New TDS Rates from 1 April 2026 — Complete Guide Under the Income Tax Act, 2025 (FY 2026-27)
| Effective From: 1 April 2026 | Governed By: Income Tax Act, 2025 | Primary Section: Section 393 (non-salary TDS) |
From 1 April 2026, India’s entire income tax system runs under the new Income Tax Act, 2025 — replacing the 65-year-old Income Tax Act, 1961. One of the most practically significant changes for businesses, employers, tenants, investors and individuals is the complete restructuring of Tax Deducted at Source (TDS).
Under the old law, TDS was scattered across more than 30 individual sections — 192, 194A, 194C, 194H, 194J, 194Q and dozens more. For anyone running a business or managing payroll, keeping track of all these sections was a compliance nightmare. The new Act consolidates virtually all of them into just two master sections: Section 392 (for salary TDS) and Section 393 (for everything else). The rates themselves have largely stayed the same — but the section numbers, form names, and reporting codes have all changed.
1. The Big Structural Change — From 30+ Sections to 3
Under the Income Tax Act, 2025, the entire TDS framework is reorganised under three sections:
- Section 392 — TDS on Salary: Covers all salary and pension TDS. The employer deducts tax at applicable slab rates. The old Section 192 and 192A are now here.
- Section 393 — TDS on Non-Salary Payments: This single master section covers all other TDS — interest, rent, contractor payments, professional fees, dividends, commissions, crypto, property sales, e-commerce, and more. The old Sections 194A, 194C, 194H, 194I, 194J, 194Q and 20+ others now fall under Section 393.
- Section 394 — TCS: Tax Collected at Source on specified transactions such as scrap, LRS, overseas tour packages, and alcohol.
Importantly, the rates are largely unchanged. What has changed is the section numbering, the form names (Form 16 → Form 130, Form 16A → Form 131, Form 24Q → Form 138), and the reporting codes used in TDS returns on the TRACES portal.
2. Complete TDS Rate Chart for FY 2026-27
Here is the complete quick-reference TDS rate chart for FY 2026-27 under the Income Tax Act, 2025 — with old section references mapped alongside new ones:
| Payment Type | Old Section | New Section | Rate | Threshold |
| Salary | 192 | 392 | Slab rates | Basic exemption |
| PF withdrawal (before 5 yrs) | 192A | 392 | 10% | Rs. 50,000 |
| Interest (Bank / Post Office — Senior Citizen) | 194A | 393 | 10% | Rs. 1,00,000 |
| Interest (Bank / Post Office — Others) | 194A | 393 | 10% | Rs. 50,000 |
| Interest (Other sources) | 194A | 393 | 10% | Rs. 10,000 |
| Dividend | 194 | 393 | 10% | Rs. 10,000 |
| Contractor payment | 194C | 393 | 1% / 2% | Rs. 30,000 single / Rs. 1 lakh aggregate |
| Rent — Land / Building | 194I | 393 | 10% | Rs. 50,000/month |
| Rent — Plant & Machinery | 194I | 393 | 2% | Rs. 50,000/month |
| Rent by Individual/HUF | 194IB | 393 | 2% | Rs. 50,000/month |
| Professional / Technical fees | 194J | 393 | 10% / 2% | Rs. 50,000 per year |
| Sale of property | 194IA | 393 | 1% | Rs. 50 lakh |
| Purchase of goods (buyer turnover > Rs.10 Cr) | 194Q | 393 | 0.1% | Rs. 50 lakh |
| E-commerce seller | 194O | 393 | 0.1% | Rs. 5 lakh (Indiv/HUF) |
| Commission / Brokerage | 194H | 393 | 2% | Rs. 20,000 |
| Lottery / Game winnings | 194B | 393 | 30% | Rs. 10,000 |
| Online gaming winnings | 194BA | 393 | 30% | No threshold |
| Virtual Digital Assets (Crypto/NFT) | 194S | 393 | 1% | Rs. 50,000 / Rs. 10,000 |
| Payment by firm to partners | 194T | 393 | 10% | Rs. 20,000 |
| Benefit / Perquisite from business | 194R | 393 | 10% | Rs. 20,000 per year |
| Cash withdrawal (non-ITR filer) | 194N | 393 | 2% | Rs. 1 crore / Rs. 3 crore (co-op) |
| Insurance commission | 194D | 393 | 2% | Rs. 20,000 |
| Life insurance maturity proceeds | 194DA | 393 | 2% | Rs. 1,00,000 |
| Manpower supply services (NEW) | 194C equivalent | 393 | 1% / 2% | Rs. 30,000 / Rs. 1 lakh |
3. Key Changes and New Additions Worth Noting
While most rates are unchanged, there are a few important new developments in the TDS framework from 1 April 2026:
- Manpower supply services is now explicitly covered under Section 393 (equivalent of old Section 194C). If you are paying a contractor who provides workers or labourers, TDS at 1% (individual/HUF) or 2% (others) now clearly applies. Many businesses were not deducting TDS on such invoices — this clarification has teeth. Non-deduction means 30% expense disallowance.
- MACT interest fully exempt: Interest awarded by a Motor Accident Claims Tribunal to a natural person is now fully exempt from income tax and TDS. Insurers and legal payors must update their payment systems accordingly.
- CBDT circulars are now binding on deductors: Section 400(2) of the new Act explicitly makes CBDT guidelines binding on both tax authorities and deductors. The earlier argument that CBDT circulars are only advisory no longer holds. This affects circulars on perquisites (old 194R) and virtual digital assets.
- Senior citizens get higher interest threshold: Banks and post offices now have a Rs. 1,00,000 TDS threshold for interest paid to senior citizens — up from the general Rs. 50,000 limit.
- Higher cash withdrawal threshold for co-operative societies: The TDS threshold on cash withdrawals for co-operative societies is Rs. 3 crore, compared to Rs. 1 crore for others.
4. What Businesses Must Do Before the First Payment of FY 2026-27
| Immediate Action Required for All Deductors: Update your accounting software and payroll ERP to use the new section codes under Section 393. Filing TDS returns with old section codes (like 194A, 194C, 194J) for FY 2026-27 transactions will trigger validation errors on the TRACES portal. Issue Form 130 (not Form 16) for salary TDS certificates from this year. Form 131 replaces Form 16A for non-salary TDS. Using old form numbers for TY 2026-27 makes the certificate technically non-compliant. Review all vendor contracts — especially for manpower supply, professional services, rent, and e-commerce. Confirm TDS applicability and rates under the new section references before the first payment. Remember: late filing of TDS returns attracts Rs. 200 per day penalty. Non-deduction attracts 100% penalty plus 30% expense disallowance. The consequences have not softened — only the structure has simplified. |
The new TDS framework under the Income Tax Act, 2025 is a genuine improvement — fewer sections, cleaner structure, and easier navigation. But the compliance obligations are just as real. The rates you pay, the threshold you watch, and the consequences of getting it wrong are unchanged. Only the section numbers and form names are new. Update your systems, review your contracts, and start FY 2026-27 right.
