TDS and TCS Rates and Thresholds for Tax Year 2026-27: Income-tax Act, 2025 vs Income-tax Act, 1961

1. What Has Changed in the Structure?
   • Consolidated sections: TDS on salary is in section 392 (earlier 192). TDS on all other payments to residents and non-residents is in section 393, which uses tables instead of separate sections (earlier 193 to 196D). TCS is in section 394 (earlier 206C).
   • “Tax year” replaces “previous year” and “financial year” for TDS/TCS purposes. Thresholds apply per tax year (April–March).
   • New forms: Quarterly statements are now Form 138 (salary, earlier 24Q), Form 140 (resident non-salary, earlier 26Q), Form 144 (non-residents, earlier 27Q) and Form 143 (TCS, earlier 27EQ). Certificates are Form 130 / 131 / 133 (earlier 16 / 16A / 27D), the challan-cum-statement for property and rent is Form 141 (earlier 26QB/QC/QD/QE), and the self-declaration for no deduction is Form 121 (earlier 15G/15H).
   • Transition: TDS on payments or credits made up to 31 March 2026 follows the Income-tax Act, 1961 (old sections, old challan and returns). Payments or credits from 1 April 2026 follow the new Act.
2. TDS Rate Chart for Tax Year 2026-27 (Payments to Residents)

   Nature of payment	Old section (1961 Act)	New provision (2025 Act)	Threshold	Rate
   Salary	192	392	Income above basic exemption	Slab rates (average rate)
   Interest on securities / debentures	193	393	₹10,000	10%
   Dividend	194	393	₹10,000	10%
   Interest – bank, co-operative bank, post office	194A	393	₹50,000 (₹1,00,000 for senior citizens)	10%
   Interest – others	194A	393	₹10,000	10%
   Winnings from lottery, crossword puzzle, card games, horse races	194B / 194BB	393	₹10,000 per transaction	30%
   Winnings from online games	194BA	393	No threshold	30%
   Payment to contractors / sub-contractors (including supply of manpower)	194C	393	₹30,000 single payment or ₹1,00,000 in the year	1% (individual/HUF); 2% (others)
   Insurance commission	194D	393	₹20,000	2% (other than company); 10% (company)
   Life insurance policy payout (income portion)	194DA	393	₹1,00,000	2%
   Commission on sale of lottery tickets	194G	393	₹20,000	2%
   Commission or brokerage	194H	393	₹20,000	2%
   Rent – plant & machinery	194I(a)	393	₹50,000 per month or part of a month	2%
   Rent – land, building, furniture	194I(b)	393	₹50,000 per month or part of a month	10%
   Purchase of immovable property (other than agricultural land)	194-IA	393	Consideration ₹50 lakh or more	1%
   Rent paid by individuals/HUFs not liable to audit	194-IB	393	₹50,000 per month	2%
   Joint development agreement – monetary consideration	194-IC	393	No threshold	10%
   Fees for professional services, royalty, non-compete fees	194J	393	₹50,000 per category	10%
   Fees for technical services, call centre, royalty for films	194J	393	₹50,000	2%
   Remuneration / commission to directors (other than salary)	194J	393	No threshold	10%
   Salary, remuneration, interest, bonus, commission to partners	194T	393	₹20,000	10%
   Income from mutual fund units	194K	393	₹10,000	10%
   Compensation on compulsory acquisition of immovable property	194LA	393	₹5,00,000	10%
   Payment to contractors/professionals by individuals/HUFs not liable to deduct under 194C/194J	194M	393	₹50 lakh	2%
   Cash withdrawal from bank / post office	194N	393	Above ₹1 crore (₹3 crore for co-operative societies); lower limits for non-filers of return	2% (5% in certain non-filer cases)
   E-commerce operator paying e-commerce participants	194-O	393	₹5 lakh (individual/HUF participants with PAN/Aadhaar)	0.1%
   Purchase of goods (buyer’s turnover above ₹10 crore)	194Q	393	Purchases above ₹50 lakh from a seller	0.1%
   Benefits or perquisites of business/profession	194R	393	₹20,000	10%
   Transfer of virtual digital assets	194S	393	₹50,000 (specified persons); ₹10,000 (others)	1%

   Payments to non-residents (earlier section 195) are covered by section 393 at the rates in force or under the applicable tax treaty, whichever is beneficial, subject to documentation.
3. TCS Rate Chart for Tax Year 2026-27: Old vs New

   Nature of transaction	Old section (1961 Act)	Rate up to 31.03.2026	Rate from 01.04.2026 (section 394)	Threshold
   Alcoholic liquor for human consumption	206C(1)	1%	2%	No threshold
   Tendu leaves	206C(1)	5%	2%	No threshold
   Timber and other forest produce	206C(1)	2.5%	2%	No threshold
   Scrap	206C(1)	1%	2%	No threshold
   Minerals – coal, lignite, iron ore	206C(1)	1%	2%	No threshold
   Parking lot, toll plaza, mining and quarrying (lease/licence)	206C(1C)	2%	2%	No threshold
   Motor vehicle and notified luxury goods	206C(1F)	1%	1%	Value above ₹10 lakh
   LRS remittance for education funded by loan from a financial institution	206C(1G)	Nil	Nil	—
   LRS remittance for education (self-funded) or medical treatment	206C(1G)	5%	2%	Amount above ₹10 lakh
   LRS remittance for other purposes (investment, gifts, etc.)	206C(1G)	20%	20%	Amount above ₹10 lakh
   Overseas tour package	206C(1G)	5% up to ₹10 lakh; 20% above	2%	No threshold (from the first rupee)

   Note: TCS on sale of goods above ₹50 lakh (earlier section 206C(1H)) was withdrawn from 1 April 2025 and does not exist under the new Act. For purchases, TDS at 0.1% (earlier 194Q) applies.
4. Key Differences: 1961 Act vs 2025 Act
   • TDS rates and thresholds are largely the same. The higher thresholds introduced from 1 April 2025 (for example, ₹50,000 for professional fees, ₹50,000 per month for rent, ₹20,000 for commission, ₹10,000 for dividends) continue under the new Act.
   • TCS rates reduced: Liquor, scrap and minerals moved to a uniform 2%, tendu leaves came down from 5% to 2%, and LRS for education/medical from 5% to 2%. Overseas tour packages are now a flat 2% from the first rupee, with no ₹10 lakh limit.
   • Supply of manpower is specifically covered as “work” for contractor TDS at 1%/2%.
   • Interest on motor accident claims (MACT) awarded to individuals is no longer subject to TDS (earlier exempt only up to ₹50,000).
   • Property bought from NRIs: Resident buyers can deduct and deposit TDS using their PAN instead of obtaining a TAN.
   • Lower / nil deduction certificates can be issued through an automated, rule-based process where the eligibility conditions are met.
   • Correction statements for TDS/TCS returns can be filed only within two years from the end of the financial year in which the original statement was due.
   • Higher rates without PAN continue: Where the deductee/collectee does not furnish PAN, TDS/TCS applies at the prescribed higher rates (generally 20% for TDS). The special higher rate for non-filers of return (earlier sections 206AB and 206CCA) was withdrawn from 1 April 2025.
5. Due Dates (Unchanged)
   • Deposit: 7th of the following month (30 April for amounts deducted in March).
   • Quarterly statements: 31 July, 31 October, 31 January and 31 May. The TCS statement (Form 143) now has the same due dates as TDS, instead of the 15th of the month after the quarter.
   • Certificates: Within 15 days of the due date of the quarterly statement (salary certificate, Form 130, by 15 June).

What This Means for Businesses

• Update your accounting and TDS software with the new section references, forms and codes for all payments made from 1 April 2026.
• Sellers of liquor, scrap, minerals and tendu leaves must collect TCS at the revised 2% rate.
• Tour operators selling overseas packages must collect 2% TCS from the first rupee. Customers can claim this TCS as credit in their income tax return.
• Keep PAN details of all vendors and customers updated to avoid higher deduction or collection.
• Collect Form 121 declarations (earlier 15G/15H) from eligible depositors and payees at the start of the year.

Note: This article covers TDS and TCS for tax year 2026-27 under the Income-tax Act, 2025 as amended by the Finance Act, 2026, compared with the Income-tax Act, 1961 as applicable up to 31 March 2026. Under section 393 the provisions are arranged in tables; rates and thresholds should be read with the conditions and exceptions in the Act and the Income-tax Rules, 2026. This article is for general information only; please consult us for advice on specific transactions.