TDS Compliance Just Got a Makeover: Key Changes You Need to Know Under the New Income Tax Act 2025

India’s tax system has undergone a major overhaul after more than 60 years, with the introduction of the Income Tax Act, 2025 and Income Tax Rules, 2026. While tax rates remain broadly similar, TDS provisions, forms, and reporting systems have been significantly restructured.

The transition to the Income Tax Act, 2025, effective from April 1, 2026, brings a structural overhaul to the TDS/Tax compliance landscape in India.

1.  Critical Procedural Changes under TDS and Form 26AS

• Simplified Tax Timeline:

  
  

  The concept of "Financial Year/Assessment Year" is being phased out. All compliance now refers to the Tax Year (TY), making it easier for assessee to track their liabilities and credits.

• Expansion of Scope in Tax Credit Statement: 

  
  

  With the Income Tax Act, 2025, the traditional Form 26AS has been replaced by Form 168—and this is far more than just a change in name. Form 168 is no longer limited to being a simple TDS statement. Instead, it has evolved into a comprehensive financial diagnostic tool that provides a broader financial data in one place of taxpayers. it can now be seen as a “Financial Health Report Card -offering deeper insights into taxpayer’s clearer, more complete picture of their financial footprint.

• Real-Time Data Integration: 

  
  

  Reporting has moved from "static/periodic" to "real-time synchronization." Form 26AS now works in perfect tandem with the Annual Information Statement (AIS), ensuring that tax records are updated as soon as transactions are reported.

• Automated Lower/Nil Deduction: 

  
  

  The process for obtaining a lower or nil TDS certificate (previously Sec 197, now Sec 395) is moving to an automated electronic system. Eligible taxpayers can receive these certificates without manual Assessing Officer intervention based on predefined criteria.

• Centralized Digital Access: 

  
  

  Compliance is no longer fragmented. The new Act mandates a centralized interface via the Modernized E-Filing Portal, ensuring that taxpayers have a single, unified view of their tax obligations.

• Tax Audit Reporting: 

  
  

  Form 26 (the new tax audit report) now includes specific schedules (Clauses 49, 50, 51) requiring exact counts and monetary values for all TDS/TCS transactions, making reporting highly granular.

• Manpower Services: 

  
  

  Supply of manpower is now explicitly classified under "Work" (Section 393, corresponding to old 194C), with TDS rates set at 1% for individuals/HUFs and 2% for others.

• Property Transactions (NRI Sellers): 

  
  

  A major relief for resident buyers: from October 1, 2026, resident individuals and HUFs will not need to obtain a TAN to deduct TDS when buying property from a non-resident. The buyer's PAN will suffice.

2. TDS/TCS Payment Challan and Due Dates

a.     Unified Challan-cum-Statement:

Under the Income Tax Act, 2025, Form 141 is the new Unified Challan-cum-Statement for reporting and paying Tax Deducted at Source (TDS) on specific transactions. It serves as both the statement of deduction and the payment challan for specific resident transactions under Section 393(1).

It effectively consolidates the legacy forms (26QB, 26QC, 26QD, and 26QE) into one streamlined, schedule-based electronic form. The form is divided into four (4) schedules, each for a specific transaction:

Schedule	Transaction Type
Schedule A	Rent (earlier 26QC)
Schedule B	Property purchase (earlier 26QB)
Schedule C	Contractors/professionals (earlier 26QD)
Schedule D	Virtual digital assets (earlier 26QE)

 Taxpayer can only report one type of transaction per Form 141. If taxpayer have both rent and VDA payments in the same month, then must file two separate forms.

b.     Updated Challan ITNS 281N:

Challan 281  replaced by Challan ITNS 281N,  is the updated version of the standard TDS/TCS challan, introduced under the Income-tax Act, 2025, specifically for payments and deductions occurring on or after 1 April 2026, for high-volume challan for corporate and non-corporate entities. Hence, ITNS 281N is mandatory for all TDS/TCS payments under the new Act.

When use the new ITNS 281N challan, taxpayer must select the code (1001-1092) that corresponds to payment type. Here is a quick reference mapping of the most common TDS payments from the old 1961 Act to the new 2025 Act :-

Code Range	Category	New Section (2025 Act)	Filing Form
1001–1004	Salary & EPF	Section 392	Form 138  (replaces 24Q)
1005–1038	Resident TDS	Section 393(1)	Form 140  (replaces 26Q)
1039–1057	Non-Resident TDS	Section 393(2)	Form 144 (replaces 27Q)
1058–1067	Any Person TDS	Section 393(3)	Form 140 / 144
1068–1092	TCS Codes	Section 394	Form 143 (replaces 27EQ)

c. TDS/TCS Payment Due Dates

The timelines for payment and filing have remained largely consistent with the previous regime to ensure continuity for businesses.

• General Monthly Deadline: 7th of the month following the month of deduction.

• March Deductions: Extended to 30th April.

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  Quarterly TDS/TCS Return Due Dates

Quarter	Period	Due Date
Q1	April 1 – June 30	July 31
Q2	July 1 – Sept 30	October 31
Q3	Oct 1 – Dec 31	January 31
Q4	Jan 1 – March 31	May 31

3. Updated Forms and Certificates

  a. Structural Changes: 

Under the new Act, the entire sections of TDS/TCS provisions has been retired and consolidated into just three parent sections:

• Section 392: TDS on Salary.

• Section 393: TDS on non-salary payments (Residents & Non-residents).

• Section 394: TCS provisions.

b. Declaration for Non-Deduction of TDS

·         Unified Access:  Unlike the old system where age determined the form (15G for <60, 15H for 60+), Form 121 is now universal for all eligible resident individuals and HUFs to declare income below taxable limit.

·         Digital Integration: Once submitted, the payer reports the declaration in their quarterly TDS Statement (Form 140). The IT Department assigns a Unique Identification Number (UIN) to each Form 121, ensuring better tracking and transparency.

c. Updated TDS payment and reporting form

The nomenclature for forms has been updated to reflect the new legislative structure.

New Form No. (2025 Act)	Old Form No. (1961 Act)	Primary Purpose
Form 121	15G / 15H	Declaration for Non-Deduction of TDS
Form 130	16	TDS Certificate (Salary)
Form 131	16A	TDS Certificate (Non-Salary)
Form 133	27D	TCS Certificate
Form 137	24G	TDS/TCS Book Adjustment Statement
Form 138	24Q	Quarterly TDS Statement (Salary)
Form 140	26Q	Quarterly TDS Statement (Non-Salary)
Form 141	26QB/C/D/E	Challan-cum-statement for specified payments
Form 143	27EQ	Quarterly TCS Statement
Form 144	27Q	Quarterly TDS Statement (Non-Resident)
Form 145	15CA	Information for Non-Resident Payments
Form 146	15CB	Accountant Certificate for NR Payments
Form 168	26AS	Annual Tax Credit Statement

4. The “Must-Do” Checklist for TDS Compliance (Tax Year 2026–27 onwards)

Staying compliant under the new Income Tax Act, 2025 requires a more structured and proactive approach. Here’s a practical checklist every taxpayer and professional should follow:

✔ Verify the TAN details before filing TDS returns to avoid rejection or mismatches

✔ Understand the new TDS sections (392, 393, 394) and their applicability

✔ Update your accounting and payroll systems in line with new forms and formats

✔ Use the correct new TDS forms (Form 130, 131, 138, 140, 144, 141, etc.)

✔ Conduct a quarterly review of all TDS deductions and filings

✔ Regularly review Form 168 to ensure tax credits are correctly reflected

✔ Cross-check TDS data with AIS to detect discrepancies early

✔ Take immediate remediation action in case of mismatches or errors

✔ Track compliance deadlines carefully to avoid penalties

✔ Educate your team or clients about the transition to the new system

✔ Maintain proper documentation for all deductions and filings

✔ Plan ahead for TY 2026–27 transition to ensure smooth compliance

Sources:

  Income Tax Department of India – Notifications, circulars, and official updates on TDS provisions and new compliance framework

  Central Board of Direct Taxes (CBDT) – Policy guidelines, press releases, and rule-making authority for income tax laws

  Income Tax Act, 2025 – Primary legislation introducing revised TDS sections, forms, and reporting structure

  Income Tax Rules, 2026 – Detailed rules governing implementation of forms, procedures, and compliance requirements