reference. Reconciliation against vendor ledgers and bank statements should continue to work without disruption.
Has Section 195 (payments to non-residents) been merged into Section 393?
No. Section 195 retains its standalone status under the new Act, with its own rate matrix and DTAA interaction. Only the resident 194-series has been folded into Section 393.
Is the higher 20% deduction for missing PAN still in force?
Yes. Section 206AA — the 20% higher-rate-for-no-PAN rule — continues unchanged. Only Section 206AB and 206CCA (higher rate for non-filers of return) have been removed.
How does the 194T partnership-firm TDS work for a partner who draws monthly remuneration plus year-end interest?
Section 194T applies on the aggregate of all qualifying payments — salary, bonus, commission and interest — per partner per financial year. The Rs 20,000 trigger is on the aggregate, not on each component. Once the aggregate crosses Rs 20,000 in a year, TDS at 10% applies to the entire qualifying payment for that partner.
Do small TDS deductors need to obtain a new TAN under the new Act?
No. Existing TANs continue to be valid. Only the section reference and (for one-off filers) the consolidated Form 141 are new.
Bottom line
The Income Tax Act 2025 has not changed the economics of TDS — rates and thresholds for most sections are already settled by the Finance Act 2025. What it changes is the legal architecture, the section reference, the reporting code in the return, and the form used for one-off filings. For a CA office, the transition is mostly a one-time update to accounting masters, internal SOPs and client-facing TDS certificates. For a salaried deductee, Form 26AS will look almost identical, just with a Sec 393 stamp appearing alongside the familiar 194-series number.
For ready computation, our TDS Calculator already implements the consolidated Sec 393 references with legacy section numbers in brackets, all Finance Act 2025 thresholds, and the Section 195 non-resident matrix. For closely related reads, see our Old vs New Tax Regime FY 2026-27 comparison and our TDS Rate Chart FY 2026-27.