What Changed in TDS and TCS Rules for FY 2026-27

The TDS and TCS Rules Changes for FY 2026-27 are particularly important because FY 2026-27 is the first full financial year in which the Income-tax Act, 2025 operates after replacing the Income-tax Act, 1961 from 1 April 2026. For businesses, employers, professionals, tax deductors, tax collectors, and taxpayers receiving payments subject to TDS or TCS, the transition means that several familiar section numbers, forms, reporting procedures, and TCS rates need to be updated.

• Explore: Corporate Tax Services

The biggest change is not that every TDS rate has been changed. In fact, many commonly used TDS rates and thresholds continue substantially unchanged. The major practical change is the reorganisation of TDS and TCS provisions into the new Act, along with revised forms, new section references, a shorter correction period, and selected TCS rate rationalisation.

The TDS and TCS changes for FY 2026-27 therefore need to be understood from two perspectives: first, what has actually changed in the law, and second, what businesses need to change in their accounting, payroll, ERP, invoicing and compliance processes.

This detailed guide explains the important changes in simple language, including the new section structure, new TDS forms, Form 130, TCS rate changes for scrap and specified minerals, overseas tour packages, LRS remittances, correction deadlines, transition from the old Act to the new Act, quarterly filing requirements, and practical steps businesses should take.

Important: The Income-tax Act, 2025 came into force from 1 April 2026. The Income Tax Department has also published the Income-tax Rules, 2026 and corresponding new forms and transition guidance. Businesses should therefore use the applicable law and forms based on the date of the underlying TDS/TCS transaction rather than simply changing the section number in older records.

• Also Read: Leave Encashment Tax Exemption Under Section 10(10AA) in India

At a Glance: TDS and TCS Changes for FY 2026-27

The following table provides a simple overview of the major changes that businesses should understand before processing transactions or filing their first quarterly statement for FY 2026-27.

Area	Earlier Framework	FY 2026-27 Position
Income-tax law	Income-tax Act, 1961	Income-tax Act, 2025
Effective date	Old Act applicable up to 31 March 2026	New Act applies from 1 April 2026
Resident TDS provisions	Spread across several sections	Consolidated primarily under Section 393
TCS provisions	Mainly Section 206C	Consolidated under Section 394
Salary TDS statement	Form 24Q	Form 138
Non-salary resident TDS statement	Form 26Q	Form 140
Non-resident TDS statement	Form 27Q	Form 144
TCS statement	Form 27EQ	Form 144A
Salary TDS certificate	Form 16	Form 130
TDS correction window	Subject to the earlier applicable limits	Two-year statutory window under new framework
Scrap TCS	1% under earlier framework	2%
Coal/lignite/iron ore TCS	1%	2%
Overseas tour package TCS	Tiered rates	Flat 2%
LRS education/medical TCS	5%	2%
LRS other purposes	20%	20%

The Income Tax Department’s official material confirms the revised TCS rates, including 2% for scrap, specified minerals, overseas tour programme packages and education/medical LRS remittances. 

Why FY 2026-27 Is Important for TDS and TCS Compliance

The transition to the Income-tax Act, 2025 is more than a change in the numbering of tax sections. It affects the way accounting teams identify transactions, prepare TDS/TCS data, select forms, maintain compliance records and correct errors.

Businesses that continue using old section numbers in new-period transactions may face processing issues even where the underlying tax rate and threshold remain unchanged. The Income Tax Department has specifically clarified that using an old section reference for a transaction governed by the new Act may result in processing errors and may require a correction statement.

This means that companies should update:

• Accounting software
• Payroll software
• ERP tax configurations
• TDS master data
• TCS master data
• Vendor payment workflows
• Employee payroll templates
• TDS certificates
• Internal compliance checklists
• Tax payment processes
• Return preparation utilities
• Finance team training material
• Audit documentation

The change is therefore operational as well as legal.

Income-tax Act, 2025 Replaces the Income-tax Act, 1961

The Income-tax Act, 2025 came into effect from 1 April 2026, making FY 2026-27 the first full financial year under the new law.

The Government introduced the new legislation with the objective of simplifying the structure of income-tax law and making the provisions easier to understand and administer. The Income Tax Department now provides separate resources for the Income-tax Act, 2025, Income-tax Rules, 2026 and the corresponding forms. 

For TDS and TCS compliance, this means that businesses must distinguish between:

Transactions governed by the Income-tax Act, 1961

and

Transactions governed by the Income-tax Act, 2025.

The transition is generally determined by the date on which the relevant TDS or TCS trigger occurs.

For TDS, where deduction is triggered by the earlier of credit or payment, the date of that triggering event is important. The Income Tax Department has specifically clarified that a payment or credit occurring before 1 April 2026 remains governed by the old Act, whereas a relevant payment or credit occurring on or after 1 April 2026 is governed by the new Act.

New TDS Section Structure Under the Income-tax Act, 2025

One of the most visible TDS and TCS Rules Changes for FY 2026-27 is the restructuring of section numbers.

Under the Income-tax Act, 1961, businesses became accustomed to sections such as:

• Section 192 for salary
• Section 194A for interest
• Section 194C for contractors
• Section 194H for commission
• Section 194-I for rent
• Section 194J for professional or technical services
• Section 194Q for purchase of goods
• Section 195 for certain payments to non-residents
• Section 206C for TCS

The new Act reorganises these provisions into a more consolidated framework.

Section 392 – Salary-Related TDS Framework

Section 392 primarily deals with TDS obligations relating to salary and certain specified payments.

Businesses should therefore update payroll systems so that salary deductions for FY 2026-27 are mapped to the relevant provisions under the new Act rather than continuing to use Section 192 as the operative section reference for new-period reporting.

The underlying salary taxation process does not become completely different simply because the section number has changed. However, the payroll team must use the correct new section references while preparing statements and certificates.

Section 393 – TDS on Other Payments

Section 393 is one of the most important provisions for businesses because it consolidates several TDS categories.

It covers different payment types, including relevant payments involving:

• Interest
• Commission
• Brokerage
• Contractor payments
• Professional services
• Rent
• Certain purchase transactions
• Certain payments to non-residents
• Other specified categories

The exact applicable sub-section and table entry depend on the nature of the payment.

This means that businesses should no longer treat old section numbers such as 194C, 194H or 194J as the operative legal reference for new-period transactions. Instead, the corresponding Section 393 entry should be identified.

The Income Tax Department’s transition guidance confirms that although the section references have changed, the substantive rate and threshold for many common TDS transactions remain unchanged.

Section 394 – TCS Under the New Act

The TDS and TCS changes for FY 2026-27 also include consolidation of Tax Collected at Source provisions.

Section 394 provides the TCS framework for specified transactions.

It covers categories such as:

• Specified goods
• Scrap
• Specified minerals
• Certain high-value goods
• LRS remittances
• Overseas tour programme packages
• Certain leasing or licensing transactions
• Other specified TCS transactions

The important point for businesses is that the old Section 206C reference is replaced by the applicable Section 394 entry for transactions governed by the Income-tax Act, 2025.

TDS Return Forms Renumbered for FY 2026-27

Another major practical change is the introduction of new form numbers under the Income-tax Rules, 2026.

Businesses that have used Form 24Q, Form 26Q, Form 27Q and Form 27EQ for many years now need to use the corresponding new forms for transactions governed by the new Act.

The official Income Tax Department forms navigator provides the following mapping. 

Earlier Form	FY 2026-27 Corresponding Form	Purpose
Form 24Q	Form 138	Quarterly TDS statement for salary
Form 26Q	Form 140	Quarterly TDS statement for other resident payments
Form 27Q	Form 144	TDS statement for specified non-resident payments
Form 27EQ	Form 144A	Quarterly TCS statement

This is an important correction to older articles and guides that incorrectly state that Form 140 has itself been replaced. Form 140 continues as the corresponding form for the old Form 26Q. 

Form 138 Replaces Form 24Q

Form 138 is the new quarterly statement for TDS relating to salary payments.

Businesses with employees must therefore update their payroll compliance checklists and software configurations.

The form essentially performs the role that Form 24Q performed under the earlier framework, but the new form uses the corresponding provisions and terminology of the Income-tax Act, 2025.

Payroll teams should therefore ensure that:

• Employee PAN details are correct.
• Salary figures reconcile with payroll.
• TDS deductions reconcile with books.
• Challan details are accurate.
• Tax regime information is correctly captured.
• Employee-wise deductions are properly reported.
• New section references are used.
• The correct financial/tax year is selected.

Form 140 Continues for Non-Salary Resident TDS

Form 140 corresponds to the old Form 26Q and is used for quarterly statements relating to TDS on payments other than salary, including eligible payments to residents.

This is particularly important for businesses because Form 140 can cover a large number of everyday transactions, such as:

• Contractor payments
• Professional fees
• Commission
• Brokerage
• Rent
• Interest
• Certain purchase payments
• Other specified resident payments

The major change is therefore not the disappearance of Form 140. Instead, businesses need to understand the new section mapping and updated reporting requirements applicable to Form 140.

Form 144 Replaces Form 27Q

Form 144 corresponds to the earlier Form 27Q and is relevant where specified TDS payments are made to non-residents.

Businesses making cross-border payments should pay particular attention because non-resident TDS involves additional considerations such as:

• Residential status
• Nature of income
• Applicable TDS provision
• DTAA provisions
• Tax residency certificate
• Permanent establishment considerations
• Royalty or fees for technical services
• Interest
• Contractual payments
• Applicable withholding rate

The new form does not eliminate these tax considerations. Instead, the reporting framework is aligned with the new Act.

Form 144A Replaces Form 27EQ

Form 144A is the corresponding TCS statement for the earlier Form 27EQ.

Businesses collecting TCS must therefore update their compliance systems and ensure that the new form is used for relevant FY 2026-27 transactions.

This is particularly important for businesses engaged in:

• Scrap sales
• Mineral sales
• Overseas tour packages
• LRS-related transactions
• Specified high-value goods
• Other transactions covered by Section 394

Form 130 Replaces Form 16

For employees, one of the most visible changes is the replacement of Form 16 with Form 130.

The Income Tax Department officially describes Form 130 as the annual certificate for TDS on salary paid to an employee, as well as specified pension or interest income covered under the relevant provisions. 

Employers should therefore update employee communication and payroll documentation.

Instead of referring to the annual salary TDS certificate as Form 16 under the new framework, payroll teams should use Form 130 where applicable.

The certificate remains important because employees use it to verify:

• Salary income
• Tax deducted
• Tax deposited
• Deductions
• Tax computation
• Employer details
• PAN information
• Other relevant salary information

What About Form 16A?

Form 16A remains relevant for TDS certificates relating to specified non-salary payments.

However, the underlying section references and reporting information will be aligned with the new Act for transactions governed by the Income-tax Act, 2025.

Businesses should therefore update their TDS certificate templates and ensure that vendor communications do not continue to reference outdated section numbers for FY 2026-27 transactions.

Important TDS and TCS Transition Rule

The transition from the Income-tax Act, 1961 to the Income-tax Act, 2025 does not mean that every transaction recorded during FY 2026-27 is automatically governed by the new Act without considering the transaction date.

The Income Tax Department has clarified that the applicable law depends on the relevant triggering event.

For TDS:

• Payment/credit before 1 April 2026 → old Act framework applies.
• Payment/credit on or after 1 April 2026 → new Act framework applies.

For TCS, the transition similarly considers the relevant debit or receipt event. The Income Tax Department specifically states that amounts debited or received on or before 31 March 2026 continue under the erstwhile Act, while amounts debited or received on or after 1 April 2026 are governed by Section 394 of the new Act.

Example of the TDS Transition

Suppose a company receives a contractor invoice dated 28 March 2026.

If the payment or credit triggering TDS occurs on 28 March 2026, the old Income-tax Act, 1961 provisions generally apply.

Now consider another invoice where the TDS trigger occurs on 2 April 2026.

That transaction falls under the Income-tax Act, 2025 framework.

The invoice date alone should therefore not be treated as the sole deciding factor. The actual statutory trigger for TDS must be examined.

This distinction is particularly important for:

• Year-end invoices
• Accrued expenses
• Salary
• Professional fees
• Contractor bills
• Commission
• Rent
• Interest
• Cross-border payments

TCS Rate Changes for FY 2026-27

Among the most substantive TDS and TCS changes for FY 2026-27 are the revised TCS rates introduced from 1 April 2026.

The Finance Act 2026 rationalised several TCS rates. The official Budget documents confirm changes for specified transactions including scrap, minerals, LRS education/medical remittances and overseas tour programme packages. 

TCS on Sale of Scrap – Rate Increased to 2%

TCS on the sale of scrap has changed from the earlier 1% rate to 2% under the revised framework.

This is particularly relevant to:

• Metal manufacturers
• Scrap dealers
• Automobile dismantlers
• Recycling businesses
• Engineering companies
• Fabrication units
• Manufacturing companies
• Industrial traders

Businesses involved in scrap sales should update their billing and accounting systems from 1 April 2026.

A company that continues applying the old 1% rate may under-collect TCS and subsequently face reconciliation and compliance issues.

The official Section 394 table specifies 2% for sale of scrap. 

TCS on Specified Minerals – Rate Increased to 2%

TCS on the sale of specified minerals, including:

• Coal
• Lignite
• Iron ore

has also been revised to 2%.

Under the previous framework, the applicable rate was 1%.

This change is particularly relevant for mining companies, mineral traders, industrial suppliers and businesses dealing in the specified mineral categories.

Businesses should update their ERP tax masters and invoice calculations before processing FY 2026-27 transactions.

TCS on Overseas Tour Packages – Flat 2%

The TCS treatment of overseas tour programme packages has been significantly simplified.

Under the earlier framework, different rates applied depending on the amount involved. The new framework replaces the earlier tiered treatment with a flat 2% TCS rate.

The official Section 394 table provides a 2% rate for sale of an overseas tour programme package, including expenses relating to travel, hotel stay, boarding, lodging and similar or related expenditure. 

This is particularly relevant to:

• Travel agencies
• Tour operators
• Corporate travel departments
• Online travel businesses
• Foreign tour package sellers
• Holiday package providers

Businesses should therefore remove obsolete threshold-based calculations from their billing systems for transactions governed by the new framework.

TCS on Overseas Tour Packages: What Businesses Need to Change

Travel businesses should review their software configuration to ensure that the system does not continue applying the old tiered rates.

The revised approach means:

Applicable overseas tour programme package TCS = 2%

The earlier ₹10 lakh threshold-based higher-rate structure no longer operates in the same manner for the revised 2% treatment.

This simplifies billing because the tax calculation no longer requires the system to switch between the earlier 5% and 20% bands based on the amount.

TCS on LRS Remittances for Education and Medical Treatment

Another important change concerns outward remittances under the Liberalised Remittance Scheme (LRS).

For remittances exceeding ₹10 lakh in a financial year for education or medical treatment, the TCS rate has been reduced to 2%.

The Budget 2026 documents specifically confirm the reduction from 5% to 2%. 

The ₹10 lakh threshold continues to be relevant.

For other specified LRS purposes, the applicable TCS rate remains 20% under the revised Section 394 framework. 

This distinction is important because taxpayers should not assume that every LRS remittance now attracts TCS at 2%.

TCS Rate Comparison for FY 2026-27

Transaction	Earlier Rate	FY 2026-27 Rate
Sale of scrap	1%	2%
Sale of coal/lignite/iron ore	1%	2%
Overseas tour programme package	5% / 20% structure	2%
LRS – education/medical treatment above threshold	5%	2%
LRS – other specified purposes above threshold	20%	20%

The revised rates are based on the Finance Act 2026 changes and Section 394 of the Income-tax Act, 2025. 

Other Important TCS Changes to Watch

The TCS changes for FY 2026-27 are not limited to overseas tour packages and scrap.

The official Section 394 framework also contains TCS provisions for other specified transactions, including certain high-value goods and licensing or leasing arrangements.

For example, the Section 394 table provides a 1% TCS rate for sale consideration exceeding ₹10 lakh in specified cases involving motor vehicles and other notified goods, while certain parking lots, toll plazas, mines and quarries continue to carry TCS requirements at specified rates. 

Businesses should therefore avoid treating the 2% rate as a universal TCS rate. The correct rate depends on the transaction category.

TDS Rates: What Has Not Changed Significantly?

A key point in understanding the TDS and TCS Rules Changes for FY 2026-27 is that the new Income-tax Act does not mean that every TDS rate has been revised.

For many routine payments, the substantive rates and thresholds continue substantially unchanged, although the applicable section numbers and reporting references have changed.

Common categories include:

• Contractor payments
• Commission and brokerage
• Professional fees
• Rent
• Interest
• Certain purchase transactions
• Salary
• Certain non-resident payments

The Income Tax Department’s transition FAQ specifically notes that substantive provisions such as applicable rates and thresholds remain unchanged for several common TDS categories even though the section references have changed.

Therefore, businesses should avoid the mistake of changing every TDS rate merely because the Income-tax Act has been replaced.

TDS on Contractors: What Businesses Should Know

Payments to contractors remain an important TDS category for almost every business.

The major FY 2026-27 change is the legal reference and reporting framework rather than a blanket change in the rate.

Businesses should update their systems so that contractor payments made from 1 April 2026 are mapped to the relevant provision under the new Act.

The Finance Act 2026 also specifically proposed bringing manpower supply services within the contractor-payment framework to remove ambiguity. The Budget documents state that TDS on such services would therefore follow the contractor-payment rates rather than an uncertain alternative classification. 

This is particularly relevant for:

• Security agencies
• Housekeeping contractors
• Staffing companies
• Facility-management companies
• Labour contractors
• Manpower suppliers

Businesses using outsourced manpower should review contracts and TDS classifications carefully.

Lower or Nil TDS Certificates Under the New Framework

Another useful development under the new framework concerns lower or nil deduction certificates.

The Finance Act 2026 introduced provisions intended to broaden access to lower or nil TDS certificates and facilitate an electronic, rule-based process for eligible taxpayers. The Budget speech specifically proposed an automated process for small taxpayers instead of requiring the traditional application route in every case. 

The Notes on Clauses also explain that the relevant application may, subject to prescribed conditions, be filed electronically before the prescribed income-tax authority, which may issue or reject the certificate based on electronic verification. 

This could reduce administrative friction for eligible taxpayers, although businesses should verify the notified procedure and eligibility before relying on it.

The New Two-Year TDS and TCS Correction Window

One of the most important compliance changes is the reduction in the time available to submit TDS/TCS correction statements.

Under the new framework, correction statements are generally required to be furnished within two years from the end of the tax year in which the statement is required to be delivered.

This is significantly shorter than the earlier six-year framework applicable to correction statements under the amended old Act. The Income Tax Department has expressly highlighted the new two-year limit.

For businesses, this changes the way TDS reconciliation should be managed.

The old approach of saying:

“We will correct it later.”

is no longer a safe compliance strategy.

Example of the Two-Year Correction Window

Suppose a TDS statement relates to Tax Year 2026-27.

The correction period must be tracked according to the statutory two-year limit applicable to that statement.

Businesses should therefore maintain a correction-expiry date for every quarterly statement.

The finance team should record:

• Original statement date
• Quarter
• Tax year
• Correction deadline
• Pending errors
• Vendor complaints
• PAN corrections
• Challan corrections
• Deductee additions
• Section corrections

This simple internal control can prevent a correction from becoming time-barred.

Why the Two-Year Correction Rule Is Important

TDS errors can affect both the deductor and the deductee.

For example, a company may deduct ₹20,000 TDS correctly but report the wrong PAN.

The company has paid the tax, but the vendor may not receive proper tax credit because the reporting information is incorrect.

Similarly, a wrong challan number, incorrect section reference, incorrect amount or omitted deductee can create reconciliation problems.

Under the new shorter correction framework, such mistakes should be identified and corrected promptly.

The Income Tax Department continues to provide a formal correction process through which deductors can download the consolidated TDS/TCS file, prepare the required correction and submit it after validation. 

Special Transition for Old TDS/TCS Returns

The two-year rule does not mean that all old returns governed by the 1961 Act suddenly become impossible to correct from 1 April 2026.

The Income Tax Department has specifically clarified that corrections relating to periods governed by the old Act can continue to be filed under the old framework where the applicable correction period permits it.

At the same time, the department had issued a transition advisory identifying certain older periods that became time-barred on 31 March 2026.

Therefore, businesses should distinguish between:

• Old-period original returns
• Old-period correction returns
• New-period original returns
• New-period correction returns

The applicable Act and form depend on the relevant period and type of filing.

TDS and TCS Correction: Practical Business Strategy

To manage the new shorter window effectively, businesses should adopt a quarterly reconciliation process.

Step 1: Reconcile TDS Ledger

Match the TDS payable ledger with actual challan payments.

Step 2: Reconcile Deductees

Check whether every vendor or employee has been reported correctly.

Step 3: Verify PAN

Check for invalid, missing or incorrect PAN details.

Step 4: Verify Section Mapping

Ensure that the correct new Act provision is used for FY 2026-27 transactions.

Step 5: Match Tax Amount

Compare:

Books → TDS working → Challan → TDS statement → Deductee credit

Step 6: Correct Immediately

Do not wait until the end of the financial year if an error is discovered.

Step 7: Track the Deadline

Maintain a correction calendar for every quarterly statement.

What Businesses Should Do Before Filing Q1 FY 2026-27 TDS Returns

The first quarter of FY 2026-27 is the most important transition period because many finance teams may still be using old software, old templates and old section references.

Before preparing the first quarterly statement, businesses should complete the following checks:

Update Accounting Software

Install the latest TDS/TCS updates in Tally, Zoho Books, Busy, ERP systems or other accounting software.

Update Section Mapping

Replace old section references with the corresponding provisions under the Income-tax Act, 2025.

Update TDS Forms

Ensure the system supports the new Forms 138, 140 and 144.

Update TCS Reporting

Ensure the system supports Form 144A.

Update Payroll

Payroll systems should be configured for the new salary TDS framework and Form 130.

Update TCS Rates

Review:

• Scrap
• Coal
• Lignite
• Iron ore
• Overseas tour packages
• LRS education
• LRS medical treatment

Train Finance Staff

Accounts staff should understand that an old section number may no longer be the correct reporting reference for a new-period transaction.

Review Vendor Master

Verify:

• PAN
• Name
• Residential status
• TDS category
• Applicable rate
• Lower-deduction certificate
• Payment classification

Do Not Mix Old and New TDS Sections

One of the most common mistakes during the transition will be mixing old and new section references.

For example, a business may correctly calculate TDS at the applicable rate but still select an old section such as 194C for a transaction that occurred after 1 April 2026.

The Income Tax Department has warned that using an old section reference for a payment governed by the new Act can result in processing errors and may require a correction statement.

Therefore, the finance team should maintain a proper old-to-new TDS mapping sheet.

For internal understanding, the old section can be mentioned alongside the new section, but the actual FY 2026-27 return should use the applicable new framework.

TDS and TCS Compliance Calendar for FY 2026-27

Although the form numbers and legal framework have changed, the familiar quarterly filing cycle remains important.

For regular TDS statements, the quarterly pattern continues around:

• 31 July
• 31 October
• 31 January
• 31 May

For TCS statements, the corresponding quarterly cycle follows the prescribed due dates under the applicable rules.

Businesses should verify the current statutory calendar before each filing rather than relying permanently on an old calendar because specific extensions or procedural notifications can alter a deadline.

The Income Tax Department continues to provide official tax calendars and compliance resources through its portal. 

What Has Not Changed in TDS and TCS?

Not every familiar compliance rule has disappeared.

Businesses should understand that the transition involves a combination of:

New legal references + new forms + selected rate changes + continuing substantive rules.

Many established principles continue, including:

• TDS must generally be deducted at the applicable statutory trigger.
• TDS must be deposited within the prescribed time.
• Quarterly statements remain required.
• PAN remains important.
• Incorrect reporting can affect deductee tax credit.
• Interest can apply for late deduction or payment.
• Non-compliance can result in default proceedings.
• TDS certificates continue to be issued.
• TCS continues to apply to specified transactions.
• Businesses must maintain appropriate records.

The Income Tax Department’s new transition guidance confirms that several substantive TDS rates and thresholds remain unchanged despite the new section numbering.

TDS/TCS Non-Compliance: Financial Consequences

Failure to deduct or collect tax, or failure to deposit tax after deduction or collection, can result in significant consequences.

Under Section 398 of the Income-tax Act, 2025, a person who is required to deduct or collect tax but fails to do so, or fails to pay the deducted/collected tax as required, can be treated as an assessee in default. Interest can also apply at the prescribed rates. 

The new Act retains the important distinction between:

• Delay in deduction/collection
• Delay in deposit/payment after deduction/collection

Interest can apply at 1% per month or part of a month for specified delay in deduction/collection and 1.5% per month or part of a month for specified delay after deduction/collection until payment. 

Businesses should therefore treat TDS and TCS as a recurring monthly compliance obligation rather than a quarterly filing activity only.

30% Expense Disallowance for Certain TDS Defaults

Another important consequence continues in the new framework.

The Income-tax Act, 2025 contains a provision corresponding to the earlier Section 40(a)(ia), under which 30% of certain resident payments can be disallowed where the required TDS has not been deducted or has not been deposited within the prescribed conditions.

The Income Tax Department’s transition FAQ specifically confirms this treatment under Section 35(b) of the new Act. 

For example, if eligible expenditure of ₹5 lakh is subject to the relevant TDS requirement and the statutory conditions for disallowance are met:

₹5,00,000 × 30% = ₹1,50,000

The potential tax impact can therefore be substantially higher than the original TDS amount.

Why TDS and TCS Reconciliation Should Be Monthly

A common mistake is to wait until quarterly return filing to identify errors.

A better process is:

Transaction → TDS/TCS calculation → Payment → Challan → Reconciliation → Quarterly filing → Certificate

When reconciliation is performed monthly, errors can be identified while invoices, payment records and vendor information are still easily available.

Monthly reconciliation should cover:

• TDS payable
• TDS deducted
• TDS deposited
• TCS collected
• TCS deposited
• PAN
• Section
• Rate
• Challan
• Vendor/customer
• Date
• Amount
• Correction requirement

This becomes even more important because the correction window under the new framework is limited.

Key Action Points for Businesses in FY 2026-27

Before processing regular TDS/TCS transactions under the new Act, businesses should:

• Update accounting software.
• Update payroll systems.
• Update ERP tax configurations.
• Learn the new section structure.
• Map old sections to new sections.
• Update TDS forms.
• Update TCS forms.
• Review TCS rates.
• Check vendor PAN data.
• Verify lower/nil deduction certificates.
• Review overseas remittance processes.
• Review overseas tour package billing.
• Update scrap-sale billing.
• Update mineral-sale billing.
• Train accounts teams.
• Reconcile TDS/TCS monthly.
• Track correction deadlines.
• Maintain transaction-level supporting records.

These steps will significantly reduce the risk of incorrect deductions, under-collection, return rejection, tax-credit mismatches and avoidable notices.

Key Takeaways: TDS and TCS Rules Changes for FY 2026-27

The TDS and TCS Rules Changes for FY 2026-27 are best understood as a combination of legal restructuring, revised forms, selected rate changes and stronger correction discipline.

The most important points are:

• The Income-tax Act, 2025 applies from 1 April 2026.
• TDS provisions have been reorganised under the new Act.
• TCS provisions are consolidated under Section 394.
• Form 24Q corresponds to new Form 138.
• Form 26Q corresponds to Form 140.
• Form 27Q corresponds to Form 144.
• Form 27EQ corresponds to Form 144A.
• Form 16 is replaced by Form 130.
• Scrap TCS is 2%.
• TCS on specified minerals such as coal, lignite and iron ore is 2%.
• Overseas tour programme package TCS is 2%.
• LRS education and medical remittance TCS is 2% above the applicable threshold.
• TCS for other specified LRS purposes remains 20%.
• A two-year correction window applies under the new framework.
• Old-period corrections continue to follow the applicable transition rules.
• Many ordinary TDS rates and thresholds remain substantially unchanged.
• Businesses should update accounting and payroll systems rather than changing rates blindly.
• Monthly reconciliation is now more important than ever.

The next part of this guide will cover the detailed TDS rate and threshold changes, TCS compliance, due dates, new forms, old-vs-new section mapping, practical examples, common mistakes, transition checklist, FAQs, and professional compliance support for FY 2026-27.

Detailed TDS and TCS Changes for FY 2026-27

The practical impact of the TDS and TCS changes for FY 2026-27 becomes clearer when businesses look beyond section numbers and examine rates, thresholds, payment classifications, filing forms, correction procedures and deadlines. A small classification error can affect the amount deducted, the deductee’s tax credit, the deductor’s expense claim and the accuracy of quarterly statements.

For this reason, finance and payroll teams should treat FY 2026-27 as a transition year requiring careful system configuration and stronger reconciliation controls. The objective should not simply be to learn the new section numbers but to ensure that every payment is correctly classified under the Income-tax Act, 2025.

TDS Rates and Thresholds: What Businesses Should Check

One of the most important points for taxpayers is that the new Income-tax Act does not automatically change every TDS rate.

Many commonly used TDS rates and thresholds continue under the new framework. Therefore, businesses should not assume that a new section number means a new percentage.

The correct approach is to check three things before deducting TDS:

1. Nature of payment.
2. Applicable threshold.
3. Applicable rate under the new Act.

For example, payments for professional services, contractor services, rent, commission, interest and specified purchases may continue to have substantially similar rates, even though their legal references have been reorganised.

TDS on Salary

Salary TDS remains one of the most important payroll obligations for employers.

Employers must calculate tax based on the employee’s estimated taxable income, applicable tax regime, eligible deductions and exemptions, and other relevant information prescribed under the law.

The major FY 2026-27 change is primarily the transition to the new Act and the replacement of the traditional Form 16 with Form 130.

Payroll teams should therefore update their salary-tax calculation software and employee communication templates.

Before finalising payroll, employers should verify:

• Employee PAN.
• Employee name.
• Salary structure.
• Taxable allowances.
• Perquisites.
• Eligible deductions.
• Tax regime.
• TDS deducted.
• TDS deposited.
• Challan details.
• Employee-wise reporting.

TDS on Interest

Interest payments may attract TDS where the statutory conditions and thresholds are satisfied.

Businesses making interest payments should identify:

• Nature of interest.
• Recipient status.
• Whether the recipient is resident or non-resident.
• Applicable threshold.
• Applicable rate.
• Whether any exemption applies.
• Whether a lower/nil deduction certificate is available.

The transition to the new Act changes the statutory references but does not mean that every interest payment automatically attracts a different TDS rate.

This is why finance teams should update the section mapping in their accounting software rather than manually changing the rate without checking the underlying provision.

TDS on Contractor Payments

Contractor payments are another major category for businesses.

Payments may include amounts paid to:

• Construction contractors.
• Transport contractors.
• Advertising contractors.
• Job-work contractors.
• Labour contractors.
• Facility-management providers.
• Manpower suppliers.
• Other eligible contractors.

The applicable TDS treatment depends on the nature of the contract and the statutory conditions.

An important FY 2026-27 development is the clarification around manpower supply services, which has been brought within the contractor-payment framework to reduce uncertainty regarding classification.

Businesses should therefore review manpower and staffing contracts instead of automatically applying professional-fee TDS merely because the vendor provides personnel.

TDS on Commission and Brokerage

Commission and brokerage payments remain subject to TDS where the applicable conditions are satisfied.

Businesses commonly pay commission to:

• Sales agents.
• Brokers.
• Referral agents.
• Marketing intermediaries.
• Insurance-related intermediaries where the relevant separate provision applies.
• Business development agents.
• Distribution agents.

The key issue is classification.

A genuine principal-agent relationship may attract TDS on commission. However, an ordinary trade discount arising from a principal-to-principal sale may not constitute commission merely because the distributor earns a margin.

Businesses should examine the underlying agreement, ownership of goods, commercial risk, invoicing arrangement and relationship between the parties before determining the applicable TDS provision.

TDS on Professional Fees

Professional fees paid to eligible professionals continue to require careful TDS classification.

Examples may include payments to:

• Chartered accountants.
• Lawyers.
• Architects.
• Engineers.
• Doctors.
• Consultants.
• Other specified professionals.

Businesses should not classify every payment described as a “consultancy fee” in the invoice in the same way without examining the actual service.

The contract and nature of service should be reviewed because professional services, technical services and other contractual services can have different tax treatments.

TDS on Rent

Businesses paying rent for:

• Offices.
• Shops.
• Warehouses.
• Factories.
• Commercial buildings.
• Equipment.
• Machinery.

should check whether the applicable threshold and TDS provisions are triggered.

The rental agreement should be reviewed alongside the accounting records.

Businesses should also maintain a clear record of:

• Landlord name.
• PAN.
• Property details.
• Monthly rent.
• Annual rent.
• TDS deducted.
• TDS deposited.
• TDS certificate.

This is particularly important where a business operates from multiple rented premises.

TDS on Purchase of Goods

Specified purchase transactions may attract TDS subject to the applicable statutory conditions.

Businesses should not confuse TDS on purchases with TCS on sales.

The tax treatment depends on:

• Buyer turnover.
• Seller turnover.
• Aggregate transaction value.
• Nature of goods.
• Applicable threshold.
• PAN availability.
• Other statutory conditions.

ERP systems should therefore be configured to identify transactions automatically rather than relying exclusively on manual calculations.

Higher TDS Where PAN Is Not Furnished

PAN remains a critical component of TDS compliance.

Where the law requires a higher rate because the payee has not furnished a valid PAN, businesses must apply the applicable higher deduction mechanism.

For many transactions, the higher rate under the relevant provision can significantly increase the amount deducted.

This makes vendor onboarding an important compliance control.

Before making payments subject to TDS, businesses should collect and validate:

• PAN.
• Legal name.
• Residential status.
• Vendor type.
• Applicable TDS category.
• Lower deduction certificate, if any.
• Relevant exemption documentation.

Lower or Nil TDS Certificates

Taxpayers who qualify may apply for a lower or nil deduction certificate under the applicable provisions.

The Finance Act 2026 introduced changes intended to simplify and expand the process through an electronic and rule-based mechanism for eligible cases.

This can be useful where deduction at the normal rate would create an excessive cash-flow burden compared with the taxpayer’s actual tax liability.

However, deductors should not independently reduce TDS merely because a vendor claims that its tax liability is lower.

A valid certificate or other legally recognised basis should be available before applying a lower rate.

TCS Changes for Businesses

The TDS and TCS changes for FY 2026-27 are particularly significant for businesses collecting tax at source.

TCS is not applicable to every sale. It applies only to transactions specifically covered by the law.

Therefore, businesses should first identify whether the transaction is covered and then apply the correct rate.

Important FY 2026-27 areas include:

• Scrap.
• Specified minerals.
• Overseas tour programme packages.
• LRS remittances.
• Motor vehicles and other specified high-value goods.
• Specified leasing/licensing transactions.
• Other notified categories.

TCS on Scrap: 2%

From 1 April 2026, TCS on the sale of scrap is 2% under the revised framework.

Businesses involved in scrap sales should therefore revise their billing systems.

This is especially important for:

• Steel scrap.
• Metal scrap.
• Manufacturing scrap.
• Automobile scrap.
• Industrial scrap.
• Recycling businesses.
• Metal traders.

A business continuing to apply 1% after the effective date may under-collect TCS.

The additional TCS should be reflected correctly in the invoice or transaction records and subsequently reported in the applicable TCS statement.

TCS on Coal, Lignite and Iron Ore

TCS on specified minerals such as:

• Coal.
• Lignite.
• Iron ore.

has also been revised to 2% from 1 April 2026.

Mining companies and mineral traders should review their accounting systems because these transactions can involve high values, making even a small rate difference financially significant.

For example, on a taxable transaction value of ₹50 lakh:

At 1% = ₹50,000

At 2% = ₹1,00,000

The difference is ₹50,000.

This demonstrates why updating the tax configuration before processing invoices is essential.

TCS on Overseas Tour Programme Packages

The revised TCS treatment for overseas tour programme packages is one of the most useful simplifications for the travel industry.

The applicable TCS rate is now 2% under the new framework.

The provision covers the amount paid or payable for an overseas tour programme package, including relevant expenditure associated with travel, hotel accommodation, boarding, lodging and similar expenses covered by the law.

Travel companies should therefore review their billing software and remove outdated rate logic where it no longer applies.

TCS on LRS Remittances

The Liberalised Remittance Scheme continues to be an important TCS area.

The tax treatment depends on the purpose of remittance.

For education and medical treatment, the TCS rate has been reduced to 2% on the relevant amount exceeding the prescribed ₹10 lakh threshold.

For other specified purposes, the applicable rate remains 20%.

This distinction is important for authorised dealers and taxpayers because applying 2% to every foreign remittance would be incorrect.

TDS and TCS Due Dates for FY 2026-27

The transition to the new Act does not mean that businesses should ignore established compliance calendars.

For quarterly TDS statements, the standard due-date pattern remains:

Quarter	Period	TDS Statement Due Date
Q1	April–June	31 July
Q2	July–September	31 October
Q3	October–December	31 January
Q4	January–March	31 May

TCS statements generally follow the prescribed quarterly filing schedule, subject to the applicable rules and any extensions notified by the tax department.

Businesses should always verify the latest official due date before filing because government notifications can extend statutory deadlines in specific circumstances.

Monthly TDS Deposit Requirement

Quarterly TDS filing should not be confused with monthly TDS payment.

In most cases, tax deducted during a month needs to be deposited within the prescribed deadline in the following month.

Businesses should therefore maintain a monthly compliance calendar.

A practical internal workflow is:

Invoice/payment → TDS calculation → deduction → challan preparation → payment → accounting entry → reconciliation → quarterly return

This prevents the common mistake of waiting until quarterly return preparation to discover that tax was never deposited.

TCS Collection and Deposit

Similarly, TCS collected from customers must be deposited within the applicable statutory deadline.

The person collecting tax should reconcile:

• Sales register.
• TCS ledger.
• Customer master.
• TCS collected.
• TCS deposited.
• Challan.
• Quarterly statement.

Any difference should be investigated before filing the quarterly statement.

New TDS and TCS Forms: Practical Mapping

Businesses should keep an internal reference table for the transition.

Purpose	Earlier Form	New Form
Salary TDS quarterly statement	24Q	138
TDS on other resident payments	26Q	140
TDS on specified non-resident payments	27Q	144
TCS quarterly statement	27EQ	144A
Salary TDS certificate	Form 16	Form 130
Non-salary TDS certificate	Form 16A	Continues with updated framework

The Income Tax Department’s official forms navigator confirms the old-to-new mapping. (incometaxindia.gov.in)

Common Mistakes in FY 2026-27

The first year of a new tax law naturally creates confusion. Businesses should pay particular attention to the following mistakes.

1. Using Old Section Numbers

Do not automatically use 194C, 194H, 194J or another old reference for transactions governed by the new Act.

The old section may still be useful for historical records and mapping, but the applicable FY 2026-27 reporting reference must follow the new framework.

2. Changing Every TDS Rate

The new Act does not mean every TDS percentage has changed.

Businesses should verify the applicable rate before changing their tax master.

3. Continuing Old TCS Rates

Scrap and specified minerals should be reviewed carefully because their TCS rate has increased to 2%.

4. Applying Old Overseas Tour Package Rates

The revised framework provides a flat 2% rate.

5. Confusing Form 24Q and Form 26Q Mapping

The correct mapping is:

24Q → 138

26Q → 140

This distinction should be clearly communicated to payroll and accounts teams.

6. Continuing to Call Form 130 “Form 16”

For FY 2026-27 compliance under the new framework, payroll teams should use the correct terminology.

7. Ignoring the Correction Deadline

A delayed correction can become a serious compliance issue once the statutory window expires.

8. Failing to Reconcile PAN

An incorrect PAN can affect the deductee’s tax credit and may result in additional compliance work.

9. Relying on Old Software

Outdated accounting software may continue displaying old sections or rates.

Always install the relevant tax update before processing transactions.

10. Mixing Tax Years

Q4 FY 2025-26 and Q1 FY 2026-27 may involve different legal frameworks.

The accounting team should clearly distinguish transactions governed by the old Act from those governed by the new Act.

How to Prepare Your Business for FY 2026-27 TDS and TCS Compliance

A structured transition plan can make the change considerably easier.

Step 1: Review Your Existing TDS Master

Prepare a list of all TDS categories currently used by your business.

Step 2: Map Old Sections to New Sections

Create an internal mapping document.

Step 3: Review TDS Rates

Confirm that the software uses the correct FY 2026-27 rate.

Step 4: Review TCS Categories

Identify whether your business sells scrap, minerals, overseas tour packages or other goods/services subject to TCS.

Step 5: Update Forms

Ensure your software supports the relevant new forms.

Step 6: Update Payroll

Configure salary TDS and Form 130 requirements.

Step 7: Verify PAN

Run a vendor and employee PAN review.

Step 8: Reconcile Monthly

Do not postpone reconciliation until the quarterly return deadline.

Step 9: Maintain Correction Calendar

Record the deadline for every statement.

Step 10: Train Accounts Staff

Conduct a short internal training session explaining the new Act, forms and section mapping.

TDS and TCS Compliance Checklist for SMEs

Small and medium businesses can use the following checklist throughout FY 2026-27:

•  TDS software updated.
•  TCS software updated.
•  Payroll system updated.
•  New section mapping completed.
•  Vendor PAN database reviewed.
•  Employee PAN database reviewed.
•  Lower TDS certificates checked.
•  Scrap TCS rate updated to 2%.
•  Specified mineral TCS rate updated to 2%.
•  Overseas tour TCS updated to 2%.
•  LRS TCS classification reviewed.
•  New forms configured.
•  Form 130 process established.
•  Monthly TDS deposit calendar created.
•  TCS deposit calendar created.
•  Quarterly filing calendar created.
•  Monthly reconciliation process established.
•  Correction deadlines recorded.
•  Supporting documents archived.
•  Finance team trained.

TDS and TCS Reconciliation: Best Practice

Reconciliation is one of the strongest safeguards against TDS and TCS defaults.

A business should ideally compare the following every month:

Books of Accounts

↓

TDS/TCS Ledger

↓

Challan Payment

↓

Quarterly Statement

↓

Deductee/Collector Tax Credit

Any difference should be investigated immediately.

For TDS, check whether:

• The vendor was correctly classified.
• The correct rate was applied.
• PAN was correctly entered.
• TDS was deducted on time.
• Challan was correctly deposited.
• The amount was correctly reported.

For TCS, additionally verify:

• Customer details.
• Transaction category.
• TCS rate.
• Threshold.
• Collection amount.
• Deposit.
• Quarterly reporting.

Why Businesses Should Not Wait Until the Return Due Date

Quarterly filing deadlines create pressure when businesses leave reconciliation until the last week.

Suppose a company discovers during return preparation that:

• Five vendors have incorrect PANs.
• Two challans have been wrongly mapped.
• One commission payment was classified incorrectly.
• TCS on scrap was calculated at 1% instead of 2%.
• One deductee was omitted.

Correcting all these issues immediately before filing can be difficult.

Monthly reconciliation provides enough time to investigate and correct the records.

Impact on Payroll Teams

The new Act also requires payroll teams to adapt.

HR and payroll departments should understand:

• New salary TDS references.
• Form 130.
• New reporting structure.
• Employee tax regime selection.
• Perquisite reporting.
• TDS reconciliation.
• Employee communication.

Employees may continue to refer to their annual salary certificate as “Form 16” because that terminology is familiar.

Payroll teams should explain that the corresponding certificate under the new framework is Form 130.

Impact on Finance and Accounts Teams

Finance teams have perhaps the largest operational responsibility because they deal with vendor payments, TDS, TCS, challans and quarterly statements.

Their responsibilities include:

• Identifying taxable payments.
• Applying the correct section.
• Calculating TDS.
• Depositing tax.
• Preparing quarterly statements.
• Reconciling challans.
• Issuing certificates.
• Responding to vendor queries.
• Preparing corrections.

The FY 2026-27 transition makes proper documentation particularly important.

Impact on ERP and Accounting Software

Businesses using ERP or accounting software should review their tax configuration.

The software should correctly identify:

• Financial year.
• Tax year.
• Payment category.
• Resident/non-resident status.
• PAN.
• TDS rate.
• TCS rate.
• Threshold.
• New section reference.
• New form mapping.

Businesses should also test the system before processing high-value transactions.

A test transaction can identify configuration problems before the error affects hundreds of invoices.

Documentation Businesses Should Maintain

A strong TDS/TCS compliance file should include:

• Vendor master.
• PAN records.
• TDS classification.
• Contracts.
• Invoices.
• Payment records.
• TDS workings.
• TCS workings.
• Challans.
• Quarterly statements.
• TDS certificates.
• Lower deduction certificates.
• Reconciliation reports.
• Correction records.
• Internal approvals.

These records can be valuable if the business receives a tax notice or needs to explain a deduction during an assessment or audit.

What Should You Do If an Error Is Found?

Do not ignore an error simply because the quarterly return has already been filed.

First identify:

1. What is wrong?
2. Which quarter is affected?
3. Which deductee or collector is affected?
4. Is the tax amount wrong?
5. Is the PAN wrong?
6. Is the challan wrong?
7. Is the section wrong?
8. Is a correction statement required?
9. What is the statutory deadline for correction?

Once the error is identified, the business should take corrective action within the applicable statutory window.

Final Takeaway: TDS and TCS Rules Changes for FY 2026-27

The TDS and TCS Rules Changes for FY 2026-27 represent a major compliance transition for Indian businesses. However, the change should not be viewed simply as replacing old section numbers with new ones.

Businesses need to understand the complete compliance chain:

Correct classification → Correct rate → Correct deduction/collection → Timely deposit → Correct return → Correct certificate → Reconciliation → Timely correction

The most important changes include the implementation of the Income-tax Act, 2025 from 1 April 2026, revised TDS/TCS section structures, new reporting forms, Form 130 for salary TDS certificates, revised TCS rates for scrap and specified minerals, a simplified 2% rate for overseas tour programme packages, reduced TCS for qualifying education and medical LRS remittances, and the new two-year correction framework.

At the same time, businesses should remember that many established TDS rates, thresholds and compliance principles continue substantially unchanged.

The safest approach is therefore not to rebuild your entire tax process blindly, but to systematically map every payment category, review the applicable provision, update software, reconcile transactions and maintain proper documentation.

Need Professional Support for TDS and TCS Compliance?

Managing the transition to the Income-tax Act, 2025 can be challenging when your business has multiple vendors, employees, contractors, professionals, customers or TCS-applicable transactions. Incorrect section mapping, outdated rates, missed deposits or delayed corrections can create unnecessary interest, penalties, reconciliation problems and tax disputes.

TrueTax Consultants provides professional tax and compliance support to businesses for TDS and TCS calculations, monthly compliance, quarterly statements, reconciliation, correction filings, payroll TDS, tax notices and other income-tax compliance requirements.

Our tax professionals can help you review your FY 2026-27 TDS and TCS process, identify applicable changes, update compliance procedures and reduce the risk of avoidable errors.

For professional assistance with TDS and TCS compliance for FY 2026-27, contact TrueTax Consultants and get expert guidance tailored to your business requirements.

Frequently Asked Questions

What are the major TDS and TCS Rules Changes for FY 2026-27?

The major changes include the implementation of the Income-tax Act, 2025 from 1 April 2026, restructuring of TDS and TCS provisions, renumbering of several compliance forms, replacement of Form 16 with Form 130, revised TCS rates for selected transactions, and a two-year framework for correction statements. However, many ordinary TDS rates and thresholds continue substantially unchanged.

Is FY 2026-27 the first full year under the Income-tax Act, 2025?

Yes. The Income-tax Act, 2025 came into effect from 1 April 2026, making FY 2026-27 the first complete financial year under the new Act. Businesses must therefore distinguish transactions governed by the Income-tax Act, 1961 from those governed by the new legislation, particularly around the transition date.

What is the new Form 138?

Form 138 is the quarterly statement corresponding to the earlier Form 24Q for TDS relating to salary. Employers should update payroll systems and internal compliance checklists to use the new form for transactions and reporting governed by the new framework.

What is the new Form 140?

Form 140 corresponds to the earlier Form 26Q and is used for quarterly reporting of TDS on specified payments other than salary, particularly payments to residents. Businesses making payments such as contractor fees, professional fees, commission, rent and interest should ensure that their reporting system uses the applicable new section references.

What replaces Form 27Q?

Form 144 corresponds to Form 27Q for specified TDS payments to non-residents. Businesses making payments to foreign parties should carefully examine residential status, applicable provisions, treaty benefits, documentation and withholding requirements before filing the relevant quarterly statement.

What replaces Form 27EQ?

Form 144A corresponds to the earlier Form 27EQ for TCS reporting. Businesses collecting TCS should update their accounting and tax software and ensure that transactions from FY 2026-27 are reported using the applicable new framework.

Is Form 16 replaced in FY 2026-27?

Yes. Under the new Income-tax Rules, the salary TDS certificate is Form 130, corresponding to the role traditionally performed by Form 16. Employers should ensure that their payroll and certificate-generation systems are updated accordingly.

Has every TDS rate changed for FY 2026-27?

No. This is an important point. The replacement of the Income-tax Act, 1961 does not mean every TDS rate has changed. Many common TDS rates and thresholds remain substantially unchanged. Businesses should therefore verify each payment category rather than changing all rates simply because section numbers have changed.

What is the TCS rate on scrap for FY 2026-27?

The TCS rate on sale of scrap is 2% under the revised framework applicable from 1 April 2026. Businesses involved in scrap sales should update their billing and accounting systems to prevent under-collection.

What is the TCS rate on coal, lignite and iron ore?

The TCS rate on specified minerals such as coal, lignite and iron ore is 2% under the revised FY 2026-27 framework. Mineral traders and businesses selling these specified goods should review their tax configuration before processing transactions.

What is the TCS rate on overseas tour programme packages?

The revised TCS rate for overseas tour programme packages is 2%. The earlier tiered treatment has been simplified, making the calculation easier for travel agencies and tour operators.

Has TCS on LRS remittances changed?

Yes, selected LRS TCS rates have changed. For education and medical treatment, the rate has been reduced to 2% on the relevant amount exceeding the prescribed ₹10 lakh threshold. Other specified LRS purposes can continue to attract TCS at 20%.

Is the TDS correction period now two years?

The new framework introduces a two-year limit for correction statements, making timely reconciliation essential. Businesses should track the applicable correction deadline for each statement instead of assuming that an error can be corrected indefinitely.

Can old TDS returns still be corrected?

Corrections relating to periods governed by the Income-tax Act, 1961 continue to be subject to the transition provisions and correction framework applicable to those periods. Businesses should therefore determine the relevant tax year and applicable law before attempting a correction.

Should businesses stop using old TDS section numbers immediately?

Businesses should distinguish historical transactions from new transactions. Old section numbers remain relevant for records and returns relating to periods governed by the Income-tax Act, 1961. For transactions governed by the Income-tax Act, 2025, the applicable new section and reporting reference should be used.

What should businesses do before filing their first FY 2026-27 TDS return?

Businesses should update accounting and payroll software, map old sections to new provisions, verify PAN details, review TDS rates, update TCS rates, configure new forms, reconcile monthly deductions and collections, and train finance staff. It is also advisable to establish a correction-deadline tracker because the new framework places greater importance on timely corrections.