Tag: Tax Year 2026-27

The start of tax year 2026-27 brought a big change in form, though not much in substance, for anyone deducting tax at source. Under the Income-tax Act, 2025, TDS on salary is in section 392, and most other TDS provisions for residents are consolidated in the tables of section 393, with payment codes used in statements instead of the familiar section numbers. This guide sets out the key TDS rates FY 2026-27 in one practical reference.

The rates and thresholds largely continue from the Finance Act 2025, which raised several thresholds from 1 April 2025. Budget 2026 did not make broad changes to the TDS structure. The chart below uses the old 1961 Act section numbers as a familiar reference.

Key takeaways

• Salary TDS is under section 392; most other resident TDS items are in section 393, with payment codes replacing section references in TDS statements.
• Rent on land or building attracts 10% TDS where rent exceeds ₹50,000 a month or part of a month.
• Contractors attract 1% (individual or HUF) or 2% (others), above ₹30,000 per payment or ₹1 lakh in the year.
• Professional fees attract 10%, and technical services 2%, above ₹50,000 a year.
• Where the payee does not furnish PAN, a higher rate, generally 20%, applies, with lower special rates for some items.

TDS rates FY 2026-27: chart for resident payees

Nature of payment	Earlier section (1961 Act)	Threshold	Rate
Salary	192	Basic exemption, as per regime	Slab rates
Interest on securities	193	₹10,000	10%
Dividend	194	₹10,000 per year	10%
Interest by banks, co-op banks, post office	194A	₹50,000 (₹1 lakh for senior citizens)	10%
Other interest	194A	₹10,000	10%
Lottery, crossword, online games winnings	194B, 194BA	₹10,000 per transaction (lottery); net winnings (online games)	30%
Insurance commission	194D	₹20,000	2% (non-company)
Commission or brokerage	194H	₹20,000	2%
Rent: plant and machinery	194-I	₹50,000 per month	2%
Rent: land or building	194-I	₹50,000 per month	10%
Rent by certain individuals or HUF	194-IB	₹50,000 per month	2%
Purchase of immovable property	194-IA	Consideration ₹50 lakh or more	1%
Contractors	194C	₹30,000 single; ₹1 lakh aggregate	1% (individual or HUF); 2% (others)
Professional fees	194J	₹50,000	10%
Technical services, certain royalties, call centres	194J	₹50,000	2%
Remuneration to partners	194T	₹20,000	10%
Benefits or perquisites of business	194R	₹20,000	10%
Purchase of goods (buyer turnover above ₹10 crore)	194Q	Purchases above ₹50 lakh from a seller	0.1%
E-commerce operators	194-O	₹5 lakh for individual or HUF sellers	0.1%
Virtual digital assets	194S	₹10,000 (₹50,000 for specified persons)	1%
Compensation on compulsory acquisition	194LA	₹5 lakh	10%

Thresholds are generally per payee per financial year unless shown otherwise. Always confirm the payment code and any conditions in the section 393 table before deducting.

Worked examples

Office rent

A company pays ₹75,000 a month to an individual landlord for office premises. Since monthly rent exceeds ₹50,000, TDS at 10% applies: ₹7,500 a month, deposited by the 7th of the following month.

Contractor with a mix of bills

A firm pays a housekeeping contractor (a company) bills of ₹22,000, ₹18,000, ₹26,000 and ₹40,000 in the year. No single bill crosses ₹30,000 until the fourth, but the aggregate crosses ₹1 lakh with the fourth bill (₹1,06,000). TDS at 2% applies on the aggregate, ₹2,120, deducted from the fourth payment.

Professional and technical fees

A start-up pays an independent designer ₹80,000 for design services (professional) and a cloud consultant ₹60,000 for technical services. TDS is 10% (₹8,000) on the first and 2% (₹1,200) on the second, as each exceeds ₹50,000 for the year.

Higher rates and lower deduction certificates

• No PAN: a higher rate applies, generally 20%, with special rates for items such as purchase of goods and e-commerce. The earlier section 206AB (higher rate for non-filers) was removed by the Finance Act 2025, so payers no longer need to run that check.
• Lower or nil deduction: a payee can apply for a certificate for lower or no deduction, and the payer must follow the certificate.
• Declarations: eligible individuals can furnish declarations for non-deduction on interest and certain income if their total income is below the taxable limit, subject to the conditions in the law.

Deposit, returns and certificates

• Deposit TDS by the 7th of the following month; for March, by 30 April.
• File quarterly TDS statements using the new payment codes; ensure PANs are verified.
• Issue certificates: salary certificates (earlier Form 16, now Form 130) and non-salary certificates (earlier Form 16A, now Form 131).
• Reconcile deductions with the annual tax statement (earlier Form 26AS, now Form 168) before year-end.

For an overview of other renumbered forms, see our guide on new income tax form numbers in 2026.

Common mistakes to avoid

1. Treating technical services as professional fees, or the reverse, leading to short or excess deduction.
2. Missing the aggregate threshold for contractors by looking only at individual bills.
3. Deducting TDS on rent including GST where the agreement shows GST separately; TDS is generally on the amount excluding GST in such cases.
4. Using the wrong payment code under the new Act, causing mismatches in the payee’s credit.
5. Not applying the 20% rate where PAN is missing or invalid.

The income tax department’s website publishes the section 393 tables and payment codes, and is the best place to confirm edge cases.

Frequently asked questions

Which section covers TDS in the Income-tax Act, 2025?

Salary TDS is in section 392, and most other TDS on payments to residents is in section 393, arranged in tables with payment codes.

What is the TDS rate on rent for FY 2026-27?

10% for land or building and 2% for plant and machinery, where rent exceeds ₹50,000 for a month or part of a month.

Did Budget 2026 change TDS rates?

Budget 2026 largely retained the rates and thresholds set by the Finance Act 2025. The main change for deductors is the new section structure and payment codes.

What happens if TDS is not deducted?

Interest, disallowance of the expense to the extent specified, and possible penalties can follow. Our guide on TDS default notices explains the consequences in detail.

This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.