New TDS & TCS Rules: FY 2025-26 Guide
While these changes apply to all transactions in Financial Year (FY) 2025–26, they will officially reflect in your tax returns for Assessment Year (AY) 2026–27. Here is everything you need to know to stay compliant.
1. Key Changes in TDS (Payments to Residents)
The government has streamlined many sections to simplify the filing process. Most common payments now fall under the new 393(1) mapping.
| Category | New Code | Rate |
|---|---|---|
| Salary (Govt & Others) | 1001 - 1003 | Slab Rates |
| PF Withdrawal | 1004 | 10% |
| Insurance/Brokerage Commission | 1005 - 1006 | 5% / 2% |
| Rent (Plant & Machinery) | 1008 | 2% |
| Rent (Land & Building) | 1009 | 10% |
| Contractor Payments | 1023 - 1024 | 1% |
| Professional Fees (Tech/Royalty) | 1026 | 2% |
| Professional/Director Fees | 1027 - 1028 | 10% |
| Purchase of Goods (> ₹50L) | 1031 | 0.1% |
| E-Commerce Transactions | 1035 | 1% |
2. TCS Rate Revisions: Cheaper vs. Costlier
Luxury Goods & Materials
- Liquor, Scrap, and Minerals: Now 2% (increased from 1%).
- Tendu Leaves: Now 2% (decreased from 5%).
- Luxury Items: A flat 1% TCS now applies to high-value purchases (over ₹10 Lakhs) including watches, art, yachts, and sportswear (Codes 1076–1085).
Foreign Remittances (LRS) & Travel
Good news for travelers and students! Many rates have been slashed:
- Education/Medical (LRS): Dropped to 2% (from 5%).
- Overseas Tour Packages: Now only 2% regardless of the amount (previously up to 20% for packages above ₹10L).
3. Special Categories & New Sections
Partner Payments (Sec 194T): A new focus area. Salary, interest, or remuneration paid to partners now carries a 10% TDS (Code 1067).
Virtual Digital Assets (Crypto): Payments for VDAs continue to attract 1% TDS under codes 1037 and 1038.
Winning from Games: Whether it's a lottery, horse race, or online gaming, the tax remains flat at 30%.
Important Reminders for Taxpayers
- Don’t Wait: New rates apply to every payment made on or after April 1, 2025.
- PAN is Mandatory: Without a PAN, TDS rates can jump to 20%.
- Update Software: Ensure your systems use the new 4-digit codes (1001–1092).
0 Discussion Comments
No comments yet
Be the first to share your thoughts on this article.