Indian TDS Changes 2026: New Section 393 & Numeric Payment Codes Guide
Compliance Alert • Financial Year 2026-27

Navigating the Massive TDS Overhaul: Farewell to 194C, 194J, & 194I under the Income Tax Act, 2025

Synopsis: Starting April 1, 2026, India's traditional "194-series" TDS sections are consolidated under Section 393 of the new Income Tax Act, 2025. This blog provides an exhaustive breakdown of the new numeric payment codes (e.g., 1005, 1022, 1026), updated thresholds, and key procedural changes on the TRACES portal to help businesses avoid critical compliance errors.

From April 1, 2026, the Indian taxation system has transitioned to the Income Tax Act, 2025, which fundamentally changes how TDS is paid and reported. While familiar sections like 194C, 194I, and 194J still exist conceptually, they are now consolidated under new section numbers and require numeric payment codes instead of section numbers during the payment process.

⚡ The Big Change: New Sections & Codes

The traditional "194-series" has been retired for all payments made on or after April 1, 2026. These are now part of Section 393 of the new Act.

Old Section Nature of Payment New Main Section New Payment Code (Resident)
194C Payments to Contractors Section 393(1) 1005 (Ind/HUF) / 1006 (Others)
194J Professional/Technical Fees Section 393(1) 1027 (Prof) / 1026 (Tech)
194I Rent (Land, Building, Furniture) Section 393(1) 1021 (Plant) / 1022 (Land/Bldg)
📍 Crucial Note: Portal Validation Changes
Using the old section numbers (194C, 194J, etc.) in your returns for current payments will lead to system-level validation errors on the TRACES portal.

🏗️ Detailed Breakdown & Examples

1. Section 194C (Now Code 1005/1006)
  • Applies to "work" contracts, including advertising, broadcasting, and manpower supply.
  • Threshold: Individual payment > ₹30,000 OR Aggregate yearly > ₹1,00,000.
  • Rates: 1% for Individual/HUF; 2% for others.
  • Update: Manpower supply is now explicitly clarified as "work".
Example: If you pay an individual decorator ₹40,000, you deduct 1% (₹400) and use Code 1005 when paying online.
2. Section 194J (Now Code 1026/1027)
  • Covers professional services (CA, Doctors), technical services, and royalties.
  • Threshold: Increased to ₹50,000 (up from ₹30,000) starting FY 2025-26.
  • Rates: 2% for Technical services/Royalty; 10% for Professional services.
Example: A company paying ₹60,000 to a software engineer (technical) deducts 2% (₹1,200) using Code 1026.
3. Section 194I (Now Code 1021/1022)
  • Applies to rent paid by business entities.
  • Threshold: ₹2,40,000 per financial year.
  • Rates: 2% for Plant/Machinery; 10% for Land/Building/Furniture.
Example: Paying ₹3,00,000 yearly rent for an office requires 10% deduction (₹30,000) using Code 1022.

📝 FAQs

Q: Can I use one challan for different codes?
A: Yes. From Tax Year 2026-27, you can include up to 20 different section codes in a single challan, as long as the deductee type (Company vs. Non-Company) is the same.
Q: What is the new form for salary TDS?
A: Form 16 is replaced by Form 130 under the new Income Tax Rules, 2026.
Q: What happens if I use the old 194C code by mistake?
A: The portal will likely reject the return. You will need to file a challan correction request via the Income Tax e-Filing portal.
Q: Are due dates changing?
A: No. Monthly deposits are still due by the 7th of the next month (April 30th for March deductions).

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