If you are a finance professional, CA, employer, or business owner, April 1, 2026 brought a change you cannot afford to ignore. The detailed comparison of old vs new TDS TCS sections reveals that India’s entire Tax Deducted at Source and Tax Collected at Source framework has been restructured under the Income Tax Act 2025, which replaces the Income Tax Act 1961 with effect from April 1, 2026.
The TDS and TCS changes in Income Tax Act 2025 are not about new taxes or higher rates — the rates largely remain unchanged. What has fundamentally shifted is the architecture: section numbers, form names, return formats, and payment codes are all new. For any payment made on or after April 1, 2026, using old section references (like 194C or 194J) in TDS returns will trigger system-level validation errors and compliance penalties.
This blog delivers the most comprehensive detailed comparison of TDS and TCS sections 1961 vs 2025 available — covering structural changes, section mappings, new forms, updated rates, transition rules, and a practical compliance checklist.
Table of Contents
Why Was the Income Tax Act 1961 Replaced?
The Income Tax Act 1961 served India for over six decades. In that time, it accumulated 819 sections and 14 schedules, layered with thousands of amendments, provisos, and explanations that made it notoriously difficult to navigate — even for tax experts.
The Income Tax Act 2025 has been designed to address this structural complexity head-on:
- Reduced volume: 536 sections and 16 schedules (down from 819 sections)
- Simplified language: Provisos and explanations integrated into main text
- Tables over text: Complex narrative provisions replaced with tables and formulas
- Cleaner rules: Income Tax Rules reduced from 511 rules with 399 forms to 333 rules with 190 forms
- No new taxes: The reform is entirely structural — same tax policy, cleaner presentation
One of the most visible terminology changes: the term “Previous Year” has been replaced by “Tax Year”, and the concept of “Assessment Year” has been discontinued. For Tax Year 2026-27, income earned during FY 2026-27 is assessed within the same year reference, eliminating the dual-year confusion that plagued the old system.
The Core Structural Shift: From 60+ Sections to 3 Sections
Under the Income Tax Act 1961, TDS provisions spanned Sections 192 through 194T — more than 60 separate sections, each covering a different payment type with its own thresholds, rates, and sub-clauses. The Income Tax Act 2025 consolidates all of this into just three parent sections:
| New Section | Coverage | Old Act Equivalent |
| Section 392 | TDS on Salary | Section 192 |
| Section 393 | TDS on all non-salary payments (residents & non-residents) | Sections 193–194T |
| Section 394 | Tax Collected at Source (TCS) | Section 206C |
Section 393 is the centrepiece of this restructuring. Instead of navigating dozens of standalone sections, deductors now refer to a single section organised as a structured table with serial numbers and numeric codes (1001–1067). Each row in the table corresponds to a specific payment type, carrying its own threshold, applicable rate, and unique code for TDS return filing.
This shift from section-based to code-based reporting is the single most impactful operational change for anyone filing TDS returns in Tax Year 2026-27.
Detailed Section-Wise TDS Comparison: Old Act vs New Act
The table below maps commonly used TDS sections from the Income Tax Act 1961 to their new equivalents under the Income Tax Act 2025.
Salary TDS
| Payment Type | Old Section (1961) | New Section (2025) | Rate |
| Salary income | Section 192 | Section 392(1) | As per slab |
| Accumulated PF balance | Section 192A | Section 392(7) | 10% |
| Premature PF withdrawal | Section 192A | Section 392(7) | 10% |
Interest & Securities TDS
| Payment Type | Old Section (1961) | New Section (2025) | Rate | Threshold |
| Interest on securities | Section 193 | Section 393(1) [Sl. No. 5(i)] | 10% | ₹10,000 |
| Interest other than securities – Senior Citizens | Section 194A | Section 393(1) [Sl. No. 5(ii).D(a)] | 10% | ₹1,00,000 |
| Interest other than securities – Others | Section 194A | Section 393(1) [Sl. No. 5(ii).D(b)] | 10% | ₹50,000 |
| Interest (other – general) | Section 194A | Section 393(1) [Sl. No. 5(iii)] | 10% | ₹10,000 |
Dividend, Lottery & Prize TDS
| Payment Type | Old Section (1961) | New Section (2025) | Rate | Threshold |
| Dividends | Section 194 | Section 393(1) [Sl. No. 7] | 10% | ₹10,000 (Individual) |
| Winning from lotteries/puzzles | Section 194B | Section 393(1) [Sl. No. 8(iv)] | 30% | ₹10,000 |
| Winning from horse races | Section 194BB | Section 393(1) [Sl. No. 8(v)] | 30% | ₹10,000 |
Contractor, Professional & Technical Fees
| Payment Type | Old Section (1961) | New Section (2025) | Rate | Threshold |
| Contractor payments – Individual/HUF | Section 194C | Section 393(1) [Sl. No. 6(i).D(a)] | 1% | ₹30,000 per transaction / ₹1,00,000 aggregate |
| Contractor payments – Others | Section 194C | Section 393(1) [Sl. No. 6(i).D(b)] | 2% | Same as above |
| Ind/HUF payments to contractors | Section 194M | Section 393(1) [Sl. No. 6(ii)] | 2% | ₹50,00,000 |
| Technical services fees | Section 194J(a) | Section 393(1) [Sl. No. 6(iii).D(a)] | 2% | ₹50,000 |
| Professional fees | Section 194J(b) | Section 393(1) [Sl. No. 6(iii).D(b)] | 10% | ₹50,000 |
| Director’s fees/commission | Section 194J(b) | Section 393(1) [Sl. No. 6(iii).D(b)] | 10% | Nil |
Rent & Property TDS
| Payment Type | Old Section (1961) | New Section (2025) | Rate | Threshold |
| Rent – Machinery (specified person) | Section 194I(a) | Section 393(1) [Sl. No. 2(ii).D(a)] | 2% | ₹50,000/month |
| Rent – Land/Building (specified person) | Section 194I(b) | Section 393(1) [Sl. No. 2(ii).D(b)] | 10% | ₹50,000/month |
| Property acquisition compensation | Section 194IA | Section 393(1) [Sl. No. 3(iii)] | 10% | ₹5 Lakh |
| JDA consideration (non-cash) | Section 194IC | Section 393(1) [Sl. No. 3(ii)] | 10% | Nil |
Commission, Insurance & Mutual Funds
| Payment Type | Old Section (1961) | New Section (2025) | Rate | Threshold |
| Insurance commission – Individual | Section 194D | Section 393(1) [Sl. No. 1(i)] | 2% | ₹20,000 |
| Insurance commission – Others | Section 194D | Section 393(1) [Sl. No. 1(i)] | 10% | ₹20,000 |
| Commission/brokerage – others | Section 194H | Section 393(1) [Sl. No. 1(ii)] | 2% | ₹20,000 |
| Mutual Fund units (resident) | Section 194K | Section 393(1) [Sl. No. 4(i)] | 10% | ₹10,000 |
Insurance, Goods Purchase & Virtual Assets
| Payment Type | Old Section (1961) | New Section (2025) | Rate | Threshold |
| Life insurance policy payout | Section 194DA | Section 393(1) [Sl. No. 8(i)] | 2% | ₹1 Lakh |
| Purchase of goods | Section 194Q | Section 393(1) [Sl. No. 8(ii)] | 0.1% | Excess of ₹50 Lakh |
| Virtual Digital Assets (VDA) | Section 194S | Section 393(1) [Sl. No. 8(vi)] | 1% | Specified threshold |
Non-Resident Payments
| Payment Type | Old Section (1961) | New Section (2025) |
| Payments to non-residents | Section 195 | Section 393(2) |
| Business trust income – interest | Section 194LBA | Section 393(1) [Sl. No. 4(ii)] |
| Investment fund income | Section 194LBB | Section 393(1) [Sl. No. 4(iii)] |
| Securitisation trust income | Section 194LBC | Section 393(1) [Sl. No. 4(iv)] |
TCS Sections: Old vs New
Under the old Act, Tax Collected at Source was governed entirely by Section 206C with its many sub-sections. The Income Tax Act 2025 consolidates all TCS provisions under Section 394, organised in a similar tabular format.
| Nature of Collection | Old Section (1961) | New Section (2025) |
| Sale of alcoholic liquor, forest produce, scrap, etc. | Section 206C(1) | Section 394(1) [Table entries] |
| Sale of motor vehicles above ₹10 Lakh | Section 206C(1F) | Section 394(1) [Corresponding table entry] |
| Foreign remittance under LRS | Section 206C(1G) | Section 394(1) [Corresponding table entry] |
| Overseas tour package | Section 206C(1G) | Section 394(1) [Corresponding table entry] |
| Sale of goods above ₹50 Lakh | Section 206C(1H) | Section 394(1) [Corresponding table entry] |
The same principle applies: the TCS provisions are now accessed through table entries within Section 394, with specific numeric codes used in TCS return forms instead of sub-section references.
New Form Names Under the Income Tax Rules 2026
This is where operational disruption is most likely. Every TDS/TCS form has been renamed under the Income Tax Rules 2026. Using old form names for Tax Year 2026-27 transactions renders certificates and returns technically non-compliant.
| Purpose | Old Form (1961 Act) | New Form (2025 Act) |
| Annual TDS certificate – Salary | Form 16 | Form 130 |
| TDS certificate – Non-salary | Form 16A | Form 131 |
| TCS certificate | Form 27D | Form 133 |
| Quarterly TDS return – Salary | Form 24Q | Form 138 |
| Quarterly TDS return – Non-salary (Residents) | Form 26Q | Form 140 |
| Quarterly TCS return | Form 27EQ | Form 143 |
| PAN-based TDS (property/rent/VDA/contractors) | Forms 26QB/C/D/E | Form 141 |
| Annual Information Statement | Form 26AS | Form 168 |
| Nil/Lower deduction declaration | Form 15G / 15H | Form 121 |
| Tax Audit Report | Form 3CA/3CB/3CD | Form 26 |
Critical note for employers: Issuing a document labelled “Form 16” for Tax Year 2026-27 salaries is non-compliant. The correct certificate is Form 130. Employees relying on the wrong form for their own returns may face mismatches on the e-filing portal.
New Payment Code System: What Replaces Section Numbers?
Under the old system, TDS returns referenced section numbers (194C, 194J, 194I, etc.) directly. Under the Income Tax Act 2025, TDS challans and return filings use numeric payment codes ranging from 1001 to 1067, each corresponding to a specific table entry in Section 393.
Sample Payment Code Mapping
| Payment Code | Old Section | Payment Type |
| 1004 | 192 | Accumulated PF balance due to employee |
| 1019 | 193 | Interest on securities |
| 1020 | 194A | Interest – Senior Citizen |
| 1021 | 194A | Interest – Others |
| 1023 | 194C | Contractor payment – Individual/HUF |
| 1024 | 194C | Contractor payment – Others |
| 1026 | 194J(a) | Technical services / call centre fees |
| 1027 | 194J(b) | Professional fees |
| 1029 | 194 | Dividends |
| 1030 | 194DA | Life insurance policy payout |
| 1031 | 194Q | Purchase of goods |
Important: Filing a TDS return with old section numbers (e.g., 194C or 194J) for payments made on or after April 1, 2026 will trigger validation errors at the TRACES/e-filing portal, requiring correction statements and causing compliance delays.
Key Substantive Changes in TDS/TCS Provisions
While the primary thrust of the 2025 Act is structural simplification, several substantive changes directly affect TDS/TCS compliance from April 1, 2026.
Manpower Supply Now Explicitly Covered
Earlier, whether deploying contract workers or labour supply services constituted a “works contract” under Section 194C was ambiguous. The Income Tax Act 2025 resolves this by explicitly including manpower supply services as “work” under the equivalent of old Section 194C (now Section 393). The applicable rates are 1% for Individual/HUF and 2% for all other cases. Businesses that were not deducting TDS on labour deployment contracts must correct this from April 1, 2026.
MACT Interest – Fully Exempt, No TDS Required
Interest awarded by the Motor Accident Claims Tribunal (MACT) to a natural person is now fully exempt from income tax. No TDS is to be deducted on such interest, and the earlier ₹50,000 ceiling no longer applies. Insurers and legal entities making such payments must update their systems.
CBDT Circulars Are Now Legally Binding
Under Section 400(2) of the Income Tax Act 2025, CBDT guidelines — including those on perquisites and virtual digital assets — now carry mandatory compliance weight for both tax authorities and deductors. The earlier argument that “CBDT circulars are only advisory” no longer holds from April 1, 2026.
Removal of ‘Assessment Year’ Terminology
The concept of “Assessment Year” has been removed. From Tax Year 2026-27 onwards, income is assessed in the same “Tax Year” it is earned. For TDS certificates and compliance documents, this means the reference period has changed from AY to TY.
Transition Cut-Off Rule
The Income Tax Act 2025 makes the transition boundary clear:
- Payments/credits on or before March 31, 2026 → governed by the Income Tax Act, 1961
- Payments/credits on or after April 1, 2026 → governed by the Income Tax Act, 2025
Pending assessments and proceedings under the old Act for earlier years remain valid and will continue under the 1961 Act framework.
TDS Rate Chart for Tax Year 2026-27 (Key Rates)
Note: TDS rates remain largely unchanged under the new Act. The following summarises key rates under the new section references.
| New Code | Nature of Payment | New Section | Rate | Threshold |
| 1019 | Interest on securities | 393(1) Sl. 5(i) | 10% | ₹10,000 |
| 1020 | Interest – Senior Citizens | 393(1) Sl. 5(ii).D(a) | 10% | ₹1,00,000 |
| 1021 | Interest – Others | 393(1) Sl. 5(ii).D(b) | 10% | ₹50,000 |
| 1023/1024 | Contractor payments | 393(1) Sl. 6(i) | 1%/2% | ₹30,000/₹1,00,000 |
| 1026 | Technical fees / call centre | 393(1) Sl. 6(iii).D(a) | 2% | ₹50,000 |
| 1027 | Professional fees | 393(1) Sl. 6(iii).D(b) | 10% | ₹50,000 |
| 1029 | Dividends | 393(1) Sl. 7 | 10% | ₹10,000 |
| 1030 | Life insurance payout | 393(1) Sl. 8(i) | 2% | ₹1,00,000 |
| 1031 | Purchase of goods | 393(1) Sl. 8(ii) | 0.1% | Excess of ₹50 Lakh |
| 1008 | Rent – Machinery | 393(1) Sl. 2(ii).D(a) | 2% | ₹50,000/month |
| 1009 | Rent – Land/Building | 393(1) Sl. 2(ii).D(b) | 10% | ₹50,000/month |
| — | Salary | 392(1) | As per slab | — |
| — | Non-resident payments | 393(2) | As applicable | — |
Transition Rules: What Applies When?
One of the most practically important aspects of this change is understanding the cut-off date rule set by the CBDT:
| Scenario | Applicable Law |
| TDS on payment made on or before March 31, 2026 | Income Tax Act, 1961 |
| TDS on payment made on or after April 1, 2026 | Income Tax Act, 2025 |
| TDS returns for Q4 FY 2025-26 (Jan–Mar 2026) | Old forms (24Q/26Q/27EQ), old section references |
| TDS returns for Q1 Tax Year 2026-27 (Apr–Jun 2026) | New forms (138/140/143), new payment codes |
| Pending assessments for AY 2023-24 and earlier | Continue under Income Tax Act, 1961 |
| Fresh notices issued on or after April 1, 2026 | Under Income Tax Act, 2025 framework |
| Form 15G/15H declarations valid beyond March 31, 2026 | New Form 121 format required |
Compliance Checklist for Deductors
Use this checklist to ensure your organisation is ready for TDS compliance under the Income Tax Act 2025:
- Update TDS software to support new section numbers, payment codes (1001–1067), and form names (Form 138, 140, 143, etc.)
- Retrain payroll and finance teams on new section references and form names — especially Form 130 in place of Form 16
- Review all vendor/contractor agreements to confirm TDS is being deducted using the correct new code
- Update manpower supply contracts — ensure TDS is now deducted on labour deployment services under Section 393
- Revise TDS certificate formats — employers must issue Form 130 (not Form 16) for TY 2026-27 salaries
- Update MACT payment workflows — no TDS to be deducted on MACT interest to natural persons
- Check Form 15G/15H declarations — these must be renewed in Form 121 format for TY 2026-27
- Reconcile AIS (Form 168) against new return formats to avoid mismatches
- Do not mix old and new references — payments before April 1, 2026 use old forms; payments from April 1, 2026 use new forms
Conclusion
The transition from the Income Tax Act 1961 to the Income Tax Act 2025 is the most significant structural overhaul of India’s direct tax law in over six decades. For TDS and TCS compliance, the change is sweeping: the old section-wise structure of 60+ sections has been consolidated into three parent sections (392, 393, and 394), every form has been renamed, and all return filings now use numeric payment codes instead of section references.
Crucially, the tax burden has not increased — the change is about clarity and compliance ease. But the operational impact is immediate and real. From April 1, 2026, every deductor must use the correct new forms, new section references, and new payment codes. Getting this wrong means validation errors, correction statements, and potential penalties.
The best preparation is three-fold: update your TDS software, retrain your compliance team, and verify your workflows using the mappings and checklists in this guide. The Income Tax Act 2025 is designed to make compliance simpler in the long run — but only for those who make the transition correctly.