Income Tax Act 2025: New TDS Sections & Forms Guide for 2026

The shift from the Income Tax Act, 1961 to the Income Tax Act, 2025 is not a cosmetic update — it is the most sweeping structural overhaul of India's tax law in six decades. From 1 April 2026, every TDS return you file, every certificate you issue, and every challan you pay must use a completely new set of section numbers, form numbers, and payment codes. If your practice or your clients are still filing under the old regime — using 194C, 194J, 194I, or any of the other familiar codes — your returns will fail at the system-validation level on the TRACES and income-tax portals.

This is not a future concern. The first quarterly TDS return under the new Act — covering April to June 2026 — was due in July 2026. If your software is not updated, or your team is still writing "Section 194C" on challans, you are at risk of correction statements, processing delays, and potential interest. This guide gives you everything you need to get it right.

Why Parliament Rewrote the TDS Law

The Income Tax Act, 1961 was amended so many times over six decades that the TDS chapter alone had ballooned to more than 60 separate sections. From Section 192 (salary) to Section 194T (payments to partners), each section had its own threshold, rate, exceptions, and litigation history. The Income Tax Act, 2025 rationalised the entire structure into three parent provisions. The Finance Act, 2026 confirmed the April 2026 operative date.

TDS rates themselves have not changed in most cases. This is purely a structural simplification — the goal was to reduce complexity for deductors, not to increase the tax burden.

The New Three-Section Structure

Section 392 — TDS on Salary

Section 392 replaces old Section 192. It covers TDS deducted by employers on salary income of resident employees. The employer still estimates total annual salary, applies the applicable tax slab, and deducts monthly. Payment code: 1001.

Section 393 — TDS on All Other Payments

Section 393 is the defining consolidation. It replaces every non-salary TDS provision that existed under the 1961 Act — more than 50 separate sections — and organises them in a single structured table with numeric payment codes.

Section 393(1) — Payments to Residents uses Payment Codes 1005 to 1038. The key mappings:

Section 393(2) — Payments to Non-Residents uses Payment Codes 1039 to 1057 and covers everything previously under Sections 195 through 196D — royalties, fees for technical services, and other payments to non-residents and foreign companies.

Section 394 — TCS (Tax Collected at Source)

Section 394 replaces Section 206C in its entirety. All TCS obligations — sale of specified goods, foreign remittances under LRS, overseas tour packages, sale of motor vehicles above ₹10 lakh — now fall under Section 394.

The New Form Numbers: Complete Mapping

Every form in the TDS ecosystem has been renamed. This is the reference table your team must use from now on:

The single most operationally impactful change: the four separate special-transaction forms — 26QB (property), 26QC (rent), 26QD (cash withdrawal), 26QE (e-commerce) — are all consolidated into a single Form 141, distinguished only by the payment code entered within the form. Finance teams accustomed to filing these as separate instruments need to relearn this workflow entirely.

Tax Audit Reporting: Form 3CD Is Now Form 26

For CA firms signing statutory and tax audits, the replacement of Form 3CD with Form 26 affects TDS disclosure directly. The old Clause 34 — which required section-wise reporting of TDS deducted, deposited, and defaulted — has been split into three dedicated clauses in Form 26:

• Clause 49 — TDS/TCS deducted but not deposited to the government
• Clause 50 — TDS/TCS deducted but short-deposited
• Clause 51 — Complete default summary

For FY 2025-26 tax audits — the first transition year — payments before 31 March 2026 fall under the old Act and old section codes; payments from 1 April 2026 fall under the new Act and new payment codes. Maintain separate schedules in your working papers for each period to keep the disclosure clean.

The Manpower Supply Dispute Is Finally Settled

Section 393 of the new Act explicitly includes manpower supply within the definition of "work." This resolves a decade-long dispute under the old Section 194C. Tax authorities routinely argued that providing manpower — security personnel, housekeeping staff, factory workers — was a professional service attracting 10% TDS under Section 194J. Taxpayers countered it was a works contract at 2% under Section 194C.

Under the Income Tax Act, 2025, the position is unambiguous: manpower supply contracts are "work" under Section 393, TDS at 2%, payment code 1013. If your business contracts with security agencies, facility management companies, or labour supply firms, update your TDS deduction rate and challan code immediately.

Practical Example: ₹12 Lakh Annual Rent Payment in May 2026

A private limited company pays ₹12 lakh as annual rent for its registered office to a corporate landlord.

Before 1 April 2026 (Income Tax Act, 1961):

• Applicable section: 194I(b) — land and building
• TDS rate: 10%
• TDS amount deducted: ₹1,20,000
• Challan type: ITNS 281, section code 194I
• Quarterly return: Form 26Q

From 1 April 2026 (Income Tax Act, 2025):

• Applicable provision: Section 393(1), Payment Code 1019
• TDS rate: 10% — unchanged
• TDS amount deducted: ₹1,20,000 — unchanged
• Challan: Numeric payment code 1019 (no section number field)
• Quarterly return: Form 140

The tax liability is identical. The compliance identifiers are completely different. Using the old section code 194I for a payment made in May 2026 will generate a system rejection at the TRACES portal and require a correction statement.

Step-by-Step Action Checklist

For CA Firms:

1. 1Verify your TDS software (TDSMAN, Gen TDS, Computax, or ERP module) has the Income Tax Act, 2025 update installed — confirm the release date is April 2026 or later
2. 2Confirm that quarterly return output files are Form 138 (salary), Form 140 (non-salary residents), Form 144 (non-residents), and Form 144A (TCS) — not the old 24Q, 26Q, 27Q, 27EQ
3. 3For all TDS challans covering payments from 1 April 2026, select a numeric payment code (1001–1092) — the old section number dropdown no longer applies
4. 4Brief client accounts teams — particularly those using Tally or manual banking portals — on the new payment code system before they file Q1 challans
5. 5For FY 2025-26 tax audits: prepare separate disclosure schedules for pre-April and post-April deductions under Clauses 49–51 of Form 26
6. 6Advise clients with lower-deduction certificates (old Form 13 / Forms 15G and 15H) to verify their continued validity under the new Act
7. 7Update engagement letter templates and compliance checklists to reference Section 393 codes rather than individual old section numbers

For Businesses:

1. 1Ask your CA or finance team to confirm that Q1 FY 2026-27 TDS returns (April–June 2026) are being filed under the Income Tax Act, 2025 — not the old 1961 Act
2. 2For any property purchases above ₹50 lakh completed after 31 March 2026, ensure TDS is being paid and reported via Form 141, not Form 26QB
3. 3For rent payments to landlords, confirm your accountant is using code 1018 (plant and machinery) or 1019 (land, building, furniture) — not the old section code 194I
4. 4Your employer must issue Form 130 as your annual salary TDS certificate for FY 2026-27 — not Form 16
5. 5If you use Zoho Books, Tally Prime, or other accounting software, confirm your vendor has released an Income Tax Act, 2025 compatibility update before you file

Common Mistakes to Avoid

Filing with old section codes for post-March 2026 payments. The income-tax portal validates the section code against the payment date. A TDS return for a contractor payment made in May 2026 that uses code "194C" will be rejected at the system level. You will need to file a correction statement, which delays TDS certificate issuance to your vendors and can trigger interest for late correction.

Issuing Form 16 to employees for FY 2026-27. Employees filing ITR-1 and ITR-2 for AY 2027-28 will find that the portal pre-fills salary TDS data from Form 130 — not Form 16. Issuing the old format creates mismatches and may require employees to contact their employer for fresh documentation mid-filing.

Treating property and rent TDS as separate-form transactions. Finance teams trained on Form 26QB for property and Form 26QC for rent must now use a single Form 141 with the correct payment code. Attempting to file via old form numbers will not be accepted on the portal.

Not verifying software version before Q1 return filing. On-premise TDS utilities — particularly older Tally plug-ins and standalone tools used in smaller cities — do not always auto-update. Always confirm the software version and release date before filing your first return under the new Act.

Applying 10% TDS to manpower supply contracts. Now that Section 393 explicitly classifies manpower supply as "work," over-deducting at 10% (the professional fee rate) creates excess TDS from vendors, generates refund complications, and may attract notices for incorrect reporting.

Key Takeaways

• All 60+ TDS sections are now three: Section 392 (salary), Section 393 (all non-salary payments to residents and non-residents), and Section 394 (all TCS) under the Income Tax Act, 2025, effective 1 April 2026.
• Rates are unchanged: The structural rationalisation does not increase or decrease your TDS deduction amounts — only the compliance identifiers change.
• Every form has a new number: Form 16 is now Form 130, Form 26Q is now Form 140, Forms 26QB and 26QC are consolidated into Form 141. Update every workflow and template that references these forms now.
• Challans use numeric codes, not section numbers: Payment codes 1001–1092 identify the nature of payment from 1 April 2026; using old section codes triggers portal rejection for any payment made after that date.
• Manpower supply TDS is settled at 2%: Section 393 explicitly includes manpower supply as "work," ending the 194C vs 194J debate and locking in the 2% rate under payment code 1013.

How corpus Helps

corpus's TDS compliance module is fully updated for the Income Tax Act, 2025. When your team records a vendor payment in corpus — whether a contractor, professional, landlord, or e-commerce operator — the platform automatically maps it to the correct Section 393 payment code and includes the payment in the right quarterly return file (Form 138, 140, or 144). Property purchase transactions trigger the Form 141 workflow automatically, with no manual code lookup required.

For CA firms managing multiple clients, corpus cross-checks all coded payments against the effective date of the new Act and flags any entries still referencing old section codes before the return is generated. Your Q1 FY 2026-27 TDS returns can be correct, complete, and filed on time — without manually translating between the Income Tax Act, 1961 and the Income Tax Act, 2025.