Learning & Re-Learning Income Tax Act, 2025 - A Paradigm Shift in TDS & TCS Compliance – Effective 1st April 2026

 

Learning & Re-Learning Income Tax Act, 2025

A Paradigm Shift in TDS & TCS Compliance – Effective 1st April 2026

The Income Tax Act, 2025 introduces a transformational shift by consolidating TDS and TCS provisions into structured sections.

• Section 392 → TDS on Salary
• Section 393 → TDS on Other Payments
• Section 394 → TCS Provisions

📌 Result: A clean, logical, and classification-driven framework replacing scattered sections like 192, 194C, 194H, 206C, etc.

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New Structure vs Old Law

Particulars	Income Tax Act, 1961	Income Tax Act, 2025
Salary TDS	Section 192	Section 392
Other TDS	194 series	Section 393
TCS	Section 206C	Section 394
Approach	Section-based	Transaction-based
Compliance	Fragmented	Unified

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Section 392 – TDS on Salary

Section 392 governs deduction of tax on salary income.

Key Features

Particular	Provision
Applicability	Employer–Employee relationship
Basis	Estimated total income of employee
Deduction	Average rate of tax
Timing	At time of payment
Adjustments	Allowed during the year

Professional Insight

• Continuity of existing principle of estimated taxation
• Increased relevance of employee declarations & proofs
• Integration with new tax regime calculations

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Section 393 – TDS on Non-Salary Payments

Section 393 consolidates all major TDS provisions under one umbrella.

📌 Core Rule:
TDS applies at time of credit or payment, whichever earlier

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Important TDS Provisions – Tabular Snapshot

Based on Section 393 of the Income Tax Act, 2025, the following data table summarises the nature of expenses, their threshold limits, and the corresponding rates of TDS for payments made to residents and specified transactions.

TDS Table for Payments to Residents (Section 393(1))

Nature of Income or Sum	Payer Type	TDS Rate	Threshold Limit (per tax year unless noted)
Insurance Commission (soliciting/procuring policies)	Any person	Rates in force	₹20,000
Other Commission or Brokerage	Specified person	2%	₹20,000
Rent (General)	Person other than specified person	2%	₹50,000 per month
Rent (Machinery/Plant/Equipment)	Specified person	2%	₹50,000 per month
Rent (Land/Building/Furniture/Fittings)	Specified person	10%	₹50,000 per month
Transfer of Immovable Property (other than agricultural land)	Any person	1% of consideration or Stamp Duty Value (higher)	₹50 Lakhs
Compulsory Acquisition of Immovable Property	Any person	10%	₹5,00,000
Mutual Fund Units/Specified Company Income	Any person	10%	₹10,000
Distributed Income from Business Trust	Business Trust	10%	Nil
Interest on Securities	Any person	Rates in force	₹10,000
Interest (Bank/Co-op Bank/Post Office)	Bank/Co-op Bank/Post Office	Rates in force	₹1,00,000 (Senior Citizens); ₹50,000 (Others)
Interest (Other than Securities)	Specified person	Rates in force	₹10,000
Payment to Contractors (Standard)	Designated person	1% (Indiv/HUF); 2% (Others)	₹30,000 (Single sum); ₹1,00,000 (Aggregate)
Payment to Contractors/Professional Fees	Individual or HUF (Large)	2%	₹50 Lakhs
Fees for Technical Services (Non-professional)	Specified person	2%	₹50,000
Professional Fees (Standard)	Specified person	10%	₹50,000
Director Remuneration/Fees (not under head Salaries)	Specified person	10%	Nil
Dividends	Domestic company	10%	Nil
Life Insurance Policy Sum	Any person	2% (on income part)	₹1,00,000
Purchase of Any Goods	Buyer	0.1%	₹50 Lakhs
Business/Profession Benefit or Perquisite	Specified person	10%	₹20,000
E-commerce participant sale/services	E-commerce operator	0.1%	Nil
Virtual Digital Asset (VDA) transfer	Any person	1%	Nil

TDS Table for Payments to Any Person (Section 393(3))

This category applies to specific types of income regardless of the residency of the payee in some cases.

Nature of Income or Sum	Payer Type	TDS Rate	Threshold Limit
Winnings (Lottery/Puzzle/Card Games/Gambling)	Any person	Rates in force	₹10,000 (Single transaction)
Winnings from Online Games	Any person	Rates in force	Net winnings (as prescribed)
Winnings from Horse Race	Any person	Rates in force	₹10,000 (Single transaction)
Lottery Ticket Commission/Remuneration	Any person	2%	₹20,000
Cash Withdrawal	Bank/Co-op Bank/Post Office	2%	₹3 Crore (for Co-op societies); ₹1 Crore (Others)
Partner Salary/Remuneration/Interest	Firm	10%	₹20,000

Key Definitions for Threshold Compliance

• Specified Person: Generally refers to any person other than an individual or Hindu Undivided Family (HUF), unless that Individual/HUF's total sales or turnover exceeded ₹1 Crore (Business) or ₹50 Lakhs (Profession) in the preceding tax year.
• Non-furnishing of PAN: If the payee fails to furnish a valid PAN, tax is generally deducted at the higher of the prescribed rate, rates in force, or 20% (5% for VDA or goods purchase).

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Section 394 – Tax Collected at Source (TCS)

Section 394 consolidates all TCS provisions earlier covered under Section 206C.

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Key TCS Provisions – Tabular View

Table: Tax Collection at Source (TCS) Provisions Nature of Receipt Person Collecting (Collector) TCS Rate Threshold / Key Condition Alcoholic liquor for human consumption Seller 1% No threshold mentioned Tendu leaves Seller 5% No threshold mentioned Timber or other forest produce under lease Seller 2% No threshold mentioned Scrap or Minerals (Coal, lignite, iron ore) Seller 1% No threshold mentioned Motor vehicle or other notified goods Seller 1% Sale consideration exceeds ₹10 Lakhs Liberalised Remittance Scheme (LRS) Authorised dealer 5% (Education/Medical) or 20% (Others) Aggregate amount exceeds ₹10 Lakhs Overseas tour programme package Seller 5% (up to ₹10L) or 20% (above ₹10L) 20% rate applies to the aggregate amount exceeding ₹10 Lakhs Parking lot, toll plaza, or mine/quarry Licensor or Lessor 2% For business purposes (excludes mineral oil/gas) Important Compliance Notes from the Source: Time of Collection: Tax must be collected at the time of debiting the account of the buyer/licensee or at the time of receipt of payment (cash, cheque, draft, etc.), whichever is earlier. Exemption for Manufacturing: No tax is collected for items 1 to 5 if a resident buyer provides a declaration that the goods will be used for manufacturing, processing, or power generation, and not for trading. LRS and Overseas Tours: Tax collection under LRS is not required if the amount being remitted is a loan from a financial institution for education. Additionally, collection is not required for LRS or overseas tours if the buyer has already had tax deducted (TDS) under other provisions of the Act.

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Interplay Between TDS & TCS

Scenario	Applicable Provision
Both TDS & TCS applicable	TDS prevails
E-commerce transactions	Specific TDS applies
VDA transactions	Specific override rules

📌 Reference: Priority rules clearly defined under Section 393 notes

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No Deduction / Collection Cases

Situation	Impact
Payment to Government / RBI	No TDS/TCS
Declaration for Nil Income	No TDS
Small e-commerce sellers	Exempt up to ₹5 lakh
Certain interest payments	Exempt

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Professional Advisory – Way Forward

Action Points for Businesses

• Re-design TDS/TCS SOPs
• Update ERP / Accounting Software mapping
• Conduct client awareness sessions
• Re-evaluate contract structuring
• Train teams on table-based interpretation

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Conclusion

The Income Tax Act, 2025 brings a structured, simplified, and future-ready tax regime.

✔ No more section memorisation
✔ Focus on transaction understanding
✔ Reduced compliance errors
✔ Better advisory opportunities

This is the right time to shift from compliance mindset to strategic advisory positioning.

CA Sukanya Patankar (Sukannya Siingh)

+91 9921010284

www.eaztaxbiz.com

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Source & Reference

• Income Tax Act, 2025
  • Section 392 – Salary TDS
  • Section 393 – TDS Provisions
  • Section 394 – TCS Provisions