Modernized TDS Framework Under ITA 2025
The Income-tax Act, 2025, taking effect from 1 April 2026, has significantly simplified India's direct tax laws. While the core deduction mechanism remains similar, the Act consolidates the rules and introduces a completely restructured form numbering system, new sections, and streamlined timelines. It is essential for businesses, employers, and deductors to understand these updates to avoid penalties.
TDS Legal Sections
Under the new simplified Act, most Tax Deducted at Source (TDS) provisions are organized under two core sections:
- Section 392 – TDS on Salary and Provident Fund Withdrawals
- Section 393 – TDS on Other Payments (such as contractor fees, professional fees, rent, interest, commission)
Familiarizing yourself with the new numbers is the first step toward compliance.
What is TDS and How Does It Work?
Tax Deducted at Source (TDS) is an indirect tax collection system where tax is deducted at the origin of income. The person or entity making specified payments (the deductor) subtracts the tax before making the payment to the recipient (the deductee) and deposits it with the Central Government.
Step-by-Step TDS Process
1 Payment Becomes Due
A specified payment (like salary, rent, professional fee, commission, or contractor charges) becomes payable or is paid (whichever is earlier).
2 Tax is Deducted
The deductor deducts TDS based on the applicable rates specified under Section 392 or Section 393.
3 Deposit with Government
The deductor deposits the collected tax into the government account within the prescribed monthly due date.
4 Filing Quarterly Returns
The deductor submits a quarterly statement of TDS (TDS Return) detailing all deductions and payments.
5 Claiming Tax Credit
The deductor issues a TDS certificate to the deductee, who can then use it to claim a tax credit when filing their Income Tax Return (ITR).
Who Should Deduct TDS & When?
The obligation to deduct TDS applies generally to all business entities and employers, including:
- Companies, LLPs, and Partnership Firms
- Government Departments and Co-operative Societies
- Trusts and Non-Governmental Organizations
- Individuals and Hindu Undivided Families (HUFs) that exceed statutory turnover thresholds
TDS Deposit Due Dates
All tax deducted at source must be deposited to the government treasury online within the following strict timelines:
TDS Deposit Timelines Checklist
| Month of Deduction | Deposit Due Date |
|---|---|
| April to February | 7th of the following month (e.g., TDS deducted on 15 August is due on or before 7 September) |
| March | 30 April of the next Tax Year |
How to Deposit TDS Online:
- Login to the official Income Tax e-Filing Portal.
- Go to e-Pay Tax → TDS/TCS Payment.
- Fill in the required details including your TAN, the relevant Tax Year, the Section, and the payment amount.
- Complete the transaction via Net Banking, Debit Card, UPI, or NEFT/RTGS and download the challan receipt immediately.
Major Form Changes Under Income-tax Act, 2025
The form numbering system has been overhauled to make it simplified and sequential. Deductors must transition to these new forms:
Form Mapping Table
| Old Form (Act of 1961) | New Form (Act of 2025) | Purpose and Scope |
|---|---|---|
| Form 16 | Form 130 | Annual Salary TDS Certificate issued to employees |
| Form 16A | Form 131 | Quarterly Non-Salary TDS Certificate |
| Form 24Q | Form 138 | Quarterly TDS Return for Salary Payments |
| Form 26Q | Form 140 | Quarterly TDS Return for Resident Non-Salary Payments |
| Form 27Q | Form 144 | Quarterly TDS Return for Non-Resident Payments |
| Form 15G / 15H | Form 121 | Self-Declaration for Non-Deduction of TDS when income is below taxable limit |
| Form 13 | Form 128 | Application for Lower or Nil TDS deduction |
| Form 26AS | Form 168 | Annual Tax Statement (Taxpayer Passbook) |
| Forms 26QB / QC / QD / QE | Form 141 | Unified Challan-cum-Statement for specified property/rent transactions |
Quarterly Return Forms & Deadlines
TDS Returns must be submitted quarterly using the designated forms after verifying them with the File Validation Utility (FVU):
- Form 138 (Salary Return): Details of salaries paid and tax deducted.
- Form 140 (Resident Non-Salary): Details of professional fees, rent, commissions, interest, etc.
- Form 144 (Non-Resident Return): Details of foreign remittances subject to TDS.
Quarterly Return Deadlines (Form 138, 140 & 144)
| Quarter | Period Covered | Filing Due Date |
|---|---|---|
| Q1 | 1 April – 30 June | 31 July |
| Q2 | 1 July – 30 September | 31 October |
| Q3 | 1 October – 31 December | 31 January |
| Q4 | 1 January – 31 March | 31 May |
Unified Form 141
Form 141 is a significant step toward simplicity, serving as a unified challan-cum-statement. It consolidates separate challans for property purchases, high rental payments, and special contract payments into one easy-to-use form under Section 393.
TDS Certificates Timeline
Deductors are legally bound to generate and issue TDS certificates so that deductees can claim credit. Mismatches will prevent deductees from claiming refunds.
TDS Certificate Timelines
| Certificate Form | Quarter | Due Date for Issuance |
|---|---|---|
| Form 130 (Salary) | Annual | 15 June of the following Tax Year |
| Form 131 (Non-Salary) | Q1 (April - June) | 15 August |
| Q2 (July - Sept) | 15 November | |
| Q3 (Oct - Dec) | 15 February | |
| Q4 (Jan - March) | 15 June |
Form 168: Your New Tax Passbook
Replaced old Form 26AS, the Form 168 acts as your unified annual tax statement. It lists TDS/TCS credits, advance taxes paid, self-assessment tax records, refunds, and high-value transactions (SFT). Taxpayers should reconcile their books with Form 168 before filing their ITR to identify mismatches and avoid receiving tax notices.
Interest, Fees, and Penalties for Delay
Delay in compliance attracts automatic interest, late fees, and penalties:
Late Deduction Interest
If you fail to deduct TDS on the due date: 1% per month or part of a month, from the date on which tax was deductible to the date of actual deduction.
Late Deposit Interest
If you deduct TDS but delay depositing it to the government: 1.5% per month or part of a month, from the date of deduction to the date of deposit.
Late Filing Fees (TDS Return)
Delay in submitting Forms 138, 140, or 144: ₹200 per day of delay, up to a maximum limit equivalent to the TDS amount for that statement.
Non-Filing Penalty
If you fail to file returns or submit incorrect details, assessing officers can levy a statutory penalty ranging from ₹10,000 to ₹1,00,000.
TDS Compliance Checklist for Businesses
- Deduct TDS correctly under the new Section 392 & Section 393
- Deposit collected tax before the 7th of the following month
- File Forms 138, 140, and 144 quarterly before due dates
- Issue Form 130 and Form 131 certificates to payees on time
- Regularly download and reconcile records with Form 168
- Verify lower-deduction certificates (Form 128) and declarations (Form 121)
Simplify Your TDS Compliance
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Disclaimer:
The information provided in this article is intended for educational and general awareness purposes only under the Income-tax Act, 2025. It does not constitute professional tax or legal advice. Readers are advised to consult a qualified Chartered Accountant before executing any tax-related transactions or decisions. The authors and the firm accept no liability for any errors or omissions.