By CA Surekha Ahuja
Introduction – Structural Reform, Not Rate Change
The Income Tax Act, 2025 (effective 1 April 2026) does not alter how TDS is computed—it fundamentally reorganises how it is structured, interpreted, and complied with.
- 20+ scattered provisions → 3 consolidated sections
- Rates & thresholds → largely retained
- Real change → clarity, classification discipline, and reduced disputes
Professional Insight:
This is a codification reform, not a tax increase framework.
Structural Shift – At a Glance
| Old Law | New Law |
|---|---|
| Sections 192–196D, 194 series, 194T | Section 392 – Salaries |
| Fragmented TDS provisions | Section 393 – Other Payments (Tables) |
| Section 206C | Section 394 – TCS (Rationalised) |
TDS on Salaries – No Substantive Change
| Particulars | Old | New |
|---|---|---|
| Section | 192 | 392 |
| Method | Annual estimation | Same |
| Certificate | Form 16 | Form 130 |
Only renumbering and reporting format changes—no impact on computation.
TDS on Other Payments – Section 393 (Core Framework)
Residents – Verified Mapping of Key Provisions
| Nature | Old Sec | New Ref | Threshold | Rate |
|---|---|---|---|---|
| Insurance Commission | 194D | 393–1(i) | ₹20,000 | Rates in force |
| Other Commission / Brokerage | 194H | 393–1(ii) | ₹20,000 | 2% |
| Interest (Bank/Post Office) | 194A | 393–5(ii) | ₹50,000 / ₹1,00,000 (senior) | Rates in force |
| Other Interest | 194A | 393–5(iii) | ₹10,000 | Rates in force |
| Dividend | 194 | 393–7 | Nil | 10% |
| Contractors | 194C | 393–6(i) | ₹30,000 / ₹1,00,000 | 1% / 2% |
| Contractors (Individual/HUF – high value) | 194M | 393–6(ii) | ₹50 lakh | 2% |
| Professional / Technical / Director | 194J | 393–6(iii) | ₹50,000 / Nil | 2% / 10% |
| Partner Remuneration | 194T | 393(3)–7 | ₹20,000 | 10% |
| Rent (Corrected Position) | 194I / 194-IB | 393–2 | ₹50,000 per month | 2% / 10% |
| Property Purchase | 194-IA | 393–3(i) | ₹50 lakh | 1% |
| Compulsory Acquisition | 194LA | 393–3(iii) | ₹5 lakh | 10% |
| Life Insurance | 194DA | 393–8(i) | ₹1 lakh | 2% (income portion) |
| Purchase of Goods | 194Q | 393–8(ii) | ₹50 lakh | 0.1% |
| Benefits/Perquisites | 194R | 393–8(iv) | ₹20,000 | 10% |
| E-commerce | 194-O | 393–8(v) | Nil (₹5 lakh relief) | 0.1% |
| Virtual Digital Assets | 194S | 393–8(vi) | ₹10K / ₹50K | 1% |
Note: “Rates in force” typically translates to 10% in standard cases, subject to PAN and specific provisions.
Rent – Key Correction and Practical Understanding
Under Section 393–2, rent provisions are now structured on a monthly threshold basis.
Threshold
- ₹50,000 per month or part thereof
- Applies across categories
Rates
| Category | Rate |
|---|---|
| Non-specified person | 2% |
| Specified person – Plant/Machinery | 2% |
| Specified person – Land/Building/Furniture | 10% |
Illustration
| Monthly Rent | TDS |
|---|---|
| ₹50,000 | No TDS |
| ₹50,001 | TDS applicable |
Practical Note:
Threshold applies per payee and per arrangement, requiring careful evaluation in multi-property cases.
Key Interpretational Improvements
Threshold Precision – Litigation Eliminated
TDS applies only when threshold is exceeded (not merely met).
Illustration (Interest)
| Amount | TDS |
|---|---|
| ₹50,000 | No TDS |
| ₹50,001 | TDS applicable |
✔ Removes ambiguity on “exceeds vs equals”
Improved Classification Framework
The law now better structures classification, reducing disputes:
- Contractor vs Professional clearly demarcated
- Call centres specifically recognised
- Commission categories separated
- Digital/e-commerce transactions defined
Illustrative Cases
Manpower Supply
✔ Covered under contractor → TDS @ 1% / 2%
Call Centre Payments
✔ Eligible for 2% (technical category relief) where conditions met
Digital Services
✔ Covered within structured provisions—classification still fact-based
Professional View:
Clarity is enhanced, but classification still requires factual evaluation.
Non-Residents – Continued Framework
- Covered under Section 393 Table 2
- Rates broadly unchanged (5%, 10%, 20%, etc.)
- DTAA override continues
TCS – Section 394 (Correct Position)
- Not a flat 2% regime
- Continues as category-based structure
- Cash withdrawal TDS (194N) effectively removed
Insight: Rationalisation—not uniformity.
Transition Rules – Critical Compliance Area
| Scenario | Applicable Provision |
|---|---|
| Deduction before 1 April 2026 | Old law |
| Deduction after 1 April 2026 | New law |
| March deduction paid in April | Old law applies |
Illustration
TDS deducted: 31 March 2026
Deposited: 5 April 2026
✔ Correct: Old section (e.g., 194T)
❌ Incorrect: Section 393
Key Rule: Deduction date governs compliance.
Compliance & Penalties – Unchanged
| Compliance | Timeline |
|---|---|
| Monthly TDS | 7th of next month |
| March TDS | 30 April |
| Default | Consequence |
|---|---|
| Delay in deposit | 1.5% interest |
| Late return | ₹200/day |
| Disallowance | Section 40(a) |
Action Checklist – April 2026
- Ensure March deductions use old section codes
- Update ERP for Section 393 mapping
- Review contracts (commission, manpower, digital services)
- Monitor monthly thresholds (rent, interest)
- Ensure correct classification in hybrid transactions
Conclusion – Expert Perspective
The Income Tax Act, 2025 does not increase tax burden—it improves the architecture of TDS law.
- From fragmentation → consolidation
- From ambiguity → structured clarity
- From interpretation disputes → standardisation
However:
- Classification remains critical
- Transition errors are the biggest risk
- Over-simplification must be avoided
