TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) require deductors and collectors to deduct or collect tax at prescribed rates, deposit it by the due dates, and file periodic returns. This technical reference explains the TDS/TCS compliance framework – deduction, deposit, returns and the consequences of default.
Under the Income Tax Act, 2025 (Tax Year 2026-27)
1. Executive Summary
The Income Tax Act, 2025 (Tax Year 2026–27) substantially restructures the TDS and TCS framework by consolidating withholding tax provisions under Sections 392, 393, and 394. This technical reference note provides a comparative mapping of key provisions, payment table codes, challan applicability, and compliance considerations relevant for deductors and tax professionals.
2. Operational Protocol: Challan & Payment Type
Taxpayers must distinguish between legacy and new framework obligations based on the date of deduction:
- Form ITNS 281N: Utilized for all withholding obligations arising under the Income Tax Act, 2025.
- Code 200 (TDS/TCS Payable by Taxpayer): Routine, self-calculated deposits.
- Code 400 (TDS/TCS Regular Assessment): Strictly for payments against formal demands or orders.
3. Indicative Mapping: Resident Withholding (Section 393)
The following table provides an indicative mapping of legacy provisions to the current consolidated framework. Reporting codes are based on currently available utility mappings and are subject to revision.
| Nature of Payment | Legacy Sec. | New Table Ref. | Indicative Code | Rate |
| Insurance Commission | 194D | T1, Sl. 1(i) | 1005 | 2% |
| Commission/Brokerage | 194H | T1, Sl. 1(ii) | 1006 | 2% |
| Rent (Plant & Mach.) | 194-I(a) | T2, Sl. 2(ii) | 1008 | 2% |
| Rent (Land & Build.) | 194-I(b) | T2, Sl. 2(ii) | 1009 | 10% |
| Property Purchase | 194-IA | T3, Sl. 3(i) | 1010 | 1% |
| Interest (Non-Sec) | 194A | T5, Sl. 5(ii) | 1020 | 10% |
| Contractor (Others) | 194C | T6, Sl. 6(i) | 1024 | 2% |
| Professional Fees | 194J(b) | T6, Sl. 6(iii) | 1028 | 10% |
| Purchase of Goods | 194Q | T8, Sl. 9 | 1055 | 0.1% |
4. TCS Framework & Unified Reporting
Under Section 394, significant rate rationalization has been implemented:
- Overseas Tour Packages: 2% (Subject to applicable surcharge/cess).
- LRS (Education/Medical): 2% (Threshold limits apply).
- Motor Vehicles (> 10L): 1%.
Proposed Form Equivalences:
- Form 138 (Salary Statement)
- Form 140 (Resident Non-Salary Statement)
- Form 143 (TCS Statement)
5. Non-Resident (NR) Framework
Withholding for Non-Residents under Section 393(2) is governed by Table NR. Taxability is determined by the nature of the asset and applicable DTAA provisions. Capital gains withholding on property sales must be calibrated as per applicable provisions of the Act/DTAA.
6. Professional Disclaimer
The table serial references, reporting codes, utility mappings, and form equivalences mentioned herein are indicative in nature and subject to change pursuant to CBDT notifications, schema updates, NSDL/TRACES utility revisions, and system-level implementation changes. This document does not constitute professional advice, and users are directed to refer to the official Bare Act and current CBDT circulars before taking any compliance action.
Further Learning Resources
For a practical walkthrough and a ‘Bare Act’ comparison of these structural changes, practitioners may refer to the analysis by CA Green Agarwal: https://www.youtube.com/watch?v=C6RWaQvwXG0
CA Green Agarwal
Co-Founder FylFlix – WFYI Technology
Frequently Asked Questions
What is the difference between TDS and TCS?
TDS is tax deducted by the payer on certain payments; TCS is tax collected by the seller on certain sales.
When must TDS be deposited?
Generally by the 7th of the following month, with a special date for March, as prescribed.
Which returns are filed for TDS/TCS?
Quarterly statements such as Form 24Q, 26Q, 27Q and 27EQ, depending on the payment type.
What happens on TDS/TCS default?
Interest, late fees and penalties apply, and the expense may be disallowed for non-deduction.
