Last Updated: May 2026 | By CA Gaurav Verma
The Income Tax Act, 1961 has been repealed and replaced by the Income Tax Act, 2025 (Act No. 30 of 2025). While the government describes it as a “simplification exercise,” a careful reading reveals several substantive changes in language, scope, definitions, threshold mechanisms, and rates across TDS/TCS provisions.
This article covers:
- Complete old-to-new section mapping with payment codes
- Section-by-section language comparison pointing out every major and notable change
- Rate revisions, new provisions added, old provisions removed
- Action items for deductors and clients
Part I: Structural Overview & Section Mapping
The ~30+ individual TDS sections (192 to 194T) have been consolidated into 3 umbrella sections:
Section 393 — TDS on all Non-Salary payments, organised into 3 Tables: Table 1 (Residents), Table 2 (Non-Residents), Table 3 (Any Person)
Section 394 — TCS (Tax Collected at Source), consolidated into a single table
Complete TDS Section Mapping: Old vs New (with Payment Codes)
Deductors must now use 4-digit Payment Codes (1001–1067) in challans and returns instead of old section numbers.
| Old Section | Code | Nature of Payment | Rate | Threshold | New Section |
|---|---|---|---|---|---|
| 192 | 1001/1002 | Salary | Slab Rates | As per slab | 392 |
| 192A | 1004 | EPF Withdrawal (taxable) | 10% | ₹50,000 | 392(7) |
| 194D | 1005 | Insurance Commission | 2% | ₹20,000 | 393(1) Sl.1(i) |
| 194H | 1006 | Commission / Brokerage | 2% | ₹20,000 | 393(1) Sl.1(ii) |
| 194M | 1007 | Commission by Ind/HUF (non-audit) | 2% | ₹50,00,000 | 393(1) Sl.1(iii) |
| 194I | 1008 | Rent – Plant & Machinery | 2% | ₹50,000/month | 393(1) Sl.2(ii).D(a) |
| 194I | 1009 | Rent – Land / Building | 10% | ₹50,000/month | 393(1) Sl.2(ii).D(b) |
| 194-IB | 1010 | Rent by Ind/HUF (non-audit) | 2% | ₹50,000/month | 393(1) Sl.2(iii) |
| 194-IA | 1011 | Transfer of Immovable Property | 1% | ₹50,00,000 | 393(1) Sl.3(ii) |
| 194LA | 1012 | Compensation – Acquisition of Property | 10% | ₹2,50,000 | 393(1) Sl.3(iii) |
| 193 | 1019 | Interest on Securities | 10% | ₹10,000 | 393(1) Sl.5(i) |
| 194A | 1020 | Interest – Senior Citizens | 10% | ₹1,00,000 | 393(1) Sl.5(ii).D(a) |
| 194A | 1021 | Interest – Others | 10% | ₹50,000 | 393(1) Sl.5(ii).D(b) |
| 194C | 1023 | Contractor – Individual/HUF | 1% | ₹30,000/₹1,00,000 | 393(1) Sl.6(i).D(a) |
| 194C | 1024 | Contractor – Others | 2% | ₹30,000/₹1,00,000 | 393(1) Sl.6(i).D(b) |
| 194J | 1026 | Technical Services / Royalty | 2% | ₹50,000 | 393(1) Sl.6(iii).D(a) |
| 194J | 1027 | Professional Services | 10% | ₹50,000 | 393(1) Sl.6(iii).D(b) |
| 194J | 1028 | Director Remuneration | 10% | No limit | 393(1) Sl.6(iii).D(b) |
| 194 | 1029 | Dividend | 10% | ₹5,000 | 393(1) Sl.7 |
| 194DA | 1030 | Life Insurance Payout (taxable) | 2% | ₹1,00,000 | 393(1) Sl.8(i) |
| 194Q | 1031 | Purchase of Goods | 0.1% | ₹50,00,000 | 393(1) Sl.8(ii) |
| 194S | 1037/1038 | Virtual Digital Assets | 1% | ₹50,000/₹10,000 | 393(1) Sl.8(iii) |
| 194R | 1033/1034 | Benefit / Perquisite | 10% | ₹20,000 | 393(1) Sl.8(iv) |
| 194O | 1035 | E-Commerce Transactions | 0.1% | ₹5,00,000 | 393(1) Sl.8(v) |
| 194B | 1058 | Winnings – Lottery/Crossword | 30% | ₹10,000 | 393(3) Sl.1 |
| 194BB | 1059 | Winnings – Horse Race | 30% | ₹10,000 | 393(3) Sl.2 |
| 194BA | 1060-1062 | Winnings – Online Games | 30% | Net winnings | 393(3) Sl.3/4/5 |
| 194N | 1063/1064 | Cash Withdrawal | 2% | ₹1 Cr/₹3 Cr | 393(3) Sl.6 |
| 194T | 1067 | Payment to Partner | 10% | ₹20,000 | 393(3) Sl.7 |
Part II: Substantive Language & Provision Changes
While the government says it is “largely a simplification exercise with no policy change,” our section-by-section analysis reveals several important changes in how TDS/TCS operates under the new Act.
MAJOR = Rate change, threshold mechanism change, provision added/removed
NOTABLE = Change in definition, scope, or applicability
NO CHANGE = Structural consolidation only
1. Cash Withdrawal: Old Sec 194N → New Sec 393(3) Sl.6 MAJOR
| Old Act (Section 194N) | New Act (Section 393(3) Sl.6) |
|---|---|
| TDS @2% on the amount EXCEEDING Rs. 1 Crore (for ITR filers). For non-filers: 2% on amount exceeding Rs. 20 Lakh; 5% on amount exceeding Rs. 1 Crore. Distinction based on ITR filing status of the recipient. |
TDS @2% on the ENTIRE / WHOLE amount of cash withdrawn once aggregate exceeds Rs. 1 Crore (Rs. 3 Crore for co-operative societies). ITR filer / non-filer distinction REMOVED. Uniform rate of 2% on the whole sum — not just the excess. |
Practical Impact — Example:
| Scenario | Old Act TDS | New Act TDS |
|---|---|---|
| Cash withdrawal of Rs. 1.20 Crore by an ITR filer | 2% of Rs. 20 Lakh (excess over Rs. 1 Cr) = Rs. 40,000 | 2% of Rs. 1.20 Crore (entire amount) = Rs. 2,40,000 |
| TDS liability increases 6x in this example. However, the 5% penalty rate for non-filers is also removed. | ||
2. Contractor Payments — Definition of ‘Work’: Old Sec 194C → New Sec 393(1) Sl.6(i) MAJOR
| Old Act (Section 194C) | New Act (Sec 393(1) + Sec 402(47)) |
|---|---|
| ‘Work’ included manufacturing, supply of product, carriage of goods/passengers, catering. Manpower supply was NOT explicitly mentioned. This led to years of litigation with conflicting ITAT and High Court rulings. |
Section 402(47) now EXPLICITLY includes ‘supply of manpower’ in the definition of ‘work’. Conclusively settles the long-standing dispute. TDS on manpower/staffing contracts is now mandatory. |
3. Lottery / Gambling Winnings: Old Sec 194B → New Sec 393(3) Sl.1 MAJOR
| Old Act (Section 194B) | New Act (Section 393(3) Sl.1) |
|---|---|
| TDS @30% if AGGREGATE winnings during the financial year exceeded Rs. 10,000. Multiple small wins of Rs. 3,000 each totalling Rs. 12,000 would attract TDS on the entire Rs. 12,000. |
TDS @30% only if a SINGLE TRANSACTION exceeds Rs. 10,000. Multiple wins below Rs. 10,000 each will NOT attract TDS, even if aggregate is higher. |
Impact: Beneficial for persons with multiple small winnings. Casinos, lottery agents, and horse race clubs must now track per-transaction amounts, not annual aggregates.
4. Payment to Partners: Sec 194T → New Sec 393(3) Sl.7 ENTIRELY NEW PROVISION
| Old Act | New Act (Section 393(3) Sl.7) |
|---|---|
| NO TDS provision existed for any payment (salary, interest, bonus, commission) by a firm to its partners. Partners received their share without any source deduction. |
TDS @10% is now mandatory on salary, remuneration, commission, bonus, or interest paid by a firm/LLP to its partners, if aggregate exceeds Rs. 20,000 per year. |
5. TCS on Sale of Goods: Old Sec 206C(1H) REMOVED
| Old Act (Section 206C(1H)) | New Act |
|---|---|
| Seller to collect TCS @0.1% if sale consideration exceeded Rs. 50 Lakh. Created double compliance — buyer deducting TDS under 194Q AND seller collecting TCS under 206C(1H) on the same transaction. |
Section 206C(1H) has been REMOVED entirely. Only buyer-side TDS under Sec 194Q / 393(1) Sl.8(ii) continues. Sellers no longer collect TCS on sale of goods. |
Impact: Major relief for sellers — no TCS compliance on goods sold. Reduces paperwork and eliminates TDS/TCS priority confusion.
6. Summary of Rate Revisions RATE CHANGES
| Old Section | Nature of Payment | Old Rate | New Rate | Change |
|---|---|---|---|---|
| 194DA | Life Insurance Payout (income part) | 5% | 2% | Reduced |
| 194-IB | Rent by Individual/HUF (non-audit) | 5% | 2% | Reduced |
| 194H | Commission / Brokerage | 5% | 2% | Reduced |
| 194O | E-Commerce Operator Payments | 1% | 0.1% | Reduced (10x) |
| 194LBC | Securitisation Trust Income | 25%/30% | 10% | Reduced (uniform) |
| 194T | Partner Payments (NEW) | NIL | 10% | New provision |
| 194LD | Interest on Bonds (FPI/QFI) | 5% | REMOVED | Section deprecated |
7. Other Notable Language / Scope Changes NOTABLE
7.1 Definition of ‘Rent’ Expanded (Old 194I → Sec 402(38))
The old definition covered land, building, plant, machinery, equipment, furniture, fittings. The new Act explicitly adds ‘factory building’ and ‘appurtenant land’. Removes ambiguity on TDS for industrial/manufacturing premises rent.
7.2 Advertising Now Under Professional Services (Old 194J → 393(1) Sl.6(iii))
Under the old Act, advertising payments were not specifically listed under professional/technical services. The new Act explicitly includes ‘advertising’ within the scope of professional services. TDS @2% (technical) or @10% (professional) is now clearly applicable.
7.3 Co-operative Bank Exemption Removed (Old 193 → 393(1) Sl.5(i))
Old Act: Both ‘banking companies’ and ‘co-operative societies engaged in banking’ were exempt from TDS on interest on securities. New Act: Exemption limited to ‘banking companies’ only. The reference to co-operative societies has been deleted. Co-operative banks must now deduct TDS.
7.4 MACT Interest — Full Exemption (Old 194A(3)(ix)/(ixa))
Old Act had a complex dual provision: interest credited by MACT was exempt, but TDS was required when interest was paid if aggregate exceeded Rs. 50,000. New Act: MACT interest to a natural person is fully exempt from income tax. No TDS at all. The credit-vs-payment confusion is eliminated.
7.5 Uniform Threshold for Interest on Securities (Old 193)
Old Act had varying thresholds — Rs. 10,000 for listed debentures, Rs. 5,000 for others. New Act: Single uniform threshold of Rs. 10,000 for all types of interest on securities.
7.6 CBDT Guidelines Now Explicitly Binding (Sec 400(2))
Under the old Act, binding nature of CBDT guidelines on deductors was debatable. New Section 400(2) explicitly makes CBDT guidelines binding on both tax authorities AND deductors/collectors. Non-compliance can now attract consequences.
7.7 Section 194LD — Removed
Section 194LD provided a concessional 5% TDS on interest from specified bonds payable to FPIs/QFIs. This section has been removed entirely. Such payments are now governed by general non-resident provisions under Section 393(2) and applicable DTAA rates. FPIs should review their tax position.
New Form Numbers (w.e.f. 01.04.2026)
| Old Form | New Form | Purpose |
|---|---|---|
| Form 24Q | Form 138 | TDS Return – Salary |
| Form 26Q | Form 140 | TDS Return – Non-Salary (Residents) |
| Form 27Q | Form 144 | TDS Return – Non-Residents |
| Form 27EQ | Form 143 | TCS Return |
| Form 16 | Form 130 | TDS Certificate – Salary |
| Form 16A | Form 131 | TDS Certificate – Non-Salary |
| Form 26QB/QC/QD/QE | Form 141 | Challan-cum-Statement |
| Form 15G / 15H | Form 121 | Declaration for Non-Deduction |
| Form 13 | Form 128 | Certificate for Lower/Nil Deduction |
| Form 15CA | Form 145 | Foreign Remittance Information |
| Form 15CB | Form 146 | CA Certificate for Foreign Remittance |
| Form 26AS | Form 132 | Annual Tax Statement |
TCS Rate Changes (Section 394)
All TCS provisions (old Section 206C) are now under Section 394. Most rates are unchanged, but a few notable revisions:
| Old Section | Nature | Old Rate | New Rate | Remark |
|---|---|---|---|---|
| 206C(1) | Tendu Leaves | 5% | 2% | Reduced |
| 206C(1G) | Overseas Tour Package | 5%/20% | 2% | Reduced (flat) |
| 206C(1G) | LRS – Education (no loan) | 5% | 2% | Reduced |
| 206C(1G) | LRS – Medical | 5% | 2% | Reduced |
| 206C(1G) | LRS – Education (loan) | 0.5% | 2% | Increased |
| 206C(1H) | Sale of Goods (> Rs. 50L) | 0.1% | REMOVED | Abolished |
| 206C(1) | Scrap | 1% | 1% | No change |
| 206C(1) | Minerals (coal, iron ore) | 1% | 1% | No change |
| 206C(1G) | LRS – Others (> Rs. 10L) | 20% | 20% | No change |
| 206C(1F) | Motor Vehicle (> Rs. 10L) | 1% | 1% | No change |
Action Items for Clients
- Cash-intensive businesses: Re-calculate TDS on cash withdrawals. TDS now applies on the ENTIRE amount, not just the excess over threshold. Budget for significantly higher TDS outflow.
- Partnership firms / LLPs: Implement TDS @10% on all partner payments (salary, interest, bonus) exceeding Rs. 20,000. Obtain TAN if not already held.
- Manpower supply engagements: TDS under contractor provisions is now mandatory on manpower supply contracts. No scope for dispute from 01.04.2026.
- Sellers of goods (> Rs. 50L): Stop collecting TCS under 206C(1H). Only buyer-side TDS under 194Q applies now.
- E-commerce sellers: Benefit from reduced TDS rate (1% to 0.1%). Verify your platform is applying the correct rate.
- Co-operative banks: New obligation to deduct TDS on interest on securities. Review compliance requirements urgently.
- Individual tenants (non-audit): TDS on rent reduced from 5% to 2%. Ensure correct rate is applied from April 2026.
- FPIs with Indian bond investments: Review tax position in light of 194LD removal. Assess applicable DTAA rate.
- Update ERP/accounting software to new Payment Codes (1001–1067) and new Form numbers (138, 140, 144, 143).
- All deductors: CBDT guidelines are now explicitly binding. Monitor and comply with all CBDT circulars on TDS/TCS.
