What replaces Section 194C from 1 April 2026?

Section 194C of the Income Tax Act, 1961 is replaced by Section 393(1) of the Income Tax Act, 2025. Payments to resident contractors now use payment code 1005 for individuals and HUFs (1% rate) and code 1006 for companies and others (2% rate). Manpower supply services are now explicitly covered under this provision.

What is the new section number for professional fees TDS from April 2026?

Section 194J is replaced by Section 393(1) of the Income Tax Act, 2025. Professional fees, royalty, and non-compete fees use payment code 1027 at 10%. Technical services use payment code 1026 at 2%. The threshold remains Rs. 30,000 per year.

What form replaces Form 16 from Tax Year 2026-27?

Form 16 is replaced by Form 130 under the Income Tax Rules, 2026. Form 130 can only be generated through the TRACES portal after the quarterly Form 138 return (which replaces Form 24Q) is filed. Any employer issuing a document labelled Form 16 for Tax Year 2026-27 is issuing a non-compliant certificate.

What form replaces Form 26Q for non-salary TDS returns from April 2026?

Form 26Q is replaced by Form 140 under the Income Tax Rules, 2026. Form 140 covers TDS under Section 393(1) for non-salary payments to resident payees. Form 27Q for non-residents is now Form 144. Form 27EQ for TCS is now Form 143.

What replaces Section 194H commission TDS from 1 April 2026?

Section 194H is replaced by Section 393(1) of the Income Tax Act, 2025, payment code 1016. The rate remains 5% and the threshold remains Rs. 15,000 per year. This covers agent commissions, broking fees, referral fees, and insurance agent commissions.

Has Section 206C(1H) TCS on sale of goods been removed?

Yes. Section 206C(1H) which required sellers to collect TCS on sale of goods above Rs. 50 lakhs has been removed under the Income Tax Act, 2025. The purchase of goods TDS provision under old Section 194Q continues under Section 393(1), code 1049, at 0.1% on purchases exceeding Rs. 50 lakhs. The overlap between TCS and TDS on goods transactions has been eliminated.

What is the new section for salary TDS from April 2026?

Salary TDS previously under Section 192 is now covered under Section 392 of the Income Tax Act, 2025. The methodology remains unchanged — slab-wise calculation on estimated annual income. The quarterly return changes from Form 24Q to Form 138, and the annual certificate changes from Form 16 to Form 130.

Which law applies to TDS on a payment credited before 31 March 2026 but paid after 1 April 2026?

The Income Tax Department has confirmed that the applicable law depends on the event of credit or payment, whichever is earlier. If the earlier event is on or before 31 March 2026, the Income Tax Act, 1961 applies and old section numbers must be quoted. If the earlier event is on or after 1 April 2026, the Income Tax Act, 2025 applies and new section references and payment codes must be used.

TDS Section Changes from 1 April 2026: Old vs New Reference Guide for India Businesses

CA Siddhartha Agrawal
19 hours ago
3 min read

Updated: 7 hours ago

If your accounts team filed TDS returns last month using Section 194C, 194J, or 194H, those were the last returns under a law that no longer exists. The Income Tax Act, 1961 stood repealed on 31 March 2026. From 1 April 2026, every TDS deduction, every challan, and every return for Tax Year 2026-27 falls under the Income Tax Act, 2025 — with new section numbers, new form names, and new payment codes.

The good news: the rates and thresholds have not changed. What has changed is everything around them — the section references, the challan codes, the return forms, and the TDS certificates. Quoting old section numbers for April 2026 transactions will generate system validation errors on the income tax portal. Here is a plain-language reference for the sections your business uses every day.

The Big Picture: Three Sections Replace Sixty

The Income Tax Act, 1961 had over 60 individual TDS sections — from Section 192 through 194T — each with its own rate, threshold, and provisos. Six decades of amendments had made the framework genuinely difficult to navigate. The Income Tax Act, 2025 consolidates everything into three parent sections.

Section 392 covers salary TDS. Section 393 covers all non-salary TDS payments — to residents, non-residents, and any-person categories — organised in a tabular format. Section 394 covers all TCS provisions. Within Section 393, payments are identified not by section number but by a numeric payment code system — codes 1001 to 1092 — that your TDS software must now use in all challans and returns.

Section-by-Section Reference: Old vs New

Below is a practical mapping of the most commonly used TDS and TCS sections — what they were under the 1961 Act and what replaces them under the 2025 Act for transactions from 1 April 2026.

Form and Return Changes — Quick Reference

The Transition Rule — Which Law Applies to Which Payment

The Income Tax Department has confirmed the governing principle:

TDS applicability depends on the event of credit or payment, whichever is earlier. If that earlier event falls on or before 31 March 2026, the Income Tax Act, 1961 applies — use old section numbers even if the return is filed after April 2026. If that earlier event falls on or after 1 April 2026, the Income Tax Act, 2025 applies — use new section references and payment codes.

Practical example: a professional fee credited on 28 March 2026 but paid on 5 April 2026. The earlier event is 28 March 2026. The 1961 Act applies. Quote Section 194J in the Q4 FY 2025-26 return. A professional fee credited on 2 April 2026 and paid on 10 April 2026. The earlier event is 2 April 2026. The 2025 Act applies. Quote Section 393 with the correct payment code in Form 140 for Q1 Tax Year 2026-27.

What Your Accounts Team Must Update Now

Update your TDS software or ERP to the new payment codes — any software that has not been updated for the Income Tax Act, 2025 will generate wrong codes automatically.

Update your vendor master — map each vendor to the correct payment code based on the nature of payment.

Update your salary system — Form 138 reference must replace Form 24Q in all communications and filings. Inform your employees — Form 130 replaces Form 16.

Employees who ask for Form 16 for Tax Year 2026-27 should be issued Form 130 from TRACES only.

Review manpower supply contracts — TDS is now explicitly mandatory on worker deployment invoices under the new Act.

If you have not been deducting, start from April 2026 immediately.

Assessment Year Is Now Tax Year

One final terminology change worth noting: the Income Tax Act, 2025 removes the distinction between Financial Year and Assessment Year. Both are replaced by Tax Year. Income earned in Tax Year 2026-27 (April 2026 to March 2027) is filed in Tax Year 2027-28. When making TDS challans and payments on the e-filing portal, ensure you select Tax Year and not Assessment Year for April 2026 onwards — the portal supports both simultaneously, so selecting the wrong reference will create reconciliation issues.

The transition from the Income Tax Act, 1961 to the Income Tax Act, 2025 is the most significant structural change to India's tax framework in over 60 years. The rates have not changed. The compliance obligations have not changed. What has changed is the language, the codes, and the forms. Get your software updated, update your vendor master, and file Q1 Tax Year 2026-27 returns using the new payment codes. If you need help structuring your accounting system for the new TDS framework or reviewing your vendor TDS classifications, book a free consultation with our team.