TDS Under the Income Tax Act, 2025: What Has Really Changed in Deduction, Deposit, Returns and on TRACES

Most of the noise around the new Income-tax Act, 2025, has gone to the income tax side. New structure, the Tax Year, ITR forms, slabs. The TDS portion has received far less attention, and that is a mistake, because TDS is the part that touches a deductor from the very first payment of the new year. By the time you realise something has changed, the challan is already wrong.

Let me say at the outset what everybody keeps saying, because it is half true. The rates have not changed. Thresholds, by and large, have not changed either. But almost everything you use to apply those rates has been redrawn. The section you quote, the challan you generate, the return you file, the certificate you issue, even the portal you log into. So when a client tells me "but you said nothing changed", I correct him. The policy did not change. The plumbing did.

I am writing this from the deductor's chair, the way I have been explaining it across my clients since April. Basics first, then the points that are actually causing trouble.

The 194 series is gone

Under the 1961 Act, TDS was spread over sixty-odd sections, 192 to 194T, each carrying its own threshold and rate. Anyone who has practised for ten years knows how messy that chapter had become.

The 2025 Act puts all of it under three sections.

Section 392 is salary (the old 192). Section 393 is everything else, and I mean everything – contractor, professional, rent, commission, interest, dividend, e-commerce, even virtual digital assets. Residents come under 393(1) and 393(3), non-residents (the old 195) under 393(2). Section 394 is TCS, replacing 206C.

So the whole 194-series as a referencing language is finished. A contractor payment is not "194C" anymore. It is a table item under 393. You will have to unlearn fifteen years of habit here, and so will your staff.

One more thing to tell clients before anything else, because it sits on every form and every challan now. Assessment Year is gone. We work with a single Tax Year, which is simply the financial year. Income of Tax Year 2026-27 is filed in 2027-28. On paper it is only a naming change. In practice every dropdown on the portal asks for Tax Year, and a wrong selection there is a genuine problem, not a cosmetic one.

Deduction - A few real changes, not just renaming

This is where I have to push back hardest on the "nothing changed" line, because some of these are substantive.

Manpower supply is finally settled. For years we fought over whether labour deployment was a works contract (lower rate) or a service (higher rate). The new Act simply includes manpower supply within the meaning of "work". So it goes at contractor rates, 1% for an individual or HUF and 2% for others. If your client was quietly not deducting on worker-deployment bills on the strength of that old ambiguity, that comfort is over from 1 April 2026.

Rent under the old 194IB has come down from 5% to 2%. Individuals and HUFs paying rent above ₹50,000 a month deduct at the lower rate now. This is a real rate cut hiding inside a "no rate change" Act, and a salaried client paying high rent will simply not know unless you tell him.

Form 15G and 15H have been merged. The age-based distinction is gone. There is now one combined declaration for nil deduction, notified as Form 121. Banks and other payers will have to change their declaration formats.

For NRI property deals, the buyer no longer needs a separate TAN. When a resident buys immovable property from a non-resident, the buyer's PAN now serves for deduction and deposit. That removes a real headache that used to hold up such transactions.

Section 194LD has been withdrawn altogether. And 206AB / 206CCA, the higher-rate-for-non-filers provisions, are also gone, which means the monthly non-filer check many finance teams had bolted on to their TDS process can be dropped. One less loop to run.

It is also worth noting that CBDT guidelines are now binding. Section 400(2) restores their mandatory character on both the department and the deductor. The old line that "a circular is only advisory" will not work anymore, and that matters wherever perquisite valuation or VDA treatment is involved.

A caution that has nothing to do with the law and everything to do with cash flow. The deposit due dates have NOT moved. Rule 218 of the Income-tax Rules, 2026 (the successor of the old Rule 30) keeps the same timelines. 7th of the next month as a rule, and 30th April for tax deducted in March by non-government deductors. Nobody got extra time. Please do not let staff assume otherwise.

Depositing TDS - The new challan and the portal

This is the change clients actually see, because it is on the screen in front of them.

The deposit still happens through e-Pay Tax on the e-filing portal (incometax.gov.in). That part is old news, the shift away from the old OLTAS / NSDL challan happened earlier. What is new is that e-Pay Tax now opens with a question you never had before. A radio button asking which Act you are paying under.

You choose "Income Tax Act 1961" for everything up to AY 2026-27, and this includes the March 2026 deduction that you deposit in April. You choose "Income Tax Act 2025" for Tax Year 2026-27 onwards. Pick the wrong one and the entire flow below it will not match your transaction.

Under the new Act, the TDS / TCS challan is ITNS 281N. The old 281 survives only for 1961-Act payments. The flow runs e-File, then e-Pay Tax, select Income Tax Act 2025, New Payment, choose Tax Year 2026-27, the Pay TDS/TCS tile, and then the portal asks you for the deductee type (Company or Other than Company) and the residential status (Resident or Non-Resident), and only after that lets you pick the nature of payment under 392, 393(1), 393(2), 393(3) or 394(1).

Now read this part twice, because it catches everybody. You need a separate challan for each combination of deductee type and residential status. The old habit of putting everything into one 281 is finished. So a single month's deduction may now mean three or four challans where earlier there was one.

Where you earlier scrolled a dropdown of section numbers, you now pick from a numeric payment-code system, the 1001 series, which classifies the nature of payment and feeds both the challan and the return. The rate behind each code is the same rate you already apply. Only the way you point at it has changed. The exact code mapping is in the Income-tax Rules, 2026, and I would honestly tell every reader to confirm the precise code against the CBDT notification or an updated utility before locking the first filing. This is the exact spot where a small slip becomes a credit mismatch in the deductee's 26AS, and then you are doing correction returns.

For the challan-cum-statement cases, the old 26QB / 26QC type property and rent situations, the new instrument is Form 141, the challan-cum-statement of deduction under Section 393(1).

And one reassurance for clients who panic at the word "new portal". The modes of payment have not changed at all. Net banking, debit card, NEFT/RTGS, UPI, pay at bank counter, all still there. The department's own FAQ says this plainly. It is the classification that changed, not the way money moves.

Returns and the new form numbers

This is the table I now keep open while filing. Every quarterly return and every certificate has been renumbered under the Income-tax Rules, 2026.

The logic of each form is the same as before. Only the number on top has changed. But that small thing has consequences. If a payroll team issues a certificate headed "Form 16" for Tax Year 2026-27 salaries, it is technically issuing a wrong certificate, because the correct one is now Form 130. And it is the employee who suffers the mismatch when he files his own return. So a one-line note to every corporate client's HR is worth sending today.

Inside the returns, the payment is now reported through the 1001-series codes instead of the old section numbers. So Form 140 carries those codes where 26Q used to carry 194C, 194J and the rest.

I will be candid about the numbers in that table. 138, 140 and 143 are clear and consistent across the official mapping. The non-resident return number and the finer code references are the items I would still cross-check against the Rules and a certified utility before an actual client filing. This is a fresh notification, precision here costs nothing, and a wrong reference costs a correction.

TRACES has shifted, and your data has not disappeared

If you have not logged in since March, the first surprise is the address itself. The portal is now traces.tdscpc.gov.in. The old www.tdscpc.gov.in still redirects for now, but I would not depend on that redirect forever. Change the bookmark, and change it on every staff machine.

The login is simpler. The separate User ID field has been removed. Deductors log in with TAN and password plus captcha, taxpayers with PAN and password. Same credentials as before, no fresh registration, no reset.

The portal now works as a dual interface, and this is the part that frightens people into thinking their data is gone. The new homepage is built for the 2025-Act work, Tax Year 2026-27 onward. Everything from the old world, Form 16 and 16A downloads, Form 26AS, Conso files, Justification reports, online corrections, all your past filings, sits behind one button on that homepage called "Compliance under Income-Tax Act, 1961". Click it and the familiar old screen opens, data intact. So when a client calls in a panic that his 26AS has vanished, the answer is almost always, it is behind that button.

There is also a cleaner unified dashboard now, pulling 26AS, AIS and TDS credit into one view, smoother corrections, and a separate NRI portal at nriservices.tdscpc.gov.in. For our day-to-day work the takeaway is simple. FY 2025-26 work, including Q4 corrections and certificates, continues on the legacy interface. Only genuine new-Act work begins on the new one.

The one mistake to avoid

If you remember nothing else from this article, remember this. The date of payment or credit decides which Act applies. Not the invoice date, not the filing date.

Payment or credit up to 31 March 2026 falls under the 1961 Act. Old section numbers, the old 281 challan, old returns (24Q, 26Q, 27Q), old certificates (16, 16A). This holds even if you deposit the challan in April or file the return later. Your Q4 return for FY 2025-26 is an old-Act return, filed on the legacy interface, and that is that.

Payment or credit on or after 1 April 2026 falls under the 2025 Act. New sections, ITNS 281N, payment codes, Forms 138 / 140 / 144 / 143, certificates 130 / 131 / 133.

The classic trap is the March invoice paid in April. If the credit to the party was passed in March, the transaction stays under the old Act even though the money went out in April. Go by the earlier of payment or credit, not by whatever is convenient. And do not mix old-Act and new-Act transactions in one return, that is the surest route to a defective filing. Returns already filed under the old Act need not be touched. They stand as they are, the two regimes run side by side.

In closing

Frankly, the law here is the easy part. It is a relabelling, with a handful of real rate and scope changes folded in. The risk is operational, not conceptual. Get your TDS and payroll software updated and certified for the new sections, codes and form numbers before the first deduction of the year, not after. Brief the accounts staff on the Act-selection button and the separate-challan rule, because that is where the first month's errors will come from. Send HR a corrected certificate template. Update the bookmarks. And confirm the exact payment codes against the CBDT notification before you file.

The rates did not move. Everything you use to apply them did. Treat this quarter as a systems and training exercise, and the transition is quiet. Treat it as "nothing changed", and the portal will correct you, the hard way, on your first return.

This article is meant for general information and awareness only, and reflects the position as understood during the transition to the Income-tax Act, 2025 and the Income-tax Rules, 2026. It is not professional advice and must not be relied upon for any particular transaction. Section references, form numbers and payment codes are still settling through CBDT notifications and updated utilities, so readers should verify the applicable provisions, and confirm details with their own advisor or directly on the Income Tax and TRACES portals, before acting. The author and the firm accept no liability for any action taken on the basis of this article.