TAX WORLD: TDS Sections Under Income-tax Act, 2025

Posted on 28-05-2026

TDS Sections Under Income-tax Act, 2025 — Complete Detailed Explanation

The Income-tax Act, 2025 has completely restructured the TDS system.

Earlier:

Old Income-tax Act, 1961 had 60+ separate TDS sections
Sections like 192, 194A, 194C, 194J, 194I etc.

Now:

Most TDS provisions are consolidated into a few master sections.

1. Major Structural Change in TDS Under 2025 Act

Old Act (1961)	New Act (2025)
192	392
193–194T	393
206C (TCS)	394

The new Act consolidates:

Salary TDS → Section 392
Non-salary TDS → Section 393
TCS → Section 394

2. Chapter for TDS

Under the 2025 Act:

TDS/TCS provisions mainly fall in:

Sections 390–402

This chapter covers:

Deduction
Collection
Rates
Thresholds
Returns
Certificates
Interest
Defaults

3. Section 390 — General Framework of Tax Deduction and Collection

Purpose

Section 390 acts like the “foundation section” for:

TDS
TCS
Advance tax mechanisms

It establishes:

Government authority to collect tax at source
General applicability principles

4. Section 392 — TDS on Salary

This replaces old:

Section 192
Section 192A

Section 392(1) to 392(6)

Covers:

Salary payments
Employer obligations
Monthly TDS deduction
Estimated annual income
Multiple employers
Tax regime selection

Core Principle of Section 392

Employer must:

1. Estimate annual taxable salary

2. Compute tax

3. Deduct monthly TDS

Example

Employee Salary Structure

Component	Amount
Basic Salary	₹10 lakh
HRA	₹3 lakh
Bonus	₹1 lakh

After exemptions/deductions:

Taxable salary calculated

Employer deducts monthly TDS.

Important Feature

Unlike other TDS sections:

Section 392 does NOT use fixed TDS rate.
It uses applicable slab rates.

Section 392(7) — Accumulated PF Balance

Replaces old Section 192A.

Applies when:

Employee withdraws PF before specified conditions.

TDS may apply on premature withdrawal.

5. Section 393 — Master TDS Section for Non-Salary Payments

This is the biggest change.

Old Act:

Separate sections for each payment type.

New Act:

One consolidated section with tables.

Structure of Section 393

Subsection	Coverage
393(1)	Payments to residents
393(2)	Payments to non-residents
393(3)	Payments to any person
393(4)	TDS exemptions / non-applicability

6. Section 393(1) — Payments to Residents

Covers TDS on:

Commission
Rent
Interest
Contractor payments
Professional fees
Purchase of goods
E-commerce
Benefits/perquisites
Crypto transactions

Important Mapping Under Section 393(1)

Old Section	New Mapping
194A	393(1) Table 5
194C	393(1) Table 6
194H	393(1) Table 1(ii)
194I	393(1) Table 2
194J	393(1) Table 6(iii)
194Q	393(1) Table 8(ii)
194O	393(1) Table 8(v)
194R	393(1) Table 8(iv)
194S	393(1) Table 8(vi)

7. Section 393(1) — Detailed Categories

A. Commission / Brokerage

Old Section:

194H

Now:

Section 393(1), Table 1(ii)

Example

Insurance company pays:

₹2 lakh commission to agent

TDS applicable.

B. Rent Payments

Old:

194I
194IB

Now:

Section 393(1), Table 2

Covers

Building rent
Office rent
Machinery rent
Equipment rent

Example

Company paying office rent:
₹80,000/month

Must deduct TDS.

C. Property Purchase

Old:

194IA

Now:

Section 393(1), Table 3(i)

Applies on:

Purchase of immovable property.

D. Interest Income

Old:

194A

Now:

Section 393(1), Table 5

Example

Bank FD interest:
₹70,000

Bank deducts TDS if threshold exceeded.

E. Contractor Payments

Old:

194C

Now:

Section 393(1), Table 6(i)

Example

Company pays:
₹5 lakh to civil contractor.

TDS applicable.

F. Professional Fees

Old:

194J

Now:

Section 393(1), Table 6(iii)

Covers

Chartered accountants
Doctors
Lawyers
Consultants
Technical services

Example

Company pays consultant:
₹3 lakh

TDS deducted.

G. Purchase of Goods

Old:

194Q

Now:

Section 393(1), Table 8(ii)

Applies to large business transactions.

H. E-commerce Transactions

Old:

194O

Now:

Section 393(1), Table 8(v)

Example

Amazon deducts TDS before paying seller.

I. Business Perquisites

Old:

194R

Now:

Section 393(1), Table 8(iv)

Example

Company gives:

Foreign trip
Expensive gift

TDS implications arise.

J. Crypto / Virtual Digital Assets

Old:

194S

Now:

Section 393(1), Table 8(vi)

Example

Crypto exchange deducts TDS on transfer.

8. Section 393(2) — Payments to Non-Residents

Replaces old:

Section 195

Applies To

Payments made to:

NRIs
Foreign companies
Foreign consultants

Examples

Payment	TDS?
Royalty	Yes
Technical services	Yes
Interest	Yes
Foreign contractor	Yes

Important Feature

Usually deducted at:

Full applicable tax rate.

Because recovery from foreign parties is difficult.

9. Section 393(3) — Payments to Any Person

Covers special transactions like:

Lottery winnings
Online gaming
Cash withdrawals
Horse race winnings
Partner payments

Important Mappings

Old Section	New Mapping
194B	393(3) Table 1
194BB	393(3) Table 3
194N	393(3) Table 5
194T	393(3) Table 7

Example — Cash Withdrawal

Large cash withdrawals beyond threshold:
→ TDS may apply.

10. Section 393(4) — Non-Deduction / Exemptions

Very important subsection.

Specifies situations where:

TDS NOT required.

Examples

Situation	TDS
Below threshold	No
Government payments	No
RBI payments	No
Exempt income	No

11. Deemed Credit Rule — Section 393(11)

Important anti-avoidance provision.

Even if payment credited to:

Suspense account
Temporary account

It is deemed credited to payee.

Thus:

TDS still applicable.

12. Section 394 — TCS (Tax Collected at Source)

Replaces old:

Section 206C

Covers:

Seller collecting tax from buyer.

Examples:

Foreign remittance
Sale of specified goods
Luxury transactions

13. Section 395 onwards — Administrative Provisions

These sections cover:

TDS certificates
Returns
Correction statements
Processing
Refunds
Rectification

14. TDS Certificates

Form	Purpose
Form 16	Salary
Form 16A	Non-salary

15. TDS Returns

Return	Purpose
24Q	Salary
26Q	Domestic non-salary
27Q	Non-resident payments

16. Section 206AA Equivalent — No PAN

If PAN not provided:

Higher TDS applicable.

This principle continues in the 2025 Act framework.

17. Non-Filer Higher TDS

Higher TDS may apply to specified non-filers.

Government uses:

AIS
PAN tracking
filing history

for enforcement.

18. Interest on TDS Defaults

If:

TDS not deducted
OR
deducted but not deposited

Interest applies.

Common Rates

Default	Interest
Non-deduction	1%
Non-payment after deduction	1.5%

19. Penalties Under 2025 Act

Penalty may arise for:

Non-deduction
Short deduction
Late filing
Wrong reporting
False TDS returns

20. Prosecution

Serious default:

Deducted TDS but not deposited

may lead to:

prosecution
imprisonment

21. Important Compliance Timeline

Deductor Must:

Step 1

Deduct TDS

Step 2

Deposit within due date

Step 3

File quarterly return

Step 4

Issue TDS certificate

22. Major Conceptual Change in 2025 Act

Old Act:

Scattered sections
Difficult navigation

New Act:

Table-driven structure
Centralized TDS system
Easier future expansion

23. Practical Example — Complete Flow

Scenario

ABC Pvt Ltd pays:

Salary = ₹12 lakh
Contractor = ₹5 lakh
CA fee = ₹2 lakh
Office rent = ₹8 lakh/year

TDS Applicability

Payment	Section
Salary	392
Contractor	393(1) Table 6(i)
CA fee	393(1) Table 6(iii)
Rent	393(1) Table 2

Company Must:

Deduct TDS
Deposit
File returns
Issue certificates

24. Important Modern Features

The 2025 Act emphasizes:

Digital compliance
AIS integration
faceless processing
centralized tracking
electronic declarations

25. Quick Section Summary

Section	Purpose
390	General TDS/TCS framework
392	Salary TDS
393	Non-salary TDS
393(1)	Residents
393(2)	Non-residents
393(3)	Special cases
393(4)	Exemptions
394	TCS
395–402	Administration/compliance

26. Core Philosophy of New TDS System

The 2025 Act tries to make TDS:

simpler
modular
digitally manageable
easier to amend
easier to automate

Instead of adding endless new sections like old law.

RECENT POSTS :

TDS Sections Under Income-tax Act, 2025 — Complete Detailed Explanation

TDS Sections Under Income-tax Act, 2025 — Complete Detailed Explanation

No comments:

Post a Comment

Followers

Total Pageviews