TDS under the Income-tax Act, 2025: The Consolidated Section 393 and What Deductors Must Do
Under the Income-tax Act, 1961, TDS was spread across dozens of sections: 192 for salary, 194C for contractors, 194J for professionals, 194-I for rent, 194Q for purchase of goods, and many more. The Income-tax Act, 2025, in force from 1 April 2026, brings these together in Section 393. Payments, thresholds and rates are set out in tables.
What has changed and what has not
Changed:
- section references, with all TDS on payments to residents and non-residents now under Section 393 and its tables
- form numbers and the names of some statements and certificates
- the language, which is simplified and arranged in tables
Largely unchanged:
- the categories of payments covered, and most rates and thresholds as they stood after the Finance Act, 2025
- the monthly deposit and quarterly statement cycle
- the consequences of default
Statements for the quarters up to March 2026 relate to the 1961 Act. Statements from the April–June 2026 quarter onwards are filed under the 2025 Act, in the new formats.
Changes carried over from Budget 2025
- Higher thresholds for several payments, including rent, professional fees, commission and interest, to reduce compliance for small payments.
- Removal of the higher rate for non-filers. The special provisions for higher TDS/TCS on "specified persons" who had not filed returns (formerly Sections 206AB and 206CCA) were omitted. The higher rate where the deductee does not furnish a PAN, or has an inoperative PAN, still applies.
- TDS on payments by firms to partners, applicable from 1 April 2025, at 10% above ₹20,000 a year.
The compliance cycle
| Activity | Due date |
|---|---|
| Deposit TDS/TCS | 7th of the following month; 30 April for tax deducted in March |
| Quarterly TDS statements | 31 July, 31 October, 31 January and 31 May |
| Quarterly TCS statements | 15 July, 15 October, 15 January and 15 May |
| Certificates to deductees | Within 15 days of the due date of the quarterly statement (annual certificate for salary) |
What a default costs
- Interest – 1% per month from the date tax was deductible to the date of deduction, and 1.5% per month from deduction to deposit
- Late filing fee – ₹200 per day of delay in filing the statement, up to the amount of TDS
- Penalty for not filing or filing incorrect statements, in addition to the fee
- Disallowance of the expense – 30% of the payment to a resident, or the whole payment to a non-resident, if TDS is not deducted or not deposited in time
- Prosecution for wilful failure to deposit tax deducted, in serious cases
Controls that prevent most problems
- Vendor master with PAN and TDS category. Validate the PAN and check that it is operative (linked with Aadhaar).
- TDS rates configured in the accounting software, updated for the 2025 Act's tables.
- Monthly review of expense ledgers for payments where TDS was missed.
- Reconcile the TDS ledger with challans and statements every quarter before filing.
- Lower deduction certificates – check them on TRACES and apply the rate only within the certificate's limit and validity.
- Payments to non-residents – get the tax residency certificate and Form 10F, and check the tax treaty and the beneficial ownership conditions before applying a treaty rate.
The information in this article reflects the law as on the date of publication and is for general guidance only.