TDS Under the Income Tax Act, 2025: New Section Numbers, Form 141 and Form 168 Require System Changes for FY 2026-27
Businesses deducting tax at source in tax year 2026-27 need to treat the move to the Income-tax Act, 2025 as a systems and reporting change, not only a renumbering exercise. The Income Tax Department's TDS Compliance guidance on the e-filing portal confirms that transactions triggered on or after 1 April 2026 fall under the new Act, while obligations that arose on or before 31 March 2026 stay under the Income-tax Act, 1961.
The Department also warns that quoting an old section number for a new-law transaction may lead to processing errors when the TDS return is filed. For finance, payroll and ERP teams, section mapping, challan logic and reporting masters all need to match the new framework.
The trigger is the earlier of credit or payment
For non-salary TDS, the governing law depends on when the earlier of credit or payment occurs. If that event took place on or before 31 March 2026, the 1961 Act governs the deduction. If it occurs on or after 1 April 2026, the Income-tax Act, 2025 applies.
The Department gives two examples that matter for contracts spanning March and April:
- Professional fee credited in March 2026, paid in April 2026: the 1961 Act applies and TDS must be deducted in March 2026.
- Advance paid in March 2026, credited in the books in April 2026: the 1961 Act applies and TDS must be deducted in March 2026.
It also gives the case of a contractor payment made on 28 March 2026: the 1961 Act applies because the triggering event occurred before 1 April 2026.
Section 392 and section 393 replace the familiar references
Under the new Act, salary TDS is governed by section 392(1), in place of old section 192. Non-salary TDS is consolidated in a table under section 393, and TCS moves to section 394. For example, contractor payments that were covered by old section 194C are now referenced as section 393(1) [Table: Sl. No. 6(i)]. Using section 194C for a transaction after 1 April 2026 may cause processing errors in the return.
The Department's TDS Compliance FAQs state that TDS rates and monetary thresholds for all categories of payments have been retained as they were under the 1961 Act. The change is in statutory structure, terminology and reporting.
ERP and payroll updates
The Department says systems must be updated to reflect the new section numbering, terminology and reporting requirements. This matters for companies that hard-code TDS sections in vendor masters, payment workflows, payroll rules, tax engines or return-preparation software. A business will need parallel references for a while: 1961 Act sections for FY 2025-26 corrections and legacy transactions, and 2025 Act references for tax year 2026-27 transactions.
For salary, employers must reset the TDS computation from 1 April 2026 for the new tax year, using projected income, deductions and the tax regime chosen for tax year 2026-27.
Form 141 replaces Forms 26QB, 26QC, 26QD and 26QE
The FAQs state that Forms 26QB, 26QC, 26QD and 26QE continue for transactions where credit or payment occurred on or before 31 March 2026. From 1 April 2026, a common Form No. 141 is used for all four types. The Form 141 FAQs describe it as the challan-cum-statement for payment and reporting of tax deducted under section 393(1), with four schedules:
| Schedule | Transaction | Section 393(1) Table Sl. No. |
|---|---|---|
| A | Rent | 2(i) |
| B | Transfer of immovable property | 3(i) |
| C | Payments to contractors or professionals by individuals and HUFs | 6(ii) |
| D | Transfer of virtual digital assets | 8(vi) |
Form 141 is meant for individuals and HUFs acting as deductors. The tax must be paid, and the form filed, within one month from the end of the month in which tax is deducted. The TDS certificate is downloaded from the TRACES portal. Taxpayers and advisers should identify the transaction date and the governing law before choosing a form.
Old-period corrections stay under the old framework
Revised or correction TDS returns for periods governed by the 1961 Act must continue to be filed under the old framework, even if filed after 1 April 2026. A business that finds an error in an FY 2025-26 statement this year should not convert it to a new-law section merely because it is filing in 2026-27.
AIS and Form 168 run in parallel
The statement for AY 2026-27 will be the Annual Information Statement (AIS) and will reflect TDS under the old Act. The annual information statement for tax year 2026-27 will be in Form No. 168. Credits follow the date of deduction: tax deducted in March 2026 is credited to AY 2026-27, and tax deducted in April 2026 is credited to tax year 2026-27. Correct year and section selection by the deductor is what puts the credit in the right statement for the deductee.
Interest for defaults is unchanged
The new Act keeps interest at 1% per month for failure to deduct and 1.5% per month for failure to deposit after deduction. A reporting error can still create processing problems even where the correct tax was deducted.
Checklist for finance and tax teams
- Map old TDS sections to the section 392, 393 or 394 references used from 1 April 2026.
- Update ERP, payroll, vendor masters and return software without deleting the old-law mappings needed for corrections.
- Apply the earlier-of-credit-or-payment test to every cross-period transaction.
- File old-period correction statements on the old forms, even after 1 April 2026.
- Move property, rent, individual/HUF contractor and VDA deductions made from 1 April 2026 to Form 141.
- Reconcile credits between the AIS for AY 2026-27 and Form 168 for tax year 2026-27.
Updated on 27 September 2026: verified against the Income Tax Department's TDS Compliance page, TDS Compliance FAQs and Form 141 FAQs; added official links, the March/April examples, the Form 141 schedule table, due dates and the credit segregation rule.
