# TDS 2026: The Major Updates That Will Impact Every CA's Compliance Workflow

Recent Budget cycles (2024, 2025) have brought multiple TDS amendments. As a CA in active practice, 3 changes are creating maximum confusion among clients:

1. Section 194I — Threshold changed from ANNUAL ₹2.40L to MONTHLY ₹50K
2. Section 194-IB — Rate CUT from 5% to 2% (post 1 Oct 2024)
3. Section 206AB — Simplified from 2-year to 1-year non-filing trigger (Budget 2025)

Plus other key updates I'll cover. Aaj is article me main practical CA guide deta hoon:

• Each section's current rate + threshold
• Effective dates for recent changes
• Forms to file (26Q, 26QB, 24Q, 27Q)
• Common compliance mistakes
• IT Act 2025 mapping (effective FY 26-27)

# 📋 TDS Quick Reference Table (FY 2025-26)

# ⭐ MAJOR CHANGE 1: Section 194I — Monthly Threshold

### Before (Up to AY 2025-26) - Threshold: ₹2,40,000 per annum cumulative rent - TDS triggered if total yearly rent crossed ₹2.40L

### After (AY 2026-27 Onwards) - Threshold: ₹50,000 per month - Any month with rent >₹50K → TDS @ 10% (building) / 2% (machinery) for THAT MONTH

### Why This Matters Old logic: Pay ₹20K/month rent (₹2.4L/year) — NO TDS
New logic: Same ₹20K × 12 = ₹2.4L/year — still NO TDS (under monthly ₹50K)

But: Old logic: Pay ₹40K/month rent (₹4.8L/year) — TDS on full ₹4.8L (₹48K @ 10%)
New logic: ₹40K/month — NO TDS (below ₹50K monthly threshold) ✅

Old logic: Pay ₹55K/month rent (₹6.6L/year) — TDS on full ₹6.6L (₹66K @ 10%)
New logic: ₹55K/month — TDS on every month's payment @ 10% = ₹5.5K/month = ₹66K/year (same final)

### Practical Implication Form 26Q filing frequency unchanged — quarterly.
Compliance burden: Slightly higher tracking — month-by-month vs annual.

### Real Example Mr. Sharma runs a business renting office for ₹75,000/month: - Each month: TDS @ 10% × ₹75K = ₹7,500 deducted - Quarterly TDS return (Form 26Q): ₹22,500 (₹7.5K × 3) - Annual: ₹90,000 TDS

# ⭐ MAJOR CHANGE 2: Section 194-IB Rate Cut

### Before (Up to 30 September 2024) - Rate: 5% - Applies to: Rent paid by Individual/HUF NOT under tax audit - Threshold: ₹50,000 per month

### After (1 October 2024 Onwards) - Rate: 2% (60% reduction!) - Threshold unchanged: ₹50,000 per month

### Why 194-IB Exists Salaried individuals or small business owners (not under tax audit u/s 44AB) paying high rent need to deduct TDS. Section 194-IB simplifies this: - One-time TDS at end of FY or termination of tenancy - Pay through Form 26QC within 30 days - File Form 16C to landlord

### Compliance Process 1. Determine if rent > ₹50K/month 2. By 30 April of following FY (or earlier on tenancy end), pay 2% TDS on annual rent via Form 26QC 3. Generate Form 16C from TRACES website 4. Provide to landlord

### Real Example Ms. Priya (salaried, no tax audit) pays ₹80,000/month for residential rental. - Annual rent: ₹9,60,000 - TDS @ 2%: ₹19,200 - Pay via Form 26QC by 30 April 2027 (for FY 2026-27)

💡 Pre 1 Oct 2024: Same scenario would have triggered ₹48,000 TDS. ₹28,800 savings due to rate cut.

# ⭐ MAJOR CHANGE 3: Section 206AB Simplified

### Before (Until Budget 2025) - Triggered if person hadn't filed ITR for 2 previous AYs - AND had TDS + TCS ≥ ₹50K in each of those 2 years - Higher TDS rate: 2x normal OR 5%, whichever higher

### After (Budget 2025, Effective AY 2026-27) - Triggered if person hasn't filed ITR for 1 previous AY - AND had TDS + TCS ≥ ₹50K in that 1 year - Rate unchanged: 2x normal OR 5%

### Why This Tighter Government's drive to bring more people in tax net. With ITR-U (updated returns) available now, no excuse for non-filing.

### Real Example Mr. Ramesh received ₹3 lakh professional fees in FY 2025-26 from a company.

Normal scenario: TDS @ 10% u/s 194J = ₹30,000

If Ramesh hadn't filed AY 2025-26 ITR (now triggers 206AB with 1-year rule): - Higher rate: 2 × 10% = 20% OR 5% (whichever higher) = 20% - TDS @ 20% = ₹60,000

Impact: ₹30,000 additional TDS deducted upfront. Ramesh needs to claim refund via ITR.

### Compliance Trap for Deductors Buyer Company's responsibility: Check supplier's PAN status via TDS Compliance Check utility before payments. Otherwise, deductor faces disallowance of expense.

# 📋 Other Important TDS Sections

### Section 194Q (TDS on Goods Purchase) - Applies when: Buyer's turnover > ₹10 Cr in previous FY - Threshold: Purchase from single seller > ₹50L - Rate: 0.1% on excess above ₹50L - Mutual exclusivity with 206C(1H): If seller deducts TCS u/s 206C(1H) (turnover >₹10Cr seller, sale >₹50L), buyer doesn't deduct 194Q - 194-O takes precedence: E-commerce transactions → 194-O applies, not 194Q

### Section 194-O (E-commerce Operator) - Applies to: All e-commerce operators (Amazon, Flipkart, Swiggy, Zomato, etc.) - Rate: 0.1% of gross sales credited to seller (Individual/HUF ≤ ₹5L threshold) - Effective: 1 October 2020 onwards - Operators must obtain PAN of sellers

### Section 194J Variations - Professional fees: 10% (lawyers, CAs, doctors, consultants) - Technical fees: 2% (technical consulting) - Royalty: 10% - Director's fees: 10% - Threshold: ₹30,000/year/payer for each category

### Section 195 (Payment to NRI) - Rate per DTAA between India and recipient's country - No threshold (TDS on first rupee usually) - Lower DTAA rate requires TRC (Tax Residency Certificate) - Failure to deduct = disallowance of expense

# 🚨 Common TDS Compliance Mistakes (See These Often)

### 1. Ignoring Section 194I Monthly Threshold Mistake: Continuing to track on annual basis (₹2.40L)
Correct: Track every month — any month >₹50K triggers TDS

### 2. Forgetting Section 194-IB for Salaried with High Rent Mistake: Salaried individuals don't deduct TDS on rent assuming it's company's job
Correct: If you (as Individual/HUF non-audit) pay rent > ₹50K/month, YOU must deduct 2% TDS via Form 26QC

### 3. Not Checking 206AB for Vendors Mistake: Deducting normal rate without checking ITR filing status
Correct: Use TDS Compliance Check utility on incometax.gov.in before each payment

### 4. Confusing 194Q and 206C(1H) Mistake: Both buyer and seller applying TDS+TCS
Correct: Only ONE applies — typically 206C(1H) by seller takes precedence for goods. Verify each transaction.

### 5. Form 26QC Late Filing Mistake: 194-IB TDS deducted but Form 26QC filed after 30 April
Correct: File within 30 days of end of FY (or tenancy termination). Late filing fees u/s 234E @ ₹200/day apply.

### 6. Incorrect TAN Usage Mistake: Using PAN instead of TAN for TDS payments
Correct: TAN required for most TDS deductors. Exception: Section 194-IB (use PAN), 194-IA (use PAN).

### 7. Missing 27Q for Foreign Payments Mistake: Filing 26Q for foreign vendor TDS
Correct: Use Form 27Q for non-resident payee TDS

# 📝 TDS Forms Cheat Sheet

# 📅 TDS Due Dates (For Quarterly Returns 24Q/26Q/27Q)

TDS Deposit Due Date: 7th of next month (except March deduction — 30 April)

# 📜 IT Act 2025 Section Mapping

Substantive rules unchanged. Effective FY 2026-27.

# 🎯 Real Example: Multi-TDS Scenario

Company X (Turnover ₹50 Cr) Pays in FY 2025-26: - ₹50,000 to lawyer (CA fee) → 194J @ 10% = ₹5,000 - ₹6,00,000 office rent annually (₹50K/month) → 194I @ 10% on ₹6L = ₹60,000 (above monthly threshold from month 1) - ₹40,00,000 goods purchase from Vendor Y (turnover ₹15 Cr) → 194Q @ 0.1% on (₹40L - ₹50L) = ZERO (below ₹50L threshold) - ₹60,00,000 goods purchase from Vendor Z (turnover ₹15 Cr) → 194Q @ 0.1% on (₹60L - ₹50L) = ₹1,000 - ₹3,00,000 commission to non-filer agent → 206AB @ higher of 2×10% = 20% = ₹60,000

Total TDS deducted: ₹1,26,000

Compliance: - Quarterly 26Q for all above - Verify each vendor's 206AB status before payment

# 🧮 Use Our Calculator

Our TDS Calculator auto-handles: - All major TDS sections (192, 194A-S, 195) - Rate selection per category - Threshold checks (monthly for 194I, annual for 194J) - 206AB higher rate for non-filers - TDS on cumulative computation

# 📚 References

• Income Tax Act 1961: Sections 192-206
• Finance Act 2024: Section 194-IB rate cut
• Budget 2025: Section 194I monthly + Section 206AB simplification
• CBDT Notifications: Various rate clarifications
• Income Tax Act 2025: Sections 392-396 (effective FY 2026-27)

# Author

CA Prabhakar Kumar at Prabhakar Kumar & Co., Pune, manages TDS compliance for 300+ business clients. He has prevented ₹3+ Cr in TDS-related penalties for clients through proactive 206AB and 194Q advisory.

For TDS advisory and compliance, WhatsApp +91 72176 34981.

Written by

Prabhakar Kumar

Chartered Accountant (ICAI, Nov 2019)

Founder of VittSphere Technologies. Practicing CA serving 200+ MSME clients across Pune. 86% win-rate at AO and CIT(A) level tax appeals. Writes on Indian taxation, capital gains, and personal finance.