A Practical Compliance Note under the Income-tax Act, 2025
By CA Surekha Ahuja
FY 2026–27 marks the first full compliance cycle under the revised TDS/TCS framework of the Income-tax Act, 2025.
This is not merely a renumbering of sections. The law has restructured the operational compliance architecture itself—returns, declarations, certificates, remittance reporting and special challan-cum-statements.
For deductors, this creates a new compliance reality:
Procedural accuracy is now as important as tax deduction accuracy.
A correct deduction with wrong reporting, wrong form, wrong challan or wrong certificate can still result in defective compliance.
And defective compliance may trigger:
- interest liability
- late filing fee
- penalty exposure
- tax credit mismatch
- notices and disputes
This note captures the key practical changes every deductor must track for FY 2026–27.
What Has Changed? (Quick Form Mapping)
| Compliance Area | Old Form | New Form |
|---|---|---|
| Declaration (non-deduction) | 15G / 15H | 121 |
| Salary TDS Return | 24Q | 138 |
| Resident TDS Return | 26Q | 140 |
| Non-resident TDS Return | 27Q | 144 |
| TCS Return | 27EQ | 143 |
| Salary Certificate | 16 | 130 |
| Non-salary Certificate | 16A | 131 |
| Property / Rent / Specified Payment Certificate | 16B / 16C / 16D | 132 |
| TCS Certificate | 27D | 133 |
| Foreign Remittance Declaration | 15CA | 145 |
| Foreign Remittance CA Certificate | 15CB | 146 |
| Special Challan-cum-Statement | 26QB / 26QC / 26QD | 141 |
Biggest transition risk: Use of old forms in the new compliance year.
Core TDS Rates (High-Frequency Transactions)
| Nature of Payment | Section | Rate | Threshold |
|---|---|---|---|
| Salary | 392 | Slab rates | Taxable salary |
| Interest (bank/deposits) | 393(1)T5 | 10% | ₹50,000 / ₹1 lakh |
| Rent | 393(1)T2(i) | 2% | ₹50,000 per month |
| Contractor Payments | 393(1)T6(i) | 1% / 2% | ₹30,000 / ₹1 lakh |
| Professional Fees | 393(1)T6(iii)(a) | 10% | ₹50,000 |
| Technical Fees | 393(1)T6(iii)(b) | 2% | ₹50,000 |
| Property Purchase | 393(1)T3(i) | 1% | ₹50 lakh |
| Purchase of Goods | 393(1)T8(ii) | 0.1% | ₹50 lakh |
| Virtual Digital Assets (VDA) | 393(1)T8(vi) | 1% | ₹10,000 / ₹50,000 |
Practical caution: Wrong classification remains one of the biggest causes of short deduction disputes.
Declaration Forms (Form 121 replacing Form 15G / 15H)
Form 121 now replaces Form 15G and Form 15H.
| Rule | Compliance Impact |
|---|---|
| Obtained before payment/credit | Valid non-deduction possible |
| Obtained after deduction | No retrospective relief |
Practical caution: Late declaration does not regularise an earlier deduction default.
Quarterly Returns & Due Dates
| Nature | New Form | Due Date |
|---|---|---|
| Salary TDS | 138 | 31 July / 31 October / 31 January / 31 May |
| Resident Payments | 140 | Same |
| Non-resident Payments | 144 | Same |
| TCS | 143 | Same |
Watchpoint: Q4 due date (31 May) remains the most frequently missed deadline.
Form 141 (Special Compliance Cases)
Separate from quarterly returns.
| Transaction | Due Date |
|---|---|
| Property Purchase | 30 days from month-end |
| Rent by specified persons | 30 days from month-end |
| Contractor / Professional payments by specified persons | 30 days from month-end |
| VDA Transfer | 30 days from month-end |
Important: Default in Form 141 is an independent compliance default.
Certificates (New Form Mapping)
| Purpose | New Form | Due Date |
|---|---|---|
| Salary Certificate | 130 | 15 June |
| Non-salary Certificate | 131 | 15 days after return due date |
| Property / Rent / Specified Payments | 132 | 15 days after Form 141 due date |
| TCS Certificate | 133 | 15 days after TCS return due date |
Practical caution: Wrong certificate issuance may affect deductee credit.
Foreign Remittance Compliance
| Purpose | New Form | Timing |
|---|---|---|
| Remittance Declaration | 145 | Before remittance |
| CA Certificate | 146 | Before remittance (where applicable) |
Banks may not process remittance without proper compliance.
Transitional Compliance Alert (April–May 2026)
This is the most critical transition phase.
For a brief period, both compliance systems will operate simultaneously.
| Deduction Period | Applicable Framework | Due Date |
|---|---|---|
| March 2026 deduction | Earlier framework (FY 2025–26) | 30 April 2026 |
| April 2026 deduction | New framework (FY 2026–27) | 7 May 2026 |
This creates a dual-compliance window.
High-risk transition errors:
❌ Depositing March deductions under new framework
❌ Depositing April deductions under old framework
❌ Wrong challan tagging
❌ ERP/payroll masters not updated from 1 April 2026
❌ Wrong form mapping in Q1 filings
Practical action:
✔ Close March reconciliation before 30 April
✔ Update payroll/TDS masters from 1 April
✔ Segregate old-year and new-year challans
✔ Validate new form mapping before first April deduction
Practical note: The first defaults under the new law may arise from transition confusion—not tax failure.
Payment Due Dates
| Compliance | Due Date |
|---|---|
| Monthly TDS/TCS (April–February) | 7th of next month |
| March deduction | 30 April |
| Form 141 cases | 30 days from month-end |
Financial Cost of Non-Compliance
| Default | Exposure |
|---|---|
| Failure to deduct | 1% per month or part thereof |
| Failure to deposit | 1.5% per month or part thereof |
| Late return filing | ₹200 per day (subject to statutory limits) |
Common correction areas:
- Wrong PAN
- Wrong section code
- Wrong financial year
- Wrong deductee mapping
Practical point: Correct errors before return processing and certificate issuance.
Key Compliance Traps in FY 2026–27
❌ Using old forms
❌ Missing Form 141 timelines
❌ Late Form 121 collection
❌ Wrong PAN reporting
❌ Wrong challan mapping
❌ Wrong certificate issuance
❌ Missing Q4 return deadline
❌ Transition-period confusion
Under the new law, TDS/TCS defaults will increasingly arise not from failure to deduct—but from failure to comply correctly.
And in the first year of transition, the biggest exposure may not be tax computation—
it may be compliance migration failure.
In FY 2026–27, procedural discipline will be the first line of tax defence.
