Revolutionary Changes to TDS and TCS Provisions from April 1, 2026

The Income Tax Act, 2025, effective from April 1, 2026, ushers in a new era for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions. This is not merely a cosmetic change but a structural overhaul, impacting how TDS and TCS obligations are classified, reported, and enforced. For tax professionals, deductors, and compliance teams, understanding these shifts is crucial.

Farewell to Old Section Numbers, Hello Numeric Codes

One of the most significant alterations is the complete elimination of the familiar 194-series sections that traditionally governed various TDS categories. These have been replaced by a new system featuring Numeric Payment Codes (1001–1067). These codes will be universally used across e-payment, challan generation, and return reporting. Existing ERP systems and accounting software will require updates to map old section references to these new codes.

Consolidated Sections for TDS

The new Act consolidates TDS provisions primarily under Sections 392, 393, and 394. Section 392 now governs TDS on salary, with Form 138 replacing Form 24Q as the quarterly return for salary deductions. Section 393 covers TDS on all non-salary payments to both residents and non-residents, while Section 394 handles residual or special category deductions. Payments will now be identified by table references and serial numbers within these consolidated sections, rather than individual section numbers.

New Forms for Compliance

The changes extend to tax forms as well. Deductors will encounter new TDS/TCS forms starting from April 1, 2026, necessitating a prompt transition for accurate compliance. The latest TDS and TCS rates and thresholds, however, largely remain the same; it is primarily the referencing format and administrative procedures that have been reformed.