TDS for FY 2026-27 needs extra care because India has moved into the Income Tax Act, 2025 for transactions from 1 April 2026 onward. The Income Tax Department has clarified that the TDS policy, rates and thresholds are broadly retained, but the presentation and section numbering have changed. Salary TDS is now under Section 392, while most non-salary resident and non-resident withholding items are consolidated under Section 393. This means the amount of TDS may look familiar, but reporting under old section numbers can still create validation and correction problems.
This guide gives a practical TDS rate chart for FY 2026-27, including major resident-payment categories, Section 392/393 mapping, deposit due dates, return due dates, Form 141, examples, interest consequences and a compliance checklist for businesses, firms, LLPs, companies, professionals and accountants.
- Quick summary
- What is TDS?
- What changed from 1 April 2026?
- TDS rate chart FY 2026-27
- Form 141 and challan-cum-statement cases
- TDS deposit due dates
- TDS return due dates
- Practical examples
- When TDS may not be required
- Interest and consequences
- TDS compliance checklist
- Common mistakes
- Related DN & CO. reads
- Frequently asked questions
- Official references
- Disclaimer
Quick Summary
| Point | FY 2026-27 Position |
|---|---|
| Applicable law for payment/credit from 1 April 2026 | Income Tax Act, 2025 |
| Salary TDS | Section 392 |
| Most non-salary TDS | Section 393 with tables for resident, non-resident and any-person categories |
| Rate and threshold policy | Broadly retained, but section references and forms need new-law mapping |
| General TDS deposit date | 7th of the next month; March deduction generally by 30 April for non-government deductors |
| Challan-cum-statement cases | Form 141 under the new law, generally within 30 days from the end of the month of deduction |
What Is TDS?
TDS means Tax Deducted at Source. The payer deducts tax at the prescribed rate when making or crediting a payment, and deposits that tax with the Government. The payee later gets credit for the TDS in the tax records, subject to correct deduction, challan payment, return reporting and PAN/TAN matching.
TDS applies to many payments such as salary, interest, commission, contractor payment, professional fee, technical fee, rent, purchase of goods, property purchase, partner remuneration, business benefits, virtual digital assets, cash withdrawals and certain non-resident payments. The deductor's first job is to classify the payment correctly.
What Changed From 1 April 2026?
The Income Tax Department's transition FAQ clarifies that TDS obligations depend on the earlier of credit or payment. If the earlier event occurred on or before 31 March 2026, the old Income-tax Act, 1961 applies. If the earlier event occurs on or after 1 April 2026, the Income Tax Act, 2025 applies.
| Transaction Timing | Applicable Law | Practical Example |
|---|---|---|
| Credit or payment up to 31 March 2026 | Income-tax Act, 1961 | Professional fee credited on 31 March 2026 but paid in April 2026 remains under old-law TDS |
| Credit or payment on or after 1 April 2026 | Income Tax Act, 2025 | April 2026 contractor bill should be mapped under Section 393(1), not old Section 194C reporting |
TDS Rate Chart FY 2026-27
The chart below focuses on practical, commonly used categories. The old section reference is shown only for familiarity. For actual reporting after 1 April 2026, use the relevant new-law section and table item.
| Nature of Payment | New Law Mapping | Rate | Threshold | Practical Note |
|---|---|---|---|---|
| Salary | Section 392 | Average rate as per estimated salary tax | Based on taxable salary | Reset payroll computation for Tax Year 2026-27 from April 2026 |
| Commission or brokerage, other than insurance commission | Section 393(1), Resident Table Sl. No. 1(ii) | 2% | ₹20,000 | Check whether the payer is a specified person |
| Rent paid by person other than specified person | Section 393(1), Resident Table Sl. No. 2(i) | 2% | ₹50,000 per month or part of month | Generally relevant for specified individual/HUF rent cases and Form 141 Schedule A |
| Rent by specified payer: plant, machinery or equipment | Section 393(1), Resident Table Sl. No. 2(ii) | 2% | ₹50,000 per month or part of month | Classify asset correctly before applying rate |
| Rent by specified payer: land, building, furniture or fittings | Section 393(1), Resident Table Sl. No. 2(ii) | 10% | ₹50,000 per month or part of month | Commonly relevant for office, shop, warehouse and commercial premises rent |
| Transfer of immovable property, other than agricultural land | Section 393(1), Resident Table Sl. No. 3(i) | 1% | ₹50 lakh | Rate applies on consideration or stamp duty value, whichever is higher, as per table wording |
| Interest from bank, co-operative bank or post office deposits | Section 393(1), Resident Table Sl. No. 5(ii) | Rates in force | ₹50,000; ₹1,00,000 for senior citizen | Check Form 15G/15H and lower/nil certificate where applicable |
| Other interest, other than securities | Section 393(1), Resident Table Sl. No. 5(iii) | Rates in force | ₹10,000 | Useful for NBFC/company loan interest and similar covered cases |
| Contractor payment to individual/HUF contractor | Section 393(1), Resident Table Sl. No. 6(i) | 1% | ₹30,000 single payment or ₹1,00,000 aggregate | Transport contractor declaration/PAN exception should be checked separately |
| Contractor payment to other contractor | Section 393(1), Resident Table Sl. No. 6(i) | 2% | ₹30,000 single payment or ₹1,00,000 aggregate | Applies to contract work including labour supply where conditions are met |
| Payment by individual/HUF for contractor, professional or commission cases | Section 393(1), Resident Table Sl. No. 6(ii) | 2% | ₹50 lakh | New Form 141 Schedule C may be relevant for covered cases |
| Professional fees | Section 393(1), Resident Table Sl. No. 6(iii) | 10% | ₹50,000 | Do not mix professional services with technical services without checking facts |
| Technical services, call centre cases and specified royalty cases | Section 393(1), Resident Table Sl. No. 6(iii) | 2% | ₹50,000, except director fee category | Use 2% only where the statutory category actually fits |
| Director fee, commission or remuneration not covered as salary | Section 393(1), Resident Table Sl. No. 6(iii) | 10% | Nil | Board fee/commission to director is a common audit check area |
| Dividend declared by domestic company | Section 393(1), Resident Table Sl. No. 7 | 10% | Nil as per Section 393 table | Deduct before distribution or payment of dividend |
| Life insurance payout where income component is taxable | Section 393(1), Resident Table Sl. No. 8(i) | 2% on income component | ₹1,00,000 | Only income comprised in the sum is relevant |
| Purchase of goods | Section 393(1), Resident Table Sl. No. 8(ii) | 0.1% | On sum exceeding ₹50 lakh, subject to note | Not applicable where another TDS/TCS provision applies to the transaction |
| Business benefit or perquisite | Section 393(1), Resident Table Sl. No. 8(iv) | 10% | ₹20,000 | Check gifts, incentives, sponsored benefits and non-cash benefits carefully |
| E-commerce participant payments | Section 393(1), Resident Table Sl. No. 8(v) | 0.1% | Nil | Applies to gross sale/services facilitated through platform |
| Virtual digital asset transfer | Section 393(1), Resident Table Sl. No. 8(vi) | 1% | Nil as per Section 393 table | Form 141 Schedule D may be relevant for specified resident cases |
| Cash withdrawal | Section 393(3), Any-person Table Sl. No. 5 | 2% | ₹1 crore; ₹3 crore for co-operative society recipient | Higher-risk cases should also check non-filer/special rules, if applicable |
| Payment by firm to partner: salary, remuneration, commission, bonus or interest | Section 393(3), Any-person Table Sl. No. 7 | 10% | ₹20,000 | Important for firms and LLPs from the applicable year |
Form 141 and Challan-Cum-Statement Cases
Under the new law, Form 141 is the unified challan-cum-statement for specified resident PAN-based TDS transactions under Section 393(1). The Income Tax Department FAQ states that older separate forms such as 26QB, 26QC, 26QD and 26QE are now merged into Form 141 for covered cases.
| Old Familiar Case | New Form 141 Schedule | General Due Date |
|---|---|---|
| Rent by individual/HUF type case | Schedule A | Within 30 days from end of month of deduction |
| Transfer of immovable property | Schedule B | Within 30 days from end of month of deduction |
| Specified contractor/professional payments by individual/HUF | Schedule C | Within 30 days from end of month of deduction |
| Virtual digital asset transaction | Schedule D | Within 30 days from end of month of deduction |
TDS Deposit Due Dates
The Income Tax Department's tax payment FAQ confirms that the due-date policy is retained under the new-law rule framework. For most non-government deductors, TDS is deposited by the 7th of the next month, with the March exception.
| Month of Deduction | General Deposit Due Date |
|---|---|
| April to February | 7th day of the following month |
| March | 30 April for non-government deductors, in general |
| Form 141 challan-cum-statement cases | Within 30 days from the end of the month in which tax is deducted |
TDS Return Due Dates
Quarterly TDS statement filing continues to be a key compliance step. Deposit of TDS alone is not enough; the deductee gets proper credit only when the statement is correctly filed and processed.
| Quarter | Period | Standard Due Date |
|---|---|---|
| Q1 | April to June | 31 July |
| Q2 | July to September | 31 October |
| Q3 | October to December | 31 January |
| Q4 | January to March | 31 May |
Practical Examples
Example 1: Professional Fees
A company pays professional fees of ₹1,00,000 to a resident consultant in May 2026. The payment crosses the Section 393(1) professional services threshold.
The company should deduct ₹10,000, pay the consultant net ₹90,000, deposit the TDS by the due date, and report the transaction under the relevant new-law Section 393 table item.
Example 2: Contractor Payment
A business pays ₹2,00,000 to an individual contractor for repair work. Since the contractor is an individual, the rate is 1% where Section 393(1) Table Sl. No. 6(i) applies.
Example 3: Office Rent
A company pays office rent of ₹80,000 per month for commercial premises. Since the rent exceeds ₹50,000 per month and the asset is land/building, TDS is 10% under the relevant rent category.
Example 4: Purchase of Goods
A buyer covered by the goods-purchase TDS provision purchases goods of ₹80 lakh from a resident seller during the year, and no other TDS/TCS provision applies to that transaction.
When TDS May Not Be Required
TDS may not be required where the payment does not cross the threshold, the payment is not covered by the relevant withholding category, a valid lower/nil deduction certificate applies, or Form 15G/15H is validly furnished in a category where the law permits such declaration.
Interest and Consequences
Section 398 of the Income Tax Act, 2025 retains the familiar interest logic for withholding defaults. Failure to deduct and failure to deposit are treated differently.
| Default | Typical Consequence |
|---|---|
| Failure or delay in deduction/collection | Interest at 1% per month or part of month |
| Failure or delay in payment after deduction/collection | Interest at 1.5% per month or part of month |
| Late TDS/TCS statement | Fee and processing consequences may apply |
| Wrong section mapping | Processing error and correction statement risk |
| Business expenditure with TDS default | Expense disallowance risk may arise in specified cases |
TDS Compliance Checklist
- Identify the exact nature of payment before booking the entry.
- Confirm whether the payee is resident or non-resident.
- Check whether the payer is a specified person/designated person for that category.
- Verify PAN, lower/nil certificate, Form 15G/15H and applicable declaration.
- Check threshold on single-payment and aggregate basis.
- Deduct at the correct event point: credit or payment, as applicable.
- Use Section 392 or the correct Section 393 table item for post-1 April 2026 transactions.
- Deposit TDS within the due date.
- File quarterly statement or Form 141, as applicable.
- Reconcile books, challans, TDS returns, Form 26AS/AIS and vendor ledger.
Common TDS Mistakes
- Using old section references in post-1 April 2026 reporting.
- Applying rent, contractor and professional fee categories interchangeably.
- Ignoring monthly threshold for rent under the new table.
- Using 2% for professional fees where 10% applies.
- Forgetting director fee TDS where the payment is not salary.
- Skipping TDS because the vendor promises to pay tax directly.
- Not updating ERP, payroll and accounting software section codes.
- Depositing TDS correctly but filing return with wrong PAN, amount or section item.
Related DN & CO. Reads
These DN & CO. articles connect TDS compliance with broader tax and business reporting:
- For new-law form mapping, read New Income Tax Forms 2026 Explained.
- For April 2026 business transition controls, see GST and Income Tax Compliance Changes FY 2026-27.
- For lower or nil withholding certificate planning, refer to Form No. 128 Lower/Nil TDS Certificate Guide.
- For partner remuneration TDS, read Section 194T TDS on Payments to Partners.
- For cash withdrawal and PAN reporting, see Bank Transaction Limits 2026 in India.
- For tax slab impact on salary TDS, read Income Tax Slabs AY 2026-27.
Frequently Asked Questions
1. Are TDS rates changed under the Income Tax Act, 2025?
No major policy change has been announced in the transition FAQ. The Department states that rates and monetary thresholds are broadly retained, but section numbering and reporting references have changed.
2. Which section applies to salary TDS from April 2026?
Salary withholding for Tax Year 2026-27 is under Section 392 of the Income Tax Act, 2025.
3. Which section applies to contractor or professional payments after 1 April 2026?
Most non-salary resident payment categories are covered in Section 393(1). The exact table serial number depends on the nature of payment.
4. Can old section names like 194C and 194J still be used?
They may be used internally for understanding, but for actual post-1 April 2026 compliance reporting, the new-law section and table item should be used.
5. What is Form 141?
Form 141 is the unified challan-cum-statement for specified resident PAN-based TDS transactions under the Income Tax Act, 2025, replacing multiple earlier challan-cum-statement forms for covered cases.
6. What happens if TDS is deducted but deposited late?
Interest at 1.5% per month or part of month generally applies from the date of deduction to the date of actual payment.
7. Does wrong section quoting matter if tax amount is correct?
Yes. The Department has indicated that quoting old section numbers for post-1 April 2026 transactions may lead to processing errors and correction statement requirements.
8. Is Form 141 available for non-resident deductees?
No. The Income Tax Department FAQ states that Form 141 can be filed only for resident deductees.
Official References
- Income Tax Department - TDS Compliance FAQs
- Income Tax Department - Tax Payments FAQ
- Income Tax Act, 2025 - Section 392
- Income Tax Act, 2025 - Section 393
- Income Tax Act, 2025 - Section 398
- Income Tax Department - Form 141 FAQs
Conclusion
TDS compliance in FY 2026-27 is a mix of familiar rates and new-law reporting discipline. The amount to deduct may often be the same as before, but the section mapping has changed. Salary now falls under Section 392, while most non-salary withholding categories are presented under Section 393.
The safest approach is to classify every payment before release, check threshold and PAN, deduct at the correct time, deposit within due date, file the correct return or Form 141, and reconcile regularly. A little discipline at the payment stage can prevent interest, disallowance, correction statements and year-end TDS stress.