Income-tax Act, 2025: from 1 April 2026, TDS and TCS sit in Section 392 (salary), Section 393 (other payments) and Section 394 (TCS). For the common TDS categories below, rates and thresholds largely carry over, with changes noted where they apply; we keep the familiar section numbers (194C, 194J and so on) because contracts and invoices still use them. Several TCS rates did change from 1 April 2026 — scrap, minerals and alcoholic liquor moved to 2%, and overseas tour packages to a flat 2%.
Why TDS thresholds and rates change so often
Nearly every Union Budget adjusts something in the TDS framework — a threshold raised to reduce compliance burden on small payments, a rate reduced for a specific category, or occasionally a genuinely new section introduced, as happened with Section 194T on partner payments from 1 April 2025. Budget 2025 specifically raised the Section 194J threshold from ₹30,000 to ₹50,000 and the Section 194-I rent threshold from ₹2.4 lakh to ₹6 lakh a year, while reducing the Section 194-IB rate on rent paid by individuals and HUFs from 5% to 2%.
A business running its TDS deductions on a threshold or rate table that hasn't been updated since the last budget is either over-deducting (creating unnecessary cash-flow friction for its vendors) or under-deducting (creating a compliance exposure for itself) — neither is a small issue at scale across a full year's payments.
What this support typically covers
- Threshold and rate table maintenance — keeping the business's deduction logic current against the latest applicable rates, rather than a table set up once and never revisited.
- Vendor and payment classification — confirming which section applies to a given payment, since contractor payments, professional fees and technical service fees are often confused with each other despite different rates.
- Lower/nil deduction certificates — tracking and applying certificates a deductee has obtained from the department, so TDS isn't deducted at the standard rate where a certificate says otherwise.
- New provisions rolled out mid-year — building a newly introduced section, like 194T, into payroll or accounts payable processes before the first payment it applies to is made.
- TAN and PAN validation — checking deductee PAN validity, since a missing or invalid PAN triggers a higher TDS rate under Section 206AA.
How we support ongoing TDS compliance
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Baseline review
The client's current deduction practice is reviewed against the latest applicable rates and thresholds, identifying anything set up under an older rule that's since changed.
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Payment classification framework
A clear mapping of common payment types to the correct TDS section is set up, so accounts payable or payroll staff aren't making the classification decision from scratch on every transaction.
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Ongoing monitoring
Budget announcements and CBDT notifications affecting TDS are tracked through the year, and clients are told promptly when something in their existing setup needs to change.
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Feeding into quarterly returns
Correct deduction at source is what makes the quarterly TDS return straightforward — this work is coordinated with, and feeds directly into, the return filing itself.
Practical notes from our engagements
- Professional fees and technical fees deducted at the wrong rate. Section 194J covers both, at different rates (10% professional, 2% technical) — payments genuinely for technical services are sometimes deducted at the higher professional rate, or vice versa.
- Contractor payments not aggregated correctly across the year. Section 194C's ₹1,00,000 aggregate threshold applies across all payments to the same contractor in the year, not just a single contract — a business paying the same vendor across several smaller invoices needs to track the running total.
- Section 206AA higher-rate deduction missed for an invalid PAN. Where a deductee's PAN is invalid or not furnished, TDS is deducted at a higher prescribed rate — skipping this because "the vendor always provides a PAN" is a gap that surfaces only when one doesn't.
- Rate tables not updated after a mid-year notification. Not every TDS change is announced in the Budget — some come through CBDT notifications during the year, and a table only reviewed once a year at Budget time can miss these.
How we handle ongoing TDS/TCS compliance
We review a client's deduction practice against current rates at least once during the year, not only when a new engagement begins, and flag changes as soon as they're notified rather than waiting for the next quarterly return cycle to surface an outdated rate. Where a new section is introduced — as with Section 194T — we help build it into the client's existing payment processes before the first affected payment goes out.
Related services
Frequently asked questions
What changed in TDS rules from Budget 2025?
Several thresholds were raised, notably Section 194J (professional/technical fees) from ₹30,000 to ₹50,000 a year, and Section 194-I (rent) from ₹2.4 lakh to ₹6 lakh a year. The Section 194-IB rate on rent paid by individuals/HUFs was also reduced from 5% to 2%, and Section 206AB (higher TDS for non-filers) was removed.
What is Section 194T, and is it really new?
Yes — it's a genuinely new TDS provision, effective 1 April 2025, requiring 10% TDS on remuneration, interest, bonus or commission paid to a partner once payments exceed ₹20,000 in a year.
What happens if a vendor doesn't provide their PAN?
TDS is deducted at a higher rate prescribed under Section 206AA, rather than the standard rate for that category of payment.
Does the Section 194C contractor threshold apply per invoice or per year?
Both, in a sense — ₹30,000 per single contract, or ₹1,00,000 in aggregate payments to the same contractor across the year, whichever triggers first.
Can a vendor avoid TDS deduction if they have a lower or nil deduction certificate?
Yes, where the department has issued such a certificate for the specific deductor-deductee relationship and period — it needs to be tracked and applied, rather than TDS deducted at the standard rate regardless.
How often should we review our TDS rate tables?
At least once a year around Budget time, but also whenever a mid-year CBDT notification changes a specific rate or threshold — not every change comes through the annual Budget.
Does Section 194Q apply to every purchase transaction?
No — it applies to purchases from a resident seller above ₹50 lakh in a year, and only where the buyer's own turnover exceeded ₹10 crore in the preceding year.