Key Takeaways

TDS (Tax Deducted at Source) under the Income Tax Act, 2025 is governed by Sections 392–394 — the Act consolidates the earlier patchwork of Sections 192–206C into a streamlined table-driven structure.
Section 392 covers TDS on salary; Section 393 consolidates TDS on all other payments (interest, contracts, rent, professional fees, etc.) into a single section with a table of rates; Section 394 covers TCS (Tax Collected at Source).
Advance tax must be paid in 4 instalments under Sections 403–408 if total tax liability exceeds Rs. 10,000 in a Tax Year.
Sections 423/424/425 (formerly Sections 234A/234B/234C) impose mandatory interest for delays in filing, shortfall in advance tax, and deferment of instalments respectively.
All TDS/TCS details are reflected in Form 26AS and Annual Information Statement (AIS) — verify before filing returns.

Income Tax Act, 2025 — Key Structural Change: TDS provisions of the erstwhile Sections 192–206C of the Income Tax Act, 1961 have been consolidated into Sections 392–394 of the Income Tax Act, 2025. Section 392 handles TDS on salary; Section 393 uses a single section with a table for all non-salary TDS (replacing Sections 193, 194, 194A–194T, 195, etc.); Section 394 covers TCS (replacing Section 206C). Higher TDS for non-filers (formerly Section 206AB) is now embedded within the rates table of Section 393 itself. TCS on LRS threshold: Rs. 10 lakh before 20% TCS applies. TDS on partner payments (formerly Section 194T): Rs. 20,000 threshold, 10% rate, now incorporated in Section 393 table.

Key TDS Sections and Rates for AY 2026-27

Under the Income Tax Act, 2025, TDS on non-salary payments is governed by a single Section 393 with a comprehensive table. The old section-wise structure has been replaced with Sl. No. references within Section 393.

| Nature of Payment (Section 393 Table) | Threshold (Rs.) | TDS Rate | |---------------------------------------|-----------------|----------| | Salary (Section 392) | Basic exemption limit | Slab rates | | Dividend | 5,000/year | 10% | | Interest — Banks (Sl. No. for interest other than securities) | 40,000 (50,000 for senior citizens) | 10% | | Interest — Others | 5,000/year | 10% | | Lottery/crossword winnings | 10,000 | 30% | | Online gaming winnings | Net winnings at withdrawal/year-end | 30% | | Contractor payments — Single/Aggregate | 30,000 / 1,00,000 | 1% (Individual/HUF) / 2% (Others) | | Commission/brokerage | 15,000 | 2% | | Rent — Plant/Machinery | 50,000/month | 2% | | Rent — Land/Building/Furniture | 50,000/month | 10% | | Property purchase (> Rs. 50 lakh) | 50,00,000 | 1% | | Professional/Technical fees | 30,000/year | 10% (professional) / 2% (technical/call centre) | | Cash withdrawal from bank (> Rs. 1 crore) | 1,00,00,000 | 2% (filers) / 5% (non-filers for Rs. 20L+) | | E-commerce operator payments | 5,00,000/year | 1% | | Purchase of goods | 50,00,000/year | 0.1% | | Transfer of Virtual Digital Asset | 50,000 (specified person) / 10,000 (others) | 1% | | Payment to partners (salary, interest, etc.) | 20,000 | 10% | | Payment to non-resident (Sl. No. for payments to non-residents) | No threshold | Rates in Act / DTAA |

Higher TDS for non-filers: The rate for specified persons/non-filers who have not filed returns for two preceding years and whose TDS/TCS exceeded Rs. 50,000 in each year is embedded within the Section 393 table itself (formerly Section 206AB of the Income Tax Act, 1961).

Section 395 (formerly Section 197) provides for lower or nil deduction certificates, and Section 397 (formerly Section 200/203AA) governs TDS returns and annual tax credit statements.

TCS (Tax Collected at Source) — Section 394

Under the Income Tax Act, 2025, TCS provisions are consolidated under Section 394 (formerly Section 206C of the Income Tax Act, 1961).

| Transaction | TCS Rate | |-----------|----------| | Sale of scrap, minerals, tendu leaves | 1% to 5% | | Sale of motor vehicle > Rs. 10 lakh | 1% | | LRS remittance for education (loan from financial institution) | 0.5% above Rs. 10 lakh | | LRS remittance for education (other) | 5% above Rs. 10 lakh | | LRS remittance for medical treatment | 5% above Rs. 10 lakh | | LRS remittance for other purposes | 20% above Rs. 10 lakh | | Overseas tour package | 5% (up to Rs. 10 lakh) / 20% (above Rs. 10 lakh) | | Sale of goods > Rs. 50 lakh | 0.1% |

Advance Tax — Instalments and Due Dates (Sections 403–408)

Every person whose estimated tax liability for the Tax Year (after TDS) exceeds Rs. 10,000 must pay advance tax under the Income Tax Act, 2025 (Sections 403–408, formerly Sections 207–219 of the Income Tax Act, 1961).

Exception: Resident senior citizens (60+) with NO income from business/profession are exempt from advance tax.

| Instalment | Due Date | Cumulative % of Tax | |-----------|---------|-------------------| | 1st | 15th June | 15% | | 2nd | 15th September | 45% | | 3rd | 15th December | 75% | | 4th | 15th March | 100% |

Presumptive taxation (Section 58, formerly 44AD/44ADA/44AE): Entire advance tax to be paid in one instalment by 15th March.

Interest and Penalties

| Section (2025 Act) | Former Section (1961 Act) | Nature | Rate | Period | |--------------------|--------------------------|--------|------|--------| | 423 | 234A | Delay in filing return | 1% per month (part month = full month) | From due date to filing date, on tax due | | 424 | 234B | Short payment of advance tax (< 90% of assessed tax) | 1% per month | April to date of assessment | | 425 | 234C | Deferment of advance tax instalment | 1% per month (3 months per instalment) | For shortfall in each instalment | | 398 | 201(1A) | Late deposit of TDS | 1% per month (non-deduction) / 1.5% per month (deducted but not deposited) | From due date to deposit date | | — (merged into Sec 393) | 271C | Penalty for non-deduction of TDS | Amount equal to TDS not deducted | Levied by JCIT | | 427 | 234E | Late filing of TDS return | Rs. 200/day | Until the return is filed (max = TDS amount) |

Landmark Judgement

Case: Hindustan Coca-Cola Beverages Pvt. Ltd. v. CIT

Court: Supreme Court of India

Year: 2007

Ruling: The Supreme Court held that when the payee (recipient of income) has paid taxes on the income received, the payer (deductor) cannot be treated as an assessee-in-default under Section 398 of the Income Tax Act, 2025 (formerly Section 201(1) of the Income Tax Act, 1961) for non-deduction of TDS. However, the payer remains liable for interest under Section 398 for the period of delay. The deductor must demonstrate that the payee has included the income in their return and paid tax thereon.

Impact: This ruling provides significant relief to deductors who inadvertently fail to deduct TDS. While the TDS demand itself can be quashed if the payee has paid tax, interest liability remains. Taxpayers should obtain certificates or proof of tax payment from payees to substantiate their defence before the Assessing Officer.

Worked Example - Advance Tax Computation

Ms. Ritu is a freelance consultant. Estimated income and tax for the Tax Year 2025-26 (old regime):

| Particulars | Amount (Rs.) | |------------|-------------| | Professional receipts (estimated) | 28,00,000 | | Expenses (estimated) | 8,00,000 | | Estimated business income | 20,00,000 | | FD interest | 1,50,000 | | Estimated Gross Total Income | 21,50,000 | | Less: Chapter VIII deductions (Sec 123 [80C equivalent]: 1,50,000 + Sec 126 [80D equivalent]: 50,000) | (2,00,000) | | Estimated Total Income | 19,50,000 |

Tax computation (Old Regime AY 2026-27):

| Slab | Tax (Rs.) | |------|----------| | Up to 2,50,000 | NIL | | 2,50,001 to 5,00,000 | 12,500 | | 5,00,001 to 10,00,000 | 1,00,000 | | 10,00,001 to 19,50,000 | 2,85,000 | | Total tax | 3,97,500 | | Add: Cess 4% | 15,900 | | Total tax liability | 4,13,400 | | Less: Estimated TDS (Section 393 on receipts, Section 393 on FD) | (2,50,000) | | Net tax payable (advance tax) | 1,63,400 |

Advance tax schedule (Sections 403–408):

| Instalment | Due Date | Amount (Rs.) | |-----------|---------|-------------| | 1st (15%) | 15 June 2025 | 24,510 | | 2nd (45%) | 15 Sep 2025 | 49,020 (cumulative 73,530) | | 3rd (75%) | 15 Dec 2025 | 49,020 (cumulative 1,22,550) | | 4th (100%) | 15 Mar 2026 | 40,850 (balance to 1,63,400) |

Any shortfall attracts interest under Section 425 (formerly Section 234C) at 1% per month for 3 months per instalment.

Expert Tip

CA Vrajkishor Changani says: Always verify your Form 26AS and AIS (Annual Information Statement) on the income tax portal before filing your return. Mismatches between TDS claimed and 26AS data are the most common reason for processing delays and demand notices. Under the Income Tax Act, 2025, TDS compliance is now governed by Sections 392–394 — the consolidation into fewer sections has not changed rates or due dates, but your compliance documents (TDS certificates, Form 16/16A) remain the same. If TDS is deducted but not reflected in 26AS, follow up with the deductor to file/correct their TDS return. For advance tax, slightly overpaying is always better than underpaying, as interest under Sections 424 and 425 adds up quickly.

Section Interconnect

Also read: Chapter 5 - Business & Profession (TDS defaults under the disallowance provisions cause expenditure disallowance)
Also read: Chapter 3 - Income from Salaries (TDS on salary under Section 392 is the employer's responsibility)
Also read: Chapter 7 - Income from Other Sources (TDS on interest and dividend under Section 393 affects this head)

Frequently Asked Questions

Q1: Can I claim TDS credit if the deductor has not deposited the TDS with the government?

Yes. Under Section 397 of the Income Tax Act, 2025 (formerly Section 199 read with Rule 37BA), you can claim TDS credit based on the TDS certificate (Form 16/16A) issued by the deductor. However, the credit may initially be denied during processing if 26AS does not reflect the entry. In such cases, file a grievance and follow up with the deductor to deposit the TDS. The Supreme Court in Hindustan Coca-Cola Beverages has clarified that the payee should not suffer for the deductor's default.

Q2: Is TCS adjustable against my income tax liability?

Yes. TCS paid or collected under Section 394 of the Income Tax Act, 2025 (formerly Section 206C) is treated as advance tax and is available as credit against your total tax liability for the Tax Year. It is reflected in your Form 26AS. You can claim the credit while filing your income tax return, similar to TDS credit.

Q3: What happens if I miss an advance tax instalment?

If you miss an instalment or pay less than the required cumulative percentage, interest under Section 425 (formerly Section 234C) is levied at 1% per month for 3 months (for the first three instalments) on the shortfall amount. For the last instalment (March), interest is for 1 month. Even if you pay the full tax later in the year, the instalment-wise shortfall still attracts Section 425 interest.

Disclaimer: This article is for educational purposes only and does not constitute legal or tax advice. Tax laws are subject to amendments. Please consult qualified CAs for advice specific to your situation.

Need help with TDS compliance, advance tax planning, or resolving 26AS mismatches? Our qualified CAs at DRSPV & Associates handle all TDS/TCS matters end to end. Chat with us on WhatsApp for immediate assistance.

TDS, TCS & Advance Tax - Complete Guide | Rates, Due Dates & Compliance [Income Tax Act, 2025]