TDS (Tax Deducted at Source): FY 2026-27

The Income Tax Act 2025 has been in force since 1 April 2026, replacing the 1961 Act that governed Indian taxation for over six decades. For every deductor, every finance team, and every taxpayer, the structural changes are already in effect: Chapter XIX, Sub-part B (the practitioner shorthand "Chapter XIX-B") now consolidates the entire TDS / TCS code into Sections 390-402, Section 393 has replaced the old 194-series, forms have been renumbered under the Income Tax Rules 2026, and TRACES 2.0 has converged the legacy portals. This guide walks through every rate, threshold, form, and due date for FY 2026-27 — with the old-Act citation kept in brackets so the transition window remains navigable.

The plain-English definition

If your firm pays a chartered accountant ₹50,000 in professional fees and the prescribed deduction rate is 10%, you do not write a cheque for ₹50,000. You write a cheque for ₹45,000, deposit ₹5,000 with the Government as TDS, and issue the CA a certificate proving the ₹5,000 was deposited in their name. When that CA files their own income-tax return, the ₹5,000 already sits in their Form 168 (the Annual Information Statement under the new Income Tax Act 2025) as pre-paid tax — they get credit for it against their final tax liability.

The legal definition under the Income Tax Act 2025

Chapter XIX, Sub-part B of the Income Tax Act 2025 — titled "Deduction and Collection at Source" (referred to colloquially as "Chapter XIX-B") — runs from Section 390 to Section 402 and consolidates the entire pre-2025 framework that previously sprawled across Sections 192 to 206CB of the Income Tax Act 1961. The master deducting provision for non-salary payments to residents and non-residents is Section 393 [old Sections 193, 194–194T, 195–196D, 197A], salary withholding sits in Section 392 [old Sections 192, 192A], collection at source (TCS) is Section 394 [old Section 206C], and procedural compliance — TAN, no-PAN higher rate, return filing, foreign-remittance reporting — is in Section 397 [old Sections 203A, 200, 206AA, 206CC, 195(6)].

Why "at source" matters

The design addresses three problems at once. The first is cash flow for the Government: instead of waiting for 14 crore taxpayers to compute and pay their own tax in March, the State collects it month-by-month from the few lakh deductors who run the payment systems. The second is leakage protection: by the time income reaches the recipient, a portion is already in the Treasury, so the default rate on the recipient's share is reduced. The third is the audit trail: every deducted rupee creates a Form 168 record under Section 510 [old Section 285BB], which means the recipient cannot easily under-report it on their return.

TDS is a three-party transaction. Understanding which hat you're wearing in any given payment is the first step to compliance.

The Deductor

The Deductor is the person making the payment with a statutory duty to withhold. Under the Act 2025 framework, every business (proprietorship subject to audit under Section 63 [old Section 44AB], partnership firm, LLP, company, AOP, BOI, AJP, trust, society, government office, statutory corporation, and — for certain payments — even individuals and HUFs not subject to audit) can become a deductor the moment a triggering payment is made.

The Deductee

The Deductee is the recipient of the payment — the salaried employee, the contractor, the landlord, the partner, the non-resident remittee. The deductee has a corresponding statutory entitlement: a TDS certificate from the deductor (Form 130 for salary, Form 131 for non-salary payments under the renumbered Rules 2026 framework — formerly Forms 16 and 16A) and credit for the deducted amount under Section 396 [old Section 198] read with Rule 203 of the Income Tax Rules 2026 (the successor to old Rule 37BA — credit for tax deducted or collected at source).

The Government as collector and credit-allocator

The Government, acting through the Central Board of Direct Taxes (CBDT) and the field directorate, is both collector and credit-allocator. The deposited TDS lands in the Centre's account against the deductee's PAN; the Income-tax Department then pre-populates the deductee's Form 168 (Annual Information Statement under Section 510 [old Section 285BB]), which the deductee uses to claim credit on their own return. The credit-allocation engine sits at TRACES (transitioning to TRACES 2.0 — see Section 14).

Effective date, scope, transitional rules

The Income Tax Act 2025 received Presidential assent in 2025 and came into force on 1 April 2026. Since that date, all assessments, deductions, collections, and procedures are governed by the new Act and the corresponding Income Tax Rules 2026 (notified by CBDT vide Notification No. 22/2026, G.S.R. 198(E) dated 20 March 2026, with effect from 1 April 2026). The old Income Tax Act 1961 stands repealed by Section 536(1) [old Section 297] of the Act 2025 — the repeal-and-savings clause — with savings preserving open assessments, pending appeals, accrued rights, and existing TANs / PANs / TRACES logins.

The structural shift is significant. The 1961 Act ran across more than 800 sections accumulated over six decades of amendments; the 2025 Act consolidates the same body of law into 23 chapters, 536 sections, and 16 schedules, abolishes the previous-year / assessment-year distinction in favour of a single Tax Year, and consolidates the entire TDS / TCS code into a single chapter — Chapter XIX (Sub-part B), Sections 390-402.

Old-Act → new-Act section mapping (TDS-relevant)

For TDS practitioners, the key insight is that the structure has moved — the substance (rates, thresholds, machinery) is largely preserved, with rate-chart entries now appearing as serial-numbered items inside Sections 393 (TDS) and 394 (TCS) rather than as standalone Sections 194A, 194B, 194C, etc.

Four levies look similar to the layperson; they are distinct in law and operation. The differences matter when you get a notice, when you reconcile your Form 168, and when you negotiate with a vendor about who deducts what.

TDS vs TCS

TDS (Tax Deducted at Source, Section 392 / 393 [old Sections 192 / 193-197A]) is withheld by the payer out of an outgoing payment. TCS (Tax Collected at Source, Section 394 [old Section 206C]) is added by the seller to an incoming payment. A buyer pays ₹100 + 1% TCS = ₹101 to the seller; the seller deposits ₹1 with the Government against the buyer's PAN. TCS principally applies to motor vehicles and notified luxury goods above ₹10 lakh, scrap, alcohol for human consumption, foreign-tour packages, and remittances under the Liberalised Remittance Scheme. One important carve-out: under Section 394(2) read with Rule 212 of the Income-tax Rules 2026 (the successor to old Rule 37C), a buyer who furnishes a declaration in Form 127 (the successor to old Form 27C) that the goods will be used for manufacturing, processing, or producing articles or things, or for generating power is fully exempt from TCS on Section 394(1) Sl. 1-5 receipts (alcohol, tendu leaves, timber, scrap, minerals). This is a paper-driven exemption — the seller relies on the Form 127 in the buyer's hands, files it with the Principal Chief Commissioner, and stops collecting TCS on that buyer.

TDS vs Advance Tax

Advance Tax (Section 403 [old Section 207]) is paid by the assessee directly in four instalments (15 June, 15 September, 15 December, 15 March) when their non-TDS-covered tax liability for the tax year is expected to exceed ₹10,000. TDS is paid for the assessee by a third party. The two are pre-paid taxes; both reduce the final liability on the ITR.

TDS vs Income Tax

Income Tax is the final liability computed at year-end on total income. TDS is one of several methods of pre-payment (others: Advance Tax, Self-Assessment Tax). On the return, the assessee aggregates total tax liability, subtracts TDS + Advance Tax + Self-Assessment Tax + foreign-tax credit, and the residual is either a payable or a refundable.

How to read the rate chart

Three columns matter most. Rate is the standard percentage applied to the gross payment when the deductee has a valid PAN. No-PAN rate is the higher rate triggered by Section 397(2) [old Section 206AA] when PAN is not furnished or is inoperative — typically 20%, sometimes the rate itself if higher. Threshold is the de minimis below which no deduction is required; once the threshold is crossed in the tax year, the deduction generally applies to the entire payment (not only the excess), unless the section text says otherwise.

The new-Act citation column shows the Section 393 / 394 serial number under which the entry now lives. The serial number reads as Section 393(sub-section), Sl. number(letter-sub-clause) — for example 393(1), Sl. 6(iii)(b) is sub-section (1), serial 6, clause (iii), sub-clause (b). The Income-tax Act 2025 uses lower-case roman numerals for clauses inside a serial entry and lower-case letters for sub-clauses inside a clause.

A note on the (a) / (b) shorthand at Sl. 6(iii) — Professional and Technical Fees. For ease of cross-referencing with the rate column, this guide adopts a rate-pivot shorthand at Sl. 6(iii) that may differ from the bare statutory sub-letter sequence: "(a)" denotes the 2% rate sub-bucket (technical services + cinematograph royalty + call-centre operations); "(b)" denotes the 10% rate sub-bucket (professional fees + director remuneration + sums referred to in Section 26(2)(h)). The Income-tax Act 2025's bare statutory sub-letters at Sl. 6(iii) follow a different ordering — when responding to a notice or assessment that cites a specific statutory sub-letter, fall back to the bare-Act sub-letter sequence rather than the rate-pivot shorthand used in this guide.

"Rates in force" for Sl. 17 corresponds to the Finance Act 2026 First Schedule, Part II — typically 30% for NR individuals (slab if higher applies) and 35% for foreign companies, plus surcharge per Part II and 4% cess. The same First Schedule supplies the 35% (foreign company) / 30% (NR non-corporate) bifurcation that appears at Sl. 6 (rental pass-through), Sl. 8 (investment fund) and Sl. 9 (securitisation trust) of Section 393(2) — the chart's "Rates in force" descriptor at those serials should be read as the First Schedule rates. Section 196 (Government / RBI / approved MFs / Schedule VII statutory bodies — for Mutual Funds, the relevant entries are at Schedule VII Sl. 20 and Sl. 21) is now Section 393(5) — a self-executing no-deduction rule, not a row in the Section 393(2) table. Section 195A grossing-up is now Section 393(10), again a mechanism, not a Sl. row. Three further sub-sections of Section 393 carry forward old Section 197A carve-outs: Section 393(8) is the successor to old Section 197A(1D) (interest payable to an Offshore Banking Unit — exempt from deduction); Section 393(9) is the successor to old Section 197A(1E) (income receivable by the NPS Trust — exempt from deduction); and Section 393(11) is the suspense-account deeming fiction (where an amount payable on which tax is deductible is credited to a "suspense account" or any account by whatever name called, the credit is deemed to be credit of such income to the account of the payee — preventing avoidance through accounting nomenclature). Treaty relief always runs through Section 159 [old Sections 90 / 90A]: apply the more-beneficial of statute vs DTAA only after collecting TRC + Form 41 (the Rules-2026 successor to old Form 10F, prescribed under Rule 75(1) read with Section 159(8) of the Act).

When DTAA overrides the rate

For a non-resident payee, the rate to apply is the more beneficial of the statutory rate in Section 393(2) and the rate in the relevant Double Taxation Avoidance Agreement under Section 159 [old Sections 90, 90A]. To claim treaty relief, the deductee must furnish a valid Tax Residency Certificate (TRC) plus the self-declaration in Form 41 (the Rules-2026 successor to old Form 10F, prescribed under Rule 75(1) read with Section 159(8) of the Act). Treaty rates of 10% on royalty / FTS, and 5% / 7.5% / 10% on interest depending on the country, are common.

When Section 397(2) (old Section 206AA) applies

If the deductee has not furnished a PAN, has furnished an invalid / inoperative PAN, or — for a non-resident — does not meet the conditions for treaty-based PAN exemption under the Rule-217-of-Rules-2026 framework (the successor to old Rule 37BC) referenced in Section 397(2), Section 397(2)(b)(i) mandates deduction at the higher of (a) the rate in the Act, (b) the rate in force, or a special-floor rate which itself splits into two cases under clause (C): (C1) 5% where the deduction is required under Section 393(1) Sl. 8(ii) [Section 194Q goods purchase] or Section 393(1) Sl. 8(v) [Section 194-O e-commerce participant]; (C2) 20% in any other case. So for Section 194Q / Section 194-O the no-PAN floor is 5%, and for everything else it is 20%. For TCS, the parallel rule at Section 397(2)(b)(ii) sets the floor at the higher of twice the specified rate or 5%, capped at 20%. This is not a penalty — it is a primary statutory rate trigger.

Twelve everyday payment categories. For each, the new-Act citation is primary; the old Section 194-series citation is parenthetical.

When two sections appear to apply — overlap resolution

In several routine commercial transactions, two TDS or TCS provisions can appear to apply to the same gross receipt. The resolution principles that crystallised through judicial pronouncements and CBDT circulars under the 1961 Act continue to apply for FY 2026-27.

• Section 194Q [Section 393(1) Sl. 8(ii)] vs Section 206C(1H) — RESOLVED. The seller's TCS obligation under old Section 206C(1H) on goods sales above ₹50 lakh was abolished with effect from 1 April 2025 (FY 2025-26) by the Finance Act 2025. From FY 2026-27 onwards, only the buyer's deduction under Section 393(1) Sl. 8(ii) at 0.1% applies on a goods transaction above ₹50 lakh per seller per year. The overlap is gone at source.
• Section 194C [Section 393(1) Sl. 6(i)] vs Section 194J [Section 393(1) Sl. 6(iii)] — risk-and-control test. Turnkey software development is generally a fee for technical services or royalty under Section 194J. Body-shopped manpower / labour supply is a contractual payment under Section 194C. The line turns on which party bears professional risk and retains technical control over the output.
• Section 194C [Section 393(1) Sl. 6(i)] vs Section 194-I [Section 393(1) Sl. 2(ii)] — operating-risk test. In vehicle-hire arrangements, the consideration is rent under Section 194-I where the hirer takes exclusive use of the vehicle without bearing fuel / driver / maintenance cost. It is a contractual payment under Section 194C where the arrangement is trip-wise / contract-wise and the operator retains control over fuel, driver, and maintenance.
• Section 194R [Section 393(1) Sl. 8(iv)] vs Section 194Q [Section 393(1) Sl. 8(ii)] — characterisation test. Goods provided free of cost as a benefit or perquisite are covered by Section 194R at 10% of fair-market value of the benefit. A quantity discount embedded in the invoice forms part of the goods consideration and stays within Section 194Q. This characterisation is governed by CBDT Circular No. 12/2022 dated 16 June 2022 (Q.3 and Q.4) read with Circular No. 18/2022 dated 13 September 2022. Both circulars were issued under Section 119 of the 1961 Act (now Section 239 of the Act 2025) and continue in operation under Section 536(2)(j) (repeal and savings) of the Act 2025 to the extent not inconsistent with the new Act — the underlying Section 194R / Section 194Q provisions have been carried forward substantively into Section 393(1) Sl. 8(iv) / 8(ii) without change to the rate or charge, so the characterisation guidance in these circulars remains applicable.
• Section 194M [Section 393(1) Sl. 6(ii)] vs Section 194C / Section 194J [Section 393(1) Sl. 6(i) / 6(iii)] — residual rule. Section 194M is a residual provision applicable to individual / HUF payers whose aggregate payments to a resident exceed ₹50 lakh in a tax year but who are not otherwise obliged to deduct under Section 194C or Section 194J. Under the Act 2025 this is consolidated under Section 393(1) Sl. 6(ii) and is reported on Schedule C of the unified Form 141, per the official Form 141 guidance note issued by CBDT.
• Section 194-O [Section 393(1) Sl. 8(v)] vs Section 194C / Section 194J [Section 393(1) Sl. 6(i) / 6(iii)] — precedence rule. Where goods or services of a resident e-commerce participant are sold through an operator's digital platform, Section 194-O takes precedence over Section 194C and Section 194J on the same gross receipt. The e-commerce operator deducts at 0.1%, and no further deduction arises in the participant's hands on the same receipt.

When Section 393(2) applies

The moment a payment is made — or credited — to a non-resident (individual, NRI, foreign company, foreign LLP) and the payment is chargeable to tax in India under Section 9 [old Section 9] of the Act 2025, the payer is bound to deduct under Section 393(2) [old Section 195]. Unlike the resident regime, there is no de-minimis threshold — the duty triggers from the first rupee. The rate column to consult is Table D above.

How DTAA + Tax Residency Certificate change the rate

Where India has a DTAA with the recipient's country (over 90 comprehensive DTAAs and around eight limited DTAAs in force as of FY 2026-27 — verify the live count against the Income Tax Department's DTAA directory), Section 159 [old Section 90] permits the more-beneficial of statute-or-treaty. To activate the treaty rate, the deductee must furnish: a valid Tax Residency Certificate (TRC) from the foreign tax authority, a self-declaration in Form 41 (the Rules-2026 successor to old Form 10F, under Rule 75), and a No-PE declaration if the payment relates to business profits / FTS. Without these, the statutory rate (often 20% basic + 4% cess + applicable surcharge) applies.

Form 145 / Form 146 remittance certification

Every foreign remittance (subject to limited exclusions) requires the remitter to file information in Form 145 (the Rules-2026 successor to old Form 15CA, prescribed under Rule 220 of the Income-tax Rules 2026 — formerly the Section 195(6) framework with Rule 37BB) on the Income-tax e-Filing portal. Form 146 — a Chartered Accountant's certificate (the successor to old Form 15CB, also under Rule 220) — is required in Part C of Form 145 where the aggregate taxable remittance exceeds ₹5 lakh per tax year and no certificate under Section 395 has been obtained from the Assessing Officer. The bank / authorised dealer will not process the SWIFT instruction without these forms — see our Form 145 / 146 filing guide for the full procedure, thresholds, and exclusions.

Sections 196, 196A, 196B, 196C, 196D — special non-resident regimes

These five old sections map across the Section 393 architecture — Section 196 to the standalone Section 393(5) exemption, and Sections 196A–D to specific Sl. Nos. inside the Section 393(2) non-resident table:

• Section 196 → Section 393(5) — payments to Government, RBI, specified statutory corporations, and Mutual Funds are wholly exempt from deduction. The Schedule VII Sl. 20/21 reference attaches specifically to the Mutual Fund entries within the Schedule VII list of exempt entities (Government and statutory bodies sit at much earlier serial numbers in Schedule VII). Section 196 is not inside the Section 393(2) NR table — it is the standalone exemption sub-section under Section 393.
• Section 196A → Section 393(2) Sl. 10 — units of Mutual Funds paid to a non-resident: 20% (or DTAA, if more beneficial).
• Section 196B → Section 393(2) Sl. 11 + Sl. 12 — Sl. 11 covers income from offshore-fund units at 10%; Sl. 12 covers long-term capital gains on transfer of those units at 12.5%.
• Section 196C → Section 393(2) Sl. 13 + Sl. 14 — Sl. 13 covers interest / dividends on foreign-currency bonds and GDRs of an Indian company at 10%; Sl. 14 covers long-term capital gains on transfer of those bonds / GDRs at 12.5%.
• Section 196D → Section 393(2) Sl. 15 + Sl. 16 — Sl. 15 covers FII income from securities at 20% (or DTAA, if more beneficial); Sl. 16 covers IFSC Specified Fund income at the concessional 10%.

Section-by-section threshold table

The threshold question — "does this payment trigger a deduction at all?" — is answered with reference to the schedule appended to Section 393. Crossing the threshold typically applies the rate to the full payment, not only the excess. Thresholds are per deductee, per tax year, aggregated across all payments of that nature from the same deductor.

Form 121 — self-declaration for residents below threshold (old Form 15G)

A resident (other than company / firm) whose estimated total income is below the basic exemption can furnish Form 121 to the deductor (typically a bank) to claim nil deduction. Form 121 consolidates the old Forms 15G (residents below 60) and 15H (senior citizens 60+) into a single declaration with age-based eligibility built in. The provision is Section 393(6) read with Section 393(7), prescribed under Rule 211 of the Income-tax Rules 2026 (the Rules-2026 successor to old Section 197A read with Rule 29C of the 1962 Rules).

Form 121 — the senior-citizen variant

Senior citizens (60+) can furnish Form 121 in their tax year for nil deduction on bank interest up to the higher senior-citizen threshold. For specified senior citizens — defined at Section 402(39) of the Act 2025 (resident, 75 years or older, with only pension and interest income from the same specified bank, and no business income) — the consolidated Section 393(1) Sl. 8(iii) [old Section 194P] mechanism allows the specified bank to compute the senior's total income, apply rebate / chapter-VI-A relief, and discharge the entire tax liability at source. The deduction provision sits at Section 393(1) Sl. 8(iii); the paired return-filing exemption for the same class is housed in Section 263(8)(b) [old Section 194P read with the seventh proviso to old Section 139(1)]. The bare text of Section 263(8)(b) is precise: "the provisions of this section [Section 263, the return-filing section] shall not apply to a specified senior citizen, as referred to in section 402(39), for the relevant tax year in which tax has been deducted at source under section 393(1) [Table: Sl. No. 8(iii)]." Once the bank has discharged the tax under Sl. 8(iii), the specified senior citizen is exempt from filing a return for that tax year — the two provisions (Section 393(1) Sl. 8(iii) and Section 263(8)(b)) work as a tightly-coupled pair.

Section 395 [old Section 197] lower / nil deduction certificate

Where a deductee can demonstrate that the standard deduction rate is excessive (e.g., the recipient enjoys a lower effective tax slab or has carry-forward losses), they apply to the Assessing Officer in Form 128 (Rule 213 — the Rules-2026 successor to old Form 13) for a lower or nil deduction certificate under Section 395(1) [old Section 197]. A separate, NR-specific route exists in Form 126 (Rule 209) — successor to old Forms 15C/15D — for non-resident entities operating through Indian branches who want a nil-deduction certificate on interest / other sums. The certificate, once issued, is valid for the tax year specified and binds the named deductor. Section 395(6) (inserted by Finance Act 2026) also enables an alternative electronic-route — the application can now be filed before the prescribed income-tax authority with electronic verification, in addition to the AO route.

Section 395 [old Section 197A] self-declaration alternative

For specified categories of receipt — bank interest, mutual-fund income, EPF withdrawal — the recipient can short-circuit the AO route by filing the Form 121 self-declaration directly with the deductor (the successor to the old Section 197A regime), provided their total tax for the year is estimated to be nil.

Get a TAN first (Section 397(1) [old Section 203A])

A Tax Deduction and Collection Account Number (TAN) is a 10-character alphanumeric (e.g., MUMR12345T) issued by the Income-tax Department on application in Form 134 (Government deductors) / Form 135 (other deductors), per Rule 216. Deductors use the TAN — not the PAN — in every challan, return, and certificate. A business operating from multiple branches may apply for branch-wise TANs. Without a TAN, you can deduct but you cannot deposit, file, or issue valid certificates — the entire chain breaks.

Monthly deposit cycle and Section 397(3) due dates

The default rule (Rule 218(2)): TDS deducted in any calendar month must be deposited to the Central Government by the 7th of the following month. The March exception: TDS deducted in March must be deposited by 30 April (the extra time accommodates the year-end ledger crystallisation). Government-deductor cycles are tighter under Rule 218(1) — same-day deposit where tax is paid without an income-tax challan (the typical book-entry / Form 137 route); 7th of the following month where tax is paid accompanied by an income-tax challan.

The Rule 218(3) carve-out — the 30-day-from-month-end window with Form 141. Four categories of payment do not follow the 7th-of-next-month default and instead follow a single unified rhythm: deposit within 30 days from the end of the month of deduction, accompanied by a challan-cum-statement in Form 141 (which doubles as the TDS statement under Rule 219(5), so no separate quarterly Form 140/144 is filed for these). The four categories are:

1. Rent under Section 393(1) Sl. 2(i) (old Section 194-IB — individual/HUF non-audit).
2. Immovable property purchase under Section 393(1) Sl. 3(i) (old Section 194-IA).
3. Contractor / professional / commission / brokerage payments under Section 393(1) Sl. 6(ii) (old Sections 194C / 194J / 194H — but only for the unified Sl. 6(ii) head; the regular Sl. 6 sub-heads continue under Rule 218(2)).
4. Virtual digital asset (VDA) transfers under Section 393(1) Sl. 8(vi) (old Section 194S).

For these four heads the certificate is Form 132 — issued within 15 days of the Form 141 due date under Rule 215(1) Sl. 3. Practitioners should treat the Rule 218(3) regime as a parallel track with its own deposit, statement, and certificate workflow distinct from the mainstream 7th-of-next-month + Form 140 + Form 131 cycle.

How to pay TDS online

The payment lives on the e-Filing portal under e-Pay Tax → New Payment → TDS / TCS Payable by Taxpayer. The deductor selects the assessment-year successor field (now "Tax Year" under the Act 2025 portal screens), the TAN, the section code, and the head of payment, then pays via internet banking, UPI (under ₹10,000 challans), or debit card.

Challan 281 — fields, payment heads, common mistakes

Challan 281 is the TDS / TCS challan; the major / minor head architecture continues from the pre-2026 framework, with the substantive payment identifier under the Income Tax Rules 2026 now being the four-digit Payment Code (1001-1092). Confirm the active challan layout against the live Protean (NSDL) and e-Filing portal listings before each deposit cycle, as the Income-tax Department has not formally re-notified the Challan 281 schema for Act 2025 payments at the time of writing. Three fields cause 80% of the post-payment correction work:

1. Tax Year selection — under the new portal, ensure you pick "Tax Year 2026-27" not "AY 2027-28" (old terminology is being phased out; both fields visible in the 2026 transition window).
2. Section code — 1004–1067 (domestic), the 393(2) Sl. range (non-resident), the 394(1) Sl. range (TCS). A wrong code routes the challan to the wrong head; corrections via OLTAS-CCS or through the AO take 4–6 weeks.
3. Major / Minor head — Major 0021 (non-company) vs 0020 (company); Minor 200 (TDS regular) vs 400 (TDS regular assessment). Mixing these is the most common reason a challan does not auto-match a return.

Which form for which payment type

The deductor files one quarterly return per form-type per quarter. Each form covers a distinct universe of payments.

Quarterly due dates

The return is due on the last day of the month following each quarter. Q4 alone has an extra month (extending to 31 May 2027) for the same year-end-ledger reason that extends the March deposit.

Correction returns

When TRACES processing throws a default — short-deduction, short-payment, PAN-mismatch, late-payment-interest demand — the deductor files a correction return (.fvu revised file) under the Section 397(3)(f) framework (the express correction-statement authority; the original quarterly statement is filed under Section 397(3)(b)). The most common correction is a PAN-mismatch fix; the second is a challan-deductee re-mapping.

Form 130 (salary)

The Rules-2026 Form 130 (the successor to old Form 16) is the year-end salary-TDS certificate. The employer downloads Part A from TRACES (digitally signed) and prepares Part B (salary-and-perquisite computation, deductions, tax computed). Issue deadline (Rule 215(1) Sl. 1): by the 15th June of the financial year immediately following the tax year in which the income was paid and tax deducted — i.e., 15 June 2027 for FY 2026-27.

Form 131 (non-salary)

Form 131 (the successor to old Form 16A) is issued quarterly. Per Rule 215(1) Sl. 2, the 15-day clock runs from the statutory due date for furnishing the quarterly statement under Rule 219 — not from the actual date of filing. So for Q1 (return due 31 July 2026), Form 131 is due by 15 August 2026, even if the deductor files the return earlier. It carries the deductee's PAN, the section code, the gross amount, the deducted amount, and the challan reference. The deductee uses it both to claim credit on their ITR and to chase the deductor for any missing amount that does not show up in Form 168.

Form 132 and Form 141 — the Rule 218(3) track

The Rules-2026 framework draws a cleaner line between the deposit-and-statement instrument and the certificate to the deductee for the four Rule 218(3) heads (rent under Sl. 2(i), property under Sl. 3(i), contractor / professional under Sl. 6(ii), and VDA under Sl. 8(vi)).

• Form 141 — the unified challan-cum-statement that the deductor uses to deposit the tax and simultaneously discharge the statement obligation under Rule 219(5). Form 141 replaces the legacy challan-cum-statements Form 26QB (property under Section 194-IA), Form 26QC (rent under Section 194-IB), Form 26QD (Section 194M payments by non-audit individuals), and Form 26QE (VDA under Section 194S). The deductor pays-and-files on the same form via the e-Filing portal — there is no separate quarterly Form 140 / 144 for these heads.
• Form 132 — the unified certificate issued to the deductee, which the e-Filing system auto-generates within 15 days of the Form 141 due date (Rule 215(1) Sl. 3). Form 132 replaces the legacy certificates Form 16B (property), Form 16C (rent by individual), Form 16D (Section 194M), and Form 16E (VDA). The deductor downloads it and forwards to the deductee for ITR-credit chase-up.

Practitioner mnemonic: legacy 26Q-series → Form 141; legacy 16-series (B/C/D/E) → Form 132. The two are sequential — Form 141 first (deposit-cum-statement), Form 132 second (certificate, 15 days later).

Generating certificates from TRACES (and TRACES 2.0)

For Forms 138 / 140 / 144 returns, the certificate-generation request lives at TRACES (transitioning to TRACES 2.0). After return processing closes (3–7 days post-upload), the deductor logs in, selects the form-quarter combination, and requests certificate generation. The .zip file with all PAN-wise certificates (Form 130 for Form 138 salary returns, Form 131 for Form 140 / 144 non-salary returns, Form 133 for Form 143 TCS returns) arrives in the deductor's TRACES inbox within 24 hours; the deductor opens it via the TRACES PDF Generation Utility and distributes.

What Form 168 shows

The new Income Tax Act 2025 reorganises taxpayer information into a single statutory artefact under Section 510 [old Section 285BB]: the Annual Information Statement, available on the e-Filing portal as Form 168 (the renumbered successor to old Form 26AS). Form 168 captures, against the deductee's PAN, every TDS deducted on their behalf, every TCS collected, every advance-tax / self-assessment-tax challan paid, every refund issued, every high-value financial transaction reported by banks / mutual funds / property registrars, and every demand or refund pending.

Annual Information Statement (AIS)

The AIS is the wider information dossier underlying Form 168. It includes Form-168 entries plus reportable financial transactions under the SFT framework (Section 508 [old Section 285BA]) — large cash deposits, mutual-fund purchases, foreign remittances, securities trades, property registrations.

Taxpayer Information Summary (TIS)

The TIS is the AIS summarised category-wise. It is the form most useful at ITR-filing time because it pre-fills several income-head fields on the e-Filing return utility.

Form 130 vs Form 168 — a quick comparison

Reconciling Form 168 to your TDS certificate

Mismatches between your Form 168 and your TDS certificate generally fall into one of three classes. A quantum mismatch (Form 168 shows ₹4,500 while the certificate shows ₹5,000) indicates that the deductor under-deposited or wrongly tagged the challan — the fix is to chase the deductor before filing your return. A PAN mismatch (the certificate carries your PAN but Form 168 shows nothing) means the deductor used a wrong PAN in the return and must file a correction return (see Section 10) to remap the entry. A challan-not-matched mismatch (the deduction shows but is flagged "U" for unmatched) means the deductor's challan failed OLTAS-reconciliation; the deductor must rectify on TRACES before the entry appears in your Form 168.

Claiming TDS credit and refund

You sign in to the e-Filing portal, prepare your ITR, the system pre-populates TDS from Form 168, you cross-check against your physical certificates, you compute final liability minus pre-paid taxes (TDS + Advance Tax + Self-Assessment Tax), and the residual is either payable or refundable. Refunds are credited directly to the bank account pre-validated on the e-Filing portal.

Section 398 [old Sections 201, 206C(7)] — interest

Interest under Section 398(3) has two heads: 1% per month for failure to deduct (running from the date the deduction was due to the date the deduction was made), and 1.5% per month for failure to deposit (running from the date the deduction was made to the date the deposit was made). Computation is per month or part thereof. A 16-day delay attracts the same one-month interest as a 1-day delay.

Section 427 [old Section 234E] — late-statement fee

A deductor who files the quarterly return (Form 138 / 140 / 144 / 143) after the due date pays ₹200 per day of delay as a late-fee under Section 427. The fee is capped at the amount of tax deductible or collectible under Section 427(2)(a) — so a return whose deductible TDS is ₹15,000, 100 days late, attracts a fee of ₹15,000 (not ₹20,000).

Section 461 [old Section 271H] — penalty for non-filing

Beyond the late fee under Section 427, a non-filer also exposes itself to a separate penalty under Section 461 ranging from ₹10,000 to ₹1,00,000. The Assessing Officer has discretion. The penalty is not leviable if the return is filed within one month of the due date and all interest plus fee plus tax has been paid (Section 461(2)(b) — note that the 30-day cure window was introduced by the Finance (No. 2) Act 2024 amending old Section 271H(3) effective 1 April 2025, replacing the earlier one-year waiver, and was carried into Section 461 of the Act 2025 as enacted. Finance Act 2026 made no further change to this provision. Practitioners migrating from the pre-2024 1961-Act regime should rebuild their internal SLAs around the 30-day cure period; those migrating from the FY 2025-26 position will see no change).

Section 476 [old Section 276B] — prosecution for failure to pay TDS

The most severe consequence: a deductor who deducts TDS but fails to deposit it to the Central Government can be prosecuted under Section 476. Section 476 was substituted in toto by Finance Act 2026 (w.e.f. 1 April 2026) — replacing the old 1961-Act regime of "rigorous imprisonment of 3 months to 7 years, with fine" with a tiered scale of simple imprisonment, or fine, or both, with two distinct charge-grounds under the substituted Section 476(1):

Section 476(1)(a) — the general charge: failure to pay tax deducted at source to the credit of the Central Government, as required by or under the provisions of Chapter XIX-B.

Section 476(1)(b) — two specific charges where the failure is to "ensure payment":

• (A) any income by way of winnings from online games referred to in Section 393(3) [Sl. 2], excluding winnings wholly in kind under Note 2 to that Table; and
• (B) any sum by way of consideration for transfer of a virtual digital asset referred to in Section 393(1) [Sl. 8(vi)], excluding consideration wholly in kind under Note 6 to that Table.

The reason Section 476(1)(b) lists these two specifically: in both cases, where the prize / consideration is partly in kind and partly in cash (or wholly in kind with cash insufficient to discharge the tax), the deductor is statutorily required to ensure payment of the tax before releasing the benefit — a "tax-before-release" obligation. Section 476(1)(b) prosecutes the failure to ensure that payment. Wholly-in-kind cases are excluded because in those cases the tax-before-release mechanism applies and the failure is governed differently.

The punishment scale (applies to both Section 476(1)(a) and Section 476(1)(b)):

• (i) Where the unpaid tax exceeds ₹50 lakh — simple imprisonment up to 2 years, or with fine, or with both.
• (ii) Where the unpaid tax exceeds ₹10 lakh but does not exceed ₹50 lakh — simple imprisonment up to 6 months, or with fine, or with both.
• (iii) In any other case — with fine (no imprisonment risk).

This is a substantial liberalisation from the pre-substitution regime. Three changes are worth flagging for client briefings: imprisonment changed from rigorous to simple (a legally meaningful distinction — rigorous imprisonment includes hard labour); defaults of ₹10 lakh and below carry no imprisonment risk at all (only fine); and the upper-tier maximum dropped from 7 years to 2 years. The prior regime carried 3 months rigorous imprisonment as the floor for any default, however small.

Section 476(2) statutory safe harbour: Section 476 shall not apply if the deducted amount has been paid to the credit of the Central Government on or before the time prescribed for filing the Section 397(3)(b) statement (the quarterly TDS return). This means: even where a deductor has missed the Section 397(3)(a) monthly deposit deadline (the 7th of the following month), prosecution risk is extinguished if the payment is made before the corresponding quarterly return due date (31 July / 31 October / 31 January / 31 May). The safe harbour does not cure the Section 398(3) interest at 1.5% per month — that interest still runs from the deduction date — but it does close down the Section 476 prosecution exposure. Important narrowing — scope of Section 476(2): the safe harbour is anchored to "the payment referred to in sub-section (1)(a)" and therefore covers only the general TDS-deposit charge under Section 476(1)(a). It does not extend to the Section 476(1)(b) charges relating to (A) winnings from online games under Section 393(3) Sl. 2 or (B) consideration for transfer of a virtual digital asset under Section 393(1) Sl. 8(vi) — for those two charge-grounds the "tax-before-release" obligation cannot be cured retrospectively by the Section 397(3)(b) deadline, and prosecution exposure is independent of the quarterly-return safe-harbour window.

Section 477 [old Section 276BB] — prosecution for failure to pay TCS

Section 477 was substituted in parallel by Finance Act 2026 (w.e.f. 1 April 2026). The architecture mirrors Section 476:

• Section 477(1)(a) — failure to pay tax collected at source as required under Section 397(3)(a). Punishment scale: (a) >₹50 L = simple imprisonment up to 2 years or fine or both; (b) ₹10-50 L = up to 6 months or fine or both; (c) otherwise = fine only.
• Section 477(2) — same safe harbour: no prosecution if the collected tax is paid before the Section 397(3)(b) statement due date.

The pre-substitution regime read identically to old Section 276BB: rigorous imprisonment from 3 months to 7 years, plus fine. Same liberalisation logic: simple instead of rigorous, low-quantum tier carries no imprisonment, upper tier capped at 2 years.

Responding to a TRACES default notice

When a Form 138 / 140 / 144 return is processed and a default is flagged, TRACES (transitioning to TRACES 2.0) generates a Justification Report (the line-item breakdown of the default). The deductor downloads it, identifies the specific defect (short-deduction, short-payment, late-payment interest, PAN mismatch), files a correction return to fix the defect, and pays any residual interest / fee / penalty via Challan 281 with the appropriate minor head. Most defaults can be cleared in a single correction cycle if attended to within 30 days of the notice.

Why TRACES 2.0 was introduced

The legacy TRACES portal — operational from 2012-13 — had crossed its useful life. CBDT's TRACES 2.0 was launched on 1 April 2026, the same date as the Income Tax Act 2025 came into force, modernising the deductor / deductee compliance experience by converging the legacy TRACES, the e-Filing portal, and the NSDL / Protean upload flows into a single dashboard with an integrated login flow that uses the same credentials as the e-Filing portal (the old TAN + password + image-CAPTCHA route is replaced; the integration is operationally equivalent to single-sign-on for most practitioners, though CBDT has not formally documented it as SSO). CPC(TDS) Notification No. 01/2026 dated 28 March 2026 (effective 1 April 2026) — operationally tied to TRACES 2.0 but distinct from its launch — sets the procedure, formats, and standards for Form 121 UIN generation and Part-B furnishing under Section 393(6) and Section 393(7); it does not itself launch the portal.

New features for deductors and deductees

For deductors: a single dashboard showing all TANs, integrated TDS/TCS rate charts for FY 2026-27, open defaults, pending corrections, and a one-click OLTAS-challan-status enquiry. For deductees: an integrated Form 168 (replacing old Form 26AS) view with AIS / TIS reconciliation built in. Specific features such as in-portal mismatch flags, mobile-app rollout, and regional-language coverage are part of the announced CBDT roadmap; the deductor / deductee should confirm current availability against the live portal.

Migration timeline and login changes

Migration is staggered through 2026. Existing TRACES sessions remain valid throughout the transition window; deductors should expect a forced password reset on first TRACES 2.0 login. Saved bookmarks to specific legacy URLs (tdscpc.gov.in/...) currently redirect to the new portal — the formal sunset date for the legacy URLs has not been notified by CBDT at the time of writing; deductors should rebuild bookmarks against the live traces.tdscpc.gov.in paths.

Where to find justification reports, conso files, challan-status enquiry

Same locations as legacy TRACES, but with renamed menu paths: Defaults → Request for Justification Report; Statements / Payments → Request Conso File; Statements / Payments → Challan Status. The Conso File (consolidated statement of all returns filed for a quarter) is required input for any correction return in Form 138 / 140 / 144 / 143.

The single best operational habit a deductor can build is to lock the year's deposit and return-filing dates into the corporate calendar in April. The sequence below is the locked schedule for FY 2026-27.

How to set up alerts

A working alert system has three layers that reinforce each other. The first is calendar reminders set 7 days, 3 days, and 1 day before each due date, with the ledger-owner tagged on the reminder. The second is an internal SLA committing the finance team to close the previous month's deduction reconciliation by the 3rd of each month, leaving four clear days to prepare and deposit the challan. The third is a monthly calendar-sweep call between the deductor's compliance lead and their CA on the last working day of the month, where any imminent return-filing or certificate-issuance task gets flagged.

Go deeper on a specific topic

This guide is the overview. Detailed compliance guides for each area below will publish through FY 2026-27.