The transition to Financial Year (FY) 2026-27 (Assessment Year 2027-28) marks a historic milestone in India’s tax history. As of April 1, 2026, the Income Tax Act, 2025 has officially replaced the 1961 Act, bringing with it a more consolidated and digital-first approach to Tax Deducted at Source (TDS).
For businesses and individuals, staying compliant is no longer just about the rates—it’s about understanding the new section numbering and integrated filing systems. Below is the comprehensive TDS Rates Chart for 2026, designed for the users of elegalfilers.in.
1. What’s New in the Income Tax Act, 2025 – TDS Rates charts ?
The new Act has simplified the TDS landscape by consolidating dozens of complex sections into a more structured format, primarily under Section 393 (the new master section for TDS).
Key Changes for 2026-27:
- Threshold Rationalization: Many limits have been rounded up to simplify accounting. For example, the threshold for professional fees is now a uniform ₹50,000.
- Reduced Rates for Insurance: TDS on life insurance payouts has been slashed from 5% to 2% to encourage long-term savings.
- NRI Property Simplified: When buying property from an NRI, residents no longer need a TAN; you can now deduct TDS using just your PAN.
- Digital Audit Trails: It is now mandatory for deductors to use accounting software that maintains an un-editable audit trail for all TDS entries.
2. Comprehensive TDS Rates Chart (FY 2026-27)
A. Payments to Residents
| Section (New/Old) | Nature of Payment | Threshold Limit (₹) | TDS Rate |
| 192 | Salary | Basic Exemption Limit | Slab Rates |
| 194A | Interest on Bank/Post Office Deposits | 50,000 (1L for Senior Citizens) | 10% |
| 194C | Payment to Contractors/Manpower Supply | 30,000 (Single) / 1,00,000 (Yearly) | 1% (Ind/HUF) / 2% (Others) |
| 194H | Commission or Brokerage | 20,000 | 2% |
| 194-I(a) | Rent – Plant & Machinery | 50,000 per month | 2% |
| 194-I(b) | Rent – Land, Building, Furniture | 50,000 per month | 10% |
| 194-IA | Sale of Immovable Property | 50,00,000 | 1% |
| 194J(a) | Technical Fees / Call Centre / Royalty | 50,000 | 2% |
| 194J(b) | Professional Services (Doctors, CAs, etc.) | 50,000 | 10% |
| 194Q | Purchase of Goods (Turnover > 10Cr) | 50,00,000 | 0.10% |
| 194S | Virtual Digital Assets (Crypto/NFT) | 10,000 (50k for specified persons) | 1% |
| 194T | Payment to Partners (Salary/Bonus/Rem.) | 20,000 | 10% |
Important Note: Section 194T is a relatively new provision (effective from 2025) that requires partnership firms to deduct tax when paying salary or interest to their own partners.
B. Winnings and Special Payments – TDS Rates charts
| Section | Nature of Payment | Threshold Limit (₹) | TDS Rate |
| 194B | Lottery / Crossword / Puzzles | 10,000 | 30% |
| 194BA | Online Gaming Winnings | No Threshold | 30% |
| 194BB | Winnings from Horse Races | 10,000 | 30% |
| 194DA | Life Insurance Policy Payouts | 1,00,000 | 2% |
3. TDS on Salary (Section 192)
TDS Rates charts on salary remains unique as it is calculated based on the average rate of income tax applicable to the employee.
With the New Tax Regime being the default in 2026, employers must:
- Calculate the total taxable income after the ₹75,000 Standard Deduction.
- Apply the latest 2026 tax slabs (Zero tax up to ₹12.75 Lakh for salaried individuals).
- Deduct the monthly tax equivalent.
4. Consequences of Non-Compliance
The 2025 Act has introduced stricter automated penalties for defaults. If you are a deductor, keep these in mind for TDS Rates charts :
- Failure to Deduct: Interest @ 1% per month from the date tax was deductible to the date it is actually deducted.
- Failure to Deposit: Interest @ 1.5% per month from the date of deduction to the date of actual payment to the government.
- No PAN/Invalid PAN: If the payee does not provide a PAN, you must deduct tax at 20% (or the higher rate applicable to that section).
- Late Filing Fees (Section 234E): A fine of ₹200 per day for late filing of TDS returns (Form 24Q, 26Q, 27Q).
5. Transition Rule: Which Act to Follow?
A common point of confusion for FY 2026-27 is the transition from the 1961 Act to the 2025 Act. The rule is simple: The date of credit or payment (whichever is earlier) determines the law with New TDS Rates.
- Payment made on March 31, 2026: Follow the Income Tax Act, 1961.
- Payment made on April 1, 2026: Follow the Income Tax Act, 2025.
Even if a contract was signed in 2024, the TDS for any work done and paid for in May 2026 must be reported under the new section numbers (e.g., citing the 2025 Act tables).
6. Pro-Tips for Businesses in 2026 – New TDS Rates charts
- Verify PAN-Aadhaar Link: TDS at a higher rate applies if the payee’s PAN is “Inoperative.” Always verify the status on the portal before making a payment.
- Lower Deduction Certificates: Encourage payees with low taxable income to apply for Form 13 online. The new 2026 system allows for near-instant electronic lower-deduction certificates.
- TCS Integration: Remember that TCS (Tax Collected at Source) rates have been rationalized to a uniform 2% for many items like scrap, minerals, and overseas tour packages. Don’t confuse these with TDS rates.
Conclusion – TDS Rates charts
The TDS landscape for FY 2026-27 is designed to be more “frictionless.” While the rates for major categories like rent and contractors haven’t changed drastically, the procedural shift to the Income Tax Act, 2025 requires a careful update of your payroll and accounting systems.
At elegalfilers.in, we simplify compliance for you. Whether you need help filing your quarterly TDS returns or responding to a tax notice, our experts are just a click away.
Keep your business compliant and penalty-free. Contact elegalfilers.in today for expert tax management!
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