TDS & TCS Rate Chart FY 2026-27: Every Rate That Changed from April 1, 2026
The new Income Tax Act 2025 renumbers every TDS section, replacing old Sections 192–206C with Sections 393 and 394. Budget 2026 also revised specific TCS rates, introduced a new TDS section for partner remuneration, and replaced Form 16 with Form 130. This guide covers every rate, every change, and every action you need to take.
The Biggest Change — All TDS Section Numbers Have Changed
The Income Tax Act 2025 consolidates all TDS and TCS provisions under a handful of new sections. Every ERP system, TDS software, and challan template that references old sections 192, 194A, 194C, 194H, 194I, 194J, 206C, and so on — will need to be updated before the first TDS payment of FY 2026-27. Using old codes in your quarterly TDS returns will trigger validation errors in the TRACES system.
The key mapping: most TDS sections are now under Section 393 of the ITA 2025. TCS provisions previously under Section 206C sub-sections move under Section 394. Salary under Section 192 moves under Section 392(7). This is an administrative change — the rates and thresholds themselves are largely unchanged, with targeted exceptions covered below. Our TDS Return Filing team has already updated all return templates and will ensure your Q1 FY 2026-27 returns are filed with the correct new codes.
Important: File your Q4 FY 2025-26 TDS return (due May 31, 2026) using the old section codes (194A, 194C etc.) — these still apply for the January–March 2026 quarter. The new Section 393/394 codes apply only from Q1 FY 2026-27 (April 2026 onwards).
TDS Rate Chart FY 2026-27 — Complete Section-Wise Reference
The table below is your complete TDS rate chart for FY 2026-27. Highlighted rows indicate sections or rates that changed in Budget 2026 or are new. For full compliance on payroll, refer to our Form 24Q (salary TDS returns) and Form 26Q (non-salary TDS returns) services. Note: PAN not provided = 20% TDS applies regardless of section rate.
| Payment Nature | Old → New Section | Rate | Threshold |
|---|---|---|---|
| Salary | 192 → 393 | As per slab | — |
| Lottery / Gambling / Online gaming | 194B, 194BA → 393 | 30% | ₹10,000 (no limit for online) |
| Dividends | 194 → 393 | 10% | ₹10,000 |
| Interest — Senior Citizens (60+) | 194A → 393 | 10% | ₹1,00,000 |
| Interest — Others | 194A → 393 | 10% | ₹50,000 |
| Rent — Land / Building / Furniture | 194I(b) → 393 | 10% | ₹50,000 / month |
| Professional fees | 194J → 393 | 10% | ₹50,000 |
| Technical services / call centre | 194J → 393 | 2% | ₹50,000 |
| Partner remuneration NEW | 194T → 393 | 10% | ₹20,000 |
| Contractor — Individual / HUF | 194C → 393 | 1% | ₹30,000 (single) / ₹1,00,000 (annual) |
| Contractor — Others (Manpower NEW) | 194C → 393 | 2% | ₹30,000 (single) / ₹1,00,000 (annual) |
| Commission / Brokerage — others ↓ | 194H → 393 | 2% | ₹20,000 |
| Rent — Plant / Machinery | 194I(a) → 393 | 2% | ₹50,000 / month |
| E-commerce operator | 194O → 393 | 1% | ₹5,00,000 |
| Immovable property purchase | 194IA → 393 | 1% | ₹50,00,000 |
| Purchase of goods | 194Q → 393 | 0.1% | ₹50,00,000 (per year) |
| Cash withdrawal | 194N → 393 | 2% / 5% | Above ₹1 Crore / ₹3 Crore |
| Virtual Digital Assets (Crypto) | 194S → 393 | 1% | ₹50,000 (specified) / ₹10,000 (others) |
NEW = Section 194T introduced for partner remuneration from April 1, 2025 (continues in FY 2026-27) • Manpower supply explicitly added to contractor definition under Budget 2026 • ↓ Commission rate revised from 5% to 2% in FY 2025-26, continues.
Forms RenumberedForm 16 is Now Form 130 — Update Before June 2027
One change that will catch many HR and payroll teams off-guard: the annual TDS certificate for salaried employees — historically Form 16 — is now called Form 130 under the Income Tax Act 2025. Form 16A (for non-salary TDS) becomes Form 131. Form 27D (TCS certificate) becomes Form 133. The content and structure of these forms remain largely the same — only the numbering has changed. However, any TDS certificate issued as Form 16 for Tax Year 2026-27 income will be technically non-compliant.
Practically, this affects payroll software, HR systems, and any template your organisation uses to issue certificates to employees and vendors. Your payroll vendor or software provider should release an update — verify this before the end of Q1 FY 2026-27. If you need assistance with salary TDS return filing or employee certificate issuance, our Business Tax Filing team handles this end-to-end for businesses of all sizes.
What Went Up & What Came Down — Budget 2026 TCS
Budget 2026 made targeted changes to TCS rates under what is now Section 394 of the Income Tax Act 2025 (replacing Section 206C). The changes go in both directions — some rates increased, others decreased significantly. Here is the complete picture:
| Transaction | Old → New Section | Old Rate | New Rate | Impact |
|---|---|---|---|---|
| Sale of Scrap | 206C(1) → 394 | 1% | 2% | Increased — manufacturing affected |
| Sale of Minerals (Coal, Iron Ore etc.) | 206C(1) → 394 | 1% | 2% | Increased — mining sector |
| Alcoholic Liquor | 206C(1) → 394 | 1% | 2% | Increased — liquor distributors |
| Overseas Tour Package | 206C(1G) → 394 | 5% / 20% | 2% | Reduced — single flat rate now |
| LRS — Education / Medical | 206C(1G) → 394 | 5% | 2% | Reduced — relief for students/patients |
| LRS — Other purposes | 206C(1G) → 394 | 20% | 20% | No change — above ₹10 lakh threshold |
| Motor Vehicle (> ₹10 lakh) | 206C(1F) → 394 | 1% | 1% | No change |
The most commercially significant reduction is the LRS overseas tour package TCS — previously 5% up to ₹10 lakh and 20% above, now a flat 2% for all amounts. This is a major cash flow improvement for travel businesses and their customers. On the other side, if your business sells scrap, coal, or minerals, your buyers now face 2% TCS — up from 1% — which you must collect and remit. Non-collection invites a penalty equal to the TCS amount under Section 271CA. Our Tax Health Check identifies TCS obligations that businesses often miss.
Other Key Changes5 Targeted TDS Changes from Budget 2026
Beyond section renumbering and the rate chart, Budget 2026 brought several targeted changes that affect specific taxpayer groups:
Partner Remuneration — Section 194T (now 393)
10% TDS on salary, bonus, interest, or commission paid to a partner exceeding ₹20,000 annually. Introduced from April 1, 2025 and fully operative in FY 2026-27. If your partnership or LLP has not been deducting TDS on partner drawings, this is a significant compliance gap. Contact our TDS Return Filing team immediately.
Manpower Supply Now Explicitly Under Contractor TDS
Budget 2026 resolves a long-standing ambiguity by explicitly including manpower deployment contracts under the contractor TDS provision. TDS on these services is 1% (individual/HUF) or 2% (others) — much lower than the 10% professional fees rate some assessees had been applying. If you have been deducting at the wrong rate, our Income Tax Notice team can help resolve any resulting notices.
No TDS on Motor Accident Tribunal Interest
Interest on compensation awarded by Motor Accident Claims Tribunals is now fully exempt from TDS — previously TDS applied if interest exceeded ₹50,000. This provides direct relief to accident victims and their families.
Form 15G / 15H — One Submission Via Depository
Investors can now submit Form 15G or 15H once to their depository (NSDL or CDSL) to prevent TDS on dividends across all their shareholdings. Previously, separate submissions to each company were required. File this early with your depository for FY 2026-27 via our Income Tax E-filing service.
Automated Lower TDS Certificates
The nil or lower deduction certificate process under Section 197 (now 393) is now rule-based and automated using AIS/TIS data. This significantly speeds up processing. If you have large payments subject to TDS and expect your final tax liability to be lower, apply early through our Lower Tax Deduction Certificate service.
8 Steps to Start FY 2026-27 Right
Use this checklist to ensure full TDS and TCS compliance from April 1, 2026. Our TDS and Tax Liability advisory team can handle any or all of these on your behalf.
Update ERP and TDS software with new section codes
Replace old Section 192–206C codes with new Section 393/394 codes before the first payment of FY 2026-27. Test with a dummy transaction before going live.
Issue Form 130 (not Form 16) to salaried employees
Form 16 is replaced by Form 130 for Tax Year 2026-27. Confirm with your payroll software vendor that the updated form templates have been deployed.
Start collecting TCS at 2% on scrap, minerals and alcoholic liquor
If applicable to your business, update invoicing software and inform buyers of the new rate effective April 1, 2026.
Deduct TDS on partner remuneration
Apply 10% TDS under Section 194T (now 393) if cumulative payments to any partner exceed ₹20,000 in FY 2026-27. Applicable for all partnership firms and LLPs.
Apply 2% TCS on overseas tour packages and LRS education / medical
Rate reduced from 5% — update your documentation, invoices, and customer disclosures accordingly.
Submit Form 15G / 15H once to depository
At the start of FY 2026-27 for dividend TDS exemption across your entire demat portfolio — one filing covers all companies.
File Q4 FY 2025-26 TDS return by May 31, 2026
Use the old section codes (192–206C) for the January–March 2026 quarter. New codes apply only from Q1 FY 2026-27.
Apply for lower / nil TDS certificate early
If large contract payments are expected. The automated system under Budget 2026 processes these faster — but apply before Q1 payments begin.
Getting TDS Right in FY 2026-27 Matters More Than Ever
Non-deduction of TDS is not just a compliance lapse — it results in disallowance of the expense under Section 40(a)(ia) of the Income Tax Act. If you deducted TDS at an old rate (e.g., 5% commission under old 194H instead of 2% under new 393), or missed the Section 194T requirement for partner remuneration, the Income Tax Department's TRACES system will flag the discrepancy when your TDS returns are filed. This triggers a Scrutiny Assessment notice and potential short-deduction demand with interest at 1.5% per month.
NRI sellers of property also see a simplified process — buyers now quote PAN instead of obtaining TAN for TDS deduction purposes. For NRI-related TDS, our NRI Tax Filing and 15CA-15CB Filing services cover all related compliance. Whether you need a quick TDS rate check or a full FY 2026-27 compliance review, our team at N D Savla & Associates is one call away at +91 9819 000 511.
The TDS rate chart for FY 2026-27 is largely the same — but the section numbers, form names, and a few targeted rates have changed significantly. Update your systems now, and your compliance will be seamless for the entire year.
N D Savla & Associates handles complete TDS return filing, lower deduction certificates, and TDS notices for businesses across Mumbai, Pune, Hyderabad, and Bengaluru.
Need help with TDS / TCS compliance for FY 2026-27?
N D Savla & Associates — Chartered Accountants, Mumbai
