New TDS Rules Under Income Tax Act 2025
New TDS Rules Under Income Tax Act 2025: What Businesses and Freelancers Should Know

India’s tax system is moving to a new structure under the Income Tax Act, 2025. A major update affects how TDS is deducted on contractor and professional payments, which now fall under Section 393. These rules become effective from 1 April 2026.

1. Move to Section 393
Contractor payments and professional fees that were earlier covered under Sections 194C and 194J are now combined under Section 393. The goal is to simplify compliance and provide clearer rules.
2. New TDS Rates (Effective April 2026)

Payments to Contractors

Payee TDS Rate Threshold
Individual / HUF 1% ₹30,000 single / ₹1,00,000 yearly
Company / Firm 2% ₹30,000 single / ₹1,00,000 yearly

Professional & Technical Services

Service Type TDS Rate Annual Threshold
Professional services 10% ₹50,000
Technical services 2% ₹50,000
Film royalty 2% ₹50,000
Call centre services 2% ₹50,000

High-Value Payments by Individuals/HUF

  • TDS Rate: 2%
  • Applies when payments exceed ₹50 lakh in a financial year
3. Important Practical Changes
  • Manpower supply is treated as contractor work with lower TDS rates.
  • Some advertising services may fall under professional service rules.
  • Extra TDS for non-filers has been removed, but PAN is still mandatory.
4. Compliance Checklist
  • Update accounting software for new section mapping.
  • Verify vendor PAN details.
  • Review manpower and service contracts.
  • Train finance teams on updated rates.
Final Note

The new structure simplifies TDS rules but requires preparation. Understanding the updated rates and classifications now will help businesses transition smoothly in April 2026.