TDS & TCS Guide under Income-tax Act 1961 vs 2025
Consolidated TDS & TCS Guide under Income-tax Act 1961 vs Income-tax Act 2025
Updated & Expanded Guide — TDS & TCS with Limits and Rates (FY 2026-27)
From 1 April 2026, India’s re-enacted tax law — the Income-tax Act, 2025 — replaces the Income-tax Act, 1961 with a modernised and more consolidated framework. Key among these reforms is how Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) provisions are structured.
Instead of dozens of isolated sections in the old law, the new Act uses grouped sections with detailed tables covering rates, thresholds, payers/payees, and exceptions.
How the TDS/TCS Structure Has Changed
Under the Income-tax Act, 1961
- TDS: Sections 192, 193, 194… up to 194T
- TCS: Primarily Section 206C and its subsections
Under the Income-tax Act, 2025
- TDS:
- Section 392 – Salary & related
- Section 393 – All other payments (tables divided by payee type)
- TCS:
- Section 394 – TCS on receipts (single consolidated table)
This new structure makes the law easier to interpret and enforce.
PART A — Detailed TDS Comparison (with Limits & Rates)
Below is the expanded comparative table showing how each old TDS section maps into the new Act, along with the threshold / applicability limit and rate for FY 2026-27:
📌 Note: Salaries are taxed based on the normal slab rates applicable for FY 2026-27 (not a fixed TDS percentage). Employers deduct TDS as per chosen tax regime (Old or New).
| Income-tax Act 1961 | Nature of Payment | Income-tax Act 2025 | Limit (FY 2026-27) | TDS Rate (FY 2026-27) |
|---|---|---|---|---|
| 192 | Salary | Sec 392(1)–(6) | Calculated under income tax slabs | Variable, per income tax slab |
| 192A | PF/EPF balance | Sec 392(7) | Premature ₹50,000 or more | 10% |
| 193 | Interest on securities | Sec 393(1) Table Sl 5(i) | ₹10,000 | 10% (usual) |
| 194 | Dividends | Sec 393(1) Table Sl 7 | ₹10,000 | 10% |
| 194A | Interest (other than securities) | Sec 393(1) Table Sl 5(ii)/(iii) | ₹1 L (senior), ₹50k (others banks), ₹10k (others) | 10% |
| 194B | Lottery/crossword winnings | Sec 393(3) Table Sl 1 | ₹10,000 per transaction | 30% |
| 194BB | Horse race winnings | Sec 393(3) Table Sl 3 | ₹10,000 per transaction | 30% |
| 194BA | Online gaming | Sec 393(3) Table Sl 2 | As per net winnings | 30% |
| 194C | Contractor payments | Sec 393(1) Table Sl 6(i),(ii) | ₹30,000 single / ₹1,00,000 aggregate (certain payers) | 1% (Ind./HUF), 2% (others) |
| 194D | Insurance commission | Sec 393(1) Table Sl 1(i) | ₹20,000 | Rates in Force (often 2% for individuals) |
| 194DA | LIC maturity payouts | Sec 393(1) Table Sl 8(i) | ₹1,00,000 | 2% |
| 194E | Non-resident sportspersons | Sec 393(2) Table | No threshold | 20% |
| 194EE | NSS accumulations | Sec 393(3) Table Sl 6 | ₹2,500 | 10% |
| 194G | Lottery commission | Sec 393(3) Table Sl 4 | ₹20,000 | 2% |
| 194H | Commission / brokerage | Sec 393(1) Table Sl 1(ii) | ₹20,000 | 2% |
| 194I | Rent | Sec 393(1) Table Sl 2(i) | ₹6 L per year / ₹50,000 per month | 2% |
| 194IA | Property transfer | Sec 393(1) Table Sl 3(i) | More than ₹50,00,000 | 1% |
| 194IB | Rent by individual/HUF | Sec 393(1) Table Sl 2(ii) | ₹6 L per year / ₹50,000 pm | 10% |
| 194J | Fees for professional/technical services | Sec 393(1) Table Sl 6(ii),(iii) | ₹50,000 | 10% |
| 194K | Mutual funds/units | Sec 393(1) Table Sl 4(i),(ii) | ₹10,000 | 10% |
| 194LA | Land acquisition comp | Sec 393(1) Table Sl 3(iii) | ₹5,00,000 | 10% |
| 194LBA/194LBB | Trust income | Sec 393(1) Table | No threshold | 10% |
| 194LBC | Securitisation trust income | Sec 393(1) Table Sl 4(iv) | No threshold | 10% |
| 194M | Individual/HUF payments | Sec 393(1) Table Sl 6(i),(ii) | ₹50 L | 5% |
| 194N | Cash withdrawals | Sec 393(3) Table Sl 5 | Various thresholds (0.20–3 Cr bands) | 2%/5% |
| 194O | E-commerce operator TDS | Sec 393(1) Table Sl 8(v) | No threshold | 0.1% |
| 194P | Senior citizens | Sec 393(1) Table Sl 8(iii) | No threshold | As per slabs |
| 194Q | Purchase of goods | Sec 393(1) Table Sl 8(ii) | ₹50 L | 0.1% |
| 194R | Benefits/perquisites | Sec 393(1) Table Sl 8(iv) | ₹20,000 | 10% |
| 194S | Virtual Digital Assets | Sec 393(1) Table Sl 8(vi) | No threshold | 1% |
| 194T | Payment to partners | Sec 393(3) Table Sl 7 | ₹20,000 | 10% |
PART B — Detailed TCS Comparison (with Limits & Rates)
The TCS regime gets notable changes in Budget 2026, especially a move to a uniform 2 % rate on many categories — including scrap, minerals, alcoholic liquor, overseas tour programmes; and relaxing rates on educational & medical remittances under the Liberalised Remittance Scheme (LRS).
| Nature of Receipt | Old Section (1961) | New Law Ref (2025) | Limit (FY 2026-27) | TCS Rate | Key Change/Status |
| Alcoholic liquor | 206C(1)(i) | Sec 394 Item 1 | No threshold | 2% | Increased from 1% to 2% (Rationalization). |
| Tendu leaves | 206C(1)(ii) | Sec 394 Item 2 | No threshold | 2% | Reduced from 5% to 2%. |
| Scrap | 206C(1) | Sec 394 Item 4 | No threshold | 2% | Increased from 1% to 2%. |
| Minerals (Coal/Iron ore) | 206C(1) | Sec 394 Item 5 | No threshold | 2% | Increased from 1% to 2%. |
| Motor Vehicles | 206C(1F) | Sec 394 Item 6 | > ₹10 Lakh | 1% | No change in rate or threshold. |
| LRS (Education/Medical) | 206C(1G) | Sec 394 Item 7 | Above ₹10 Lakh | 2% | Reduced from 5% to 2%. |
| LRS (Other purposes) | 206C(1G) | Sec 394 Item 7 | Above ₹10 Lakh | 20% | Continues at 20% for non-essential remits. |
| Overseas Tour Packages | 206C(1G) | Sec 394 Item 8 | None | 2% | Major Change: Flat 2%, threshold removed. |
What the Updates Mean
✔ Many TCS rates simplified to 2 % for major categories.
✔ Education and medical LRS remittances benefit from reduced 2 % TCS.
✔ TCS Thresholds for remittances (₹10 L) continues.
Key Takeaways — Changes & Continuities
Structural Improvements
- TDS and TCS provisions moved into consolidated sections (Sections 392–394).
- Rates and thresholds are now clearer via tables.
Budget 2026 Highlights
- No change in income tax slabs for FY 2026-27.
- Several TCS rates simplified to 2 %.
Final Words
The Income-tax Act, 2025 is best understood as a structural overhaul rather than a complete rewrite of tax policy. With Budget 2026’s targeted rate rationalisation, the TDS and TCS landscape for FY 2026-27 becomes both simpler and more taxpayer-friendly — especially for families, service recipients, and businesses navigating cross-border spending or high cash-flow transactions.
Publishing this consolidated TDS & TCS reference on your site will be a high-value resource for businesses, professionals, and individual taxpayers alike.
Read More: Union Budget 2026 – CA Cult
