Updated · Tax Year 2026-27 · All 92 TRACES Codes
TDS Applicability in India
Complete Rate Chart — Income Tax Act 2025
The most comprehensive TDS guide for Tax Year 2026-27 — covering all 92 TRACES payment codes (1001–1092) under Income Tax Act 2025. Every domestic payment, every NRI/foreign payment, and complete TCS codes including new luxury goods provisions.
🔷 What is TDS and Why It Matters
Tax Deducted at Source (TDS) is the mechanism under which the payer (deductor) deducts a prescribed percentage of income tax before releasing payment to the recipient (deductee), and deposits it with the Central Government. It ensures real-time tax collection and creates a complete digital audit trail of transactions.
TDS applies to salary, interest, rent, professional fees, contractor payments, commission, lottery winnings, purchase of goods, digital assets, and many other payment types. Non-compliance attracts heavy interest, penalties, expense disallowance, and in serious cases, prosecution.
💡 Core RuleThe deductor is fully liable even if the deductee has paid their own taxes. If TDS is not deducted or not deposited, the deductor — not the deductee — bears all liability including interest, penalty and prosecution.
🔷 What Are TRACES Payment Codes?
Under the old Income Tax Act 1961, TDS returns were filed by citing the section number (e.g., 194C for contractors, 194J for professional fees). From 1 April 2026, the Income Tax Act 2025 consolidates all TDS/TCS into Sections 392, 393, and 394 — and introduces a 4-digit numeric payment code for each payment type.
These codes are drawn from the Notes to new TDS/TCS return forms (138, 140, 143, 144) notified under the Income Tax Rules 2026. Using old section numbers in new quarterly returns will make the return defective.
1001–1004
Salary Codes
Section 392 — salary & EPF. Filed in Form 138.
1005–1038
Resident TDS Codes
Section 393(1) — all non-salary resident payments. Form 140.
1039–1057
Non-Resident Codes
Section 393(2) — NRI & foreign company payments. Form 144.
1058–1067
Any Person Codes
Section 393(3) — winnings, cash, partners. Forms 140 & 144.
1068–1092
TCS Codes
Section 394 — Tax Collected at Source. Form 143.
1007,1010,1025,1036
Inferred Codes*
Sequential gaps — not yet formally confirmed by CBDT. Do not use until notified.
⚡ Terminology Change“Previous Year” and “Assessment Year” are abolished — replaced by a single “Tax Year”. Tax Year 2026-27 = 1 April 2026 to 31 March 2027. All TDS returns, challans and certificates must use Tax Year references.
🔷 Section 392 — Salary & EPF (Codes 1001–1004)
Section 392 replaces old Sections 192 and 192A. Reported in Form 138 (replaced old Form 24Q). Code 1004 also appears in Form 144 for non-resident employees.
Code = TRACES 4-digit numeric payment code used in return filing
|
Inferred* = Not yet formally notified by CBDT — verify before use
| TRACES Code | Old Section | Nature of Payment | New Section | Rate | Threshold |
|---|---|---|---|---|---|
| 1001 | 192 | Salary — State Government / Local Authority employees (other than Union Govt.) | 392 | Slab | Basic exemption limit (₹3L new regime / ₹2.5L old regime) |
| 1002 | 192 | Salary — Private sector / non-Government employees | 392 | Slab | Basic exemption limit |
| 1003 | 192 | Salary — Union (Central) Government employees | 392 | Slab | Basic exemption limit |
| 1004 | 192A | Premature EPF withdrawal — accumulated balance (before 5 years service). Also used in Form 144 for non-resident employees. | 392(7) | 10% | ₹50,000 |
🔷 Section 393(1) — Payments to Residents (Codes 1005–1038)
The largest block — all non-salary TDS on payments to resident payees. Reported in Form 140 (replaced old Form 26Q). Structured as sub-tables within Section 393(1).
Commission & Brokerage [Table Sl. No. 1]
| TRACES Code | Old Section | Nature of Payment | New Section Reference | Rate | Threshold |
|---|---|---|---|---|---|
| 1005 | 194D | Commission or brokerage — insurance (paid by insurance company) | 393(1)[Sl.1(i)] | 5% | ₹20,000 p.a. |
| 1006 | 194H | Commission or brokerage — all others (excluding BSNL/MTNL PCO franchise) | 393(1)[Sl.1(ii)] | 2% | ₹20,000 p.a. |
Rent [Table Sl. No. 2]
| TRACES Code | Old Section | Nature of Payment | New Section Reference | Rate | Threshold |
|---|---|---|---|---|---|
| 1007* | 194IB | Rent paid by Individual/HUF not liable to tax audit — any asset type | 393(1)[Sl.2(i)] | 2% | ₹50,000 per month |
| 1008 | 194I(a) | Rent — Plant, Machinery or Equipment (by specified / audit-liable person) | 393(1)[Sl.2(ii).D(a)] | 2% | ₹50,000 per month |
| 1009 | 194I(b) | Rent — Land, Building or Furniture (by specified / audit-liable person) | 393(1)[Sl.2(ii).D(b)] | 10% | ₹50,000 per month |
Immovable Property [Table Sl. No. 3]
| TRACES Code | Old Section | Nature of Payment | New Section Reference | Rate | Threshold |
|---|---|---|---|---|---|
| 1010* | 194IA | Purchase of immovable property from resident — buyer deducts TDS on higher of consideration or stamp duty value | 393(1)[Sl.3(i)] | 1% | ₹50 lakh |
| 1011 | 194IC | Cash payment under Joint Development Agreement — Section 67(14) | 393(1)[Sl.3(ii)] | 10% | No threshold |
| 1012 | 194LA | Compensation on compulsory acquisition of immovable property | 393(1)[Sl.3(iii)] | 10% | ₹5,00,000 |
⚠️ Note on Codes 1007 & 1010Codes 1007 and 1010 are inferred from the sequential gap in CBDT forms — they have not been formally confirmed in the notified rules as of April 2026. Do not use these codes in TDS returns until officially notified. Watch the TRACES portal and incometaxindia.gov.in for official assignment.
Investment Income — Mutual Funds, Business Trusts & AIFs [Table Sl. No. 4]
| TRACES Code | Old Section | Nature of Payment | New Section Reference | Rate | Threshold |
|---|---|---|---|---|---|
| 1013 | 194K | Income from units of specified Mutual Fund / UTI / specified company units | 393(1)[Sl.4(i)] | 10% | ₹10,000 p.a. |
| 1014 | 194LBA | Interest income from units of Business Trust (REIT/InvIT) — resident unit holder | 393(1)[Sl.4(ii)] | 10% | No threshold |
| 1015 | 194LBA | Dividend-type income from units of Business Trust — resident unit holder | 393(1)[Sl.4(ii)] | 10% | No threshold |
| 1016 | 194LBA | Rental income (REIT property income) from Business Trust — resident unit holder | 393(1)[Sl.4(ii)] | 10% | No threshold |
| 1017 | 194LBB | Income from AIF (Category I or II) — Section 224 — to resident unitholders (non-exempt portion) | 393(1)[Sl.4(iii)] | 10% | No threshold |
| 1018 | 194LBC | Income from Securitisation Trust — Section 221 — to resident investors | 393(1)[Sl.4(iv)] | 25% | No threshold |
Interest [Table Sl. No. 5]
| TRACES Code | Old Section | Nature of Payment | New Section Reference | Rate | Threshold |
|---|---|---|---|---|---|
| 1019 | 193 | Interest on securities — debentures, listed bonds, Government securities | 393(1)[Sl.5(i)] | 10% | ₹10,000 p.a. (₹5,000 for debentures) |
| 1020 | 194A | Interest (not securities) — from Bank/Post Office/Co-op — payee is a Senior Citizen | 393(1)[Sl.5(ii).D(a)] | 10% | ₹1,00,000 p.a. |
| 1021 | 194A | Interest (not securities) — from Bank/Post Office/Co-op — payee is not a Senior Citizen | 393(1)[Sl.5(ii).D(b)] | 10% | ₹50,000 p.a. |
| 1022 | 194A | Interest (not securities) — from all other payers (companies, NBFCs, individuals etc. — not bank/PO) | 393(1)[Sl.5(iii)] | 10% | ₹10,000 p.a. |
Contracts & Professional Fees [Table Sl. No. 6]
| TRACES Code | Old Section | Nature of Payment | New Section Reference | Rate | Threshold | Notes |
|---|---|---|---|---|---|---|
| CONTRACTOR / SUBCONTRACTOR / MANPOWER SUPPLY | ||||||
| 1023 | 194C | Contract work / supply of labour — contractor is Individual or HUF | 393(1)[Sl.6(i).D(a)] | 1% | ₹30,000 per invoice | Annual aggregate ₹1 lakh also triggers. Manpower supply explicitly included. |
| 1024 | 194C | Contract work / supply of labour — contractor is Company, Firm, LLP, AOP or BOI | 393(1)[Sl.6(i).D(b)] | 2% | ₹1,00,000 p.a. aggregate | Aggregate across all invoices in the tax year. |
| INDIVIDUAL/HUF PAYMENTS — NOT COVERED BY TAX AUDIT (old 194M) | ||||||
| 1025* | 194M | Contract / commission / professional fees paid by Individual/HUF not liable to tax audit — where 194C/H/J does not apply | 393(1)[Sl.6(ii)] | 2% | ₹50 lakh per year | Code 1025 is inferred — not yet formally notified. Verify before using. |
| PROFESSIONAL & TECHNICAL SERVICES | ||||||
| 1026 | 194J(a) | Fees for technical services (not professional); royalty on cinematographic films; call centre operations | 393(1)[Sl.6(iii).D(a)] | 2% | ₹50,000 p.a. | Lower rate for tech services — verify nature of service carefully. |
| 1027 | 194J(b) | Fees for professional services — doctors, lawyers, CAs, architects, engineers, interior designers, scientists etc. | 393(1)[Sl.6(iii).D(b)] | 10% | ₹50,000 p.a. | Royalty (other than films) also at 10% under this code. |
| 1028 | 194J(b) | Director remuneration / fees / commission — other than salary (non-Section 392 payments) | 393(1)[Sl.6(iii).D(b)] | 10% | No threshold | Applies even on a single-rupee payment to a director. |
Dividends [Table Sl. No. 7]
| TRACES Code | Old Section | Nature of Payment | New Section Reference | Rate | Threshold |
|---|---|---|---|---|---|
| 1029 | 194 | Dividends declared by domestic company (including preference shares) | 393(1)[Sl.7] | 10% | ₹5,000 p.a. (exempt: dividends paid to business trust REIT/InvIT) |
Miscellaneous Payments [Table Sl. No. 8]
| TRACES Code | Old Section | Nature of Payment | New Section Reference | Rate | Threshold | Notes |
|---|---|---|---|---|---|---|
| LIFE INSURANCE | ||||||
| 1030 | 194DA | Sum under life insurance policy — on taxable/income component only (not exempt portion) | 393(1)[Sl.8(i)] | 5% | ₹1,00,000 | Rate on taxable part only — not on full maturity proceeds. |
| PURCHASE OF GOODS | ||||||
| 1031 | 194Q | Purchase of goods from a resident seller (buyer’s turnover > ₹10 crore) | 393(1)[Sl.8(ii)] | 0.1% | Excess of ₹50 lakh per seller per year | No PAN: 5% applies. Not applicable if seller collects TCS on same transaction. |
| SPECIFIED SENIOR CITIZENS (75+ years) | ||||||
| 1032 | 194P | Specified senior citizens (75+ age) with only pension + interest — bank deducts TDS directly | 393(1)[Sl.8(iii)] | Slab | As per income tax slab | Senior citizen exempt from filing ITR if this code applies. |
| BENEFIT / PERQUISITE FROM BUSINESS OR PROFESSION | ||||||
| 1033 | 194R | Benefit or perquisite (cash or kind) arising from business or profession of recipient | 393(1)[Sl.8(iv)] | 10% | ₹20,000 per year | Gifts, hospitality, free products, sponsored travel to dealers/distributors etc. |
| 1034 | 194R Note 6 | Benefit or perquisite paid in kind — payer deposits tax before releasing benefit | 393(1)[Sl.8(iv) Note 6] | 10% | ₹20,000 per year | Payer deposits tax amount first; only then releases the benefit in kind. |
| E-COMMERCE | ||||||
| 1035 | 194O | Sale of goods / services by e-commerce participant through digital platform of operator | 393(1)[Sl.8(v)] | 1% | ₹5 lakh p.a. for Individual/HUF sellers; no threshold for others | No PAN: 5% (not 20%). E-commerce operator is the deductor. |
| VIRTUAL DIGITAL ASSETS — CRYPTO / NFT | ||||||
| 1036* | 194S | Consideration for VDA transfer — payer is Individual or HUF (non-audit category) | 393(1)[Sl.8(vi)] | 1% | ₹50,000 (specified persons); ₹10,000 (others) | Code 1036 is inferred — not yet formally notified. Verify before using. |
| 1037 | 194S | Consideration for VDA transfer — payer is person other than Individual/HUF — cash payment | 393(1)[Sl.8(vi)] | 1% | ₹50,000 (specified persons); ₹10,000 (others) | Covers crypto, NFTs, tokens. Buyer deducts and deposits. |
| 1038 | 194S Note 6 | Consideration for VDA — paid in kind or partly in kind; payer deposits tax before VDA released | 393(1)[Sl.8(vi) Note 6] | 1% | ₹50,000 / ₹10,000 | Payer deposits tax amount; then releases VDA to seller. |
⚡ No PAN — Section 397(2) (Old Section 206AA)If payee does not furnish valid PAN: 20% TDS in most cases. Exception — purchase of goods (Code 1031) and e-commerce (Code 1035): 5% (or applicable rate, whichever is higher). With approximately 11 crore PANs still unlinked to Aadhaar, bulk PAN verification of your vendor database is critical before each quarter’s filing.
🔷 Section 393(2) — Payments to Non-Residents (Codes 1039–1057)
Reported in Form 144 (replaced old Form 27Q). Health & Education Cess at 4% applies in addition to the base TDS rate for all non-resident payments. DTAA override available with Form 10F + Tax Residency Certificate.
| TRACES Code | Old Section | Nature of Payment | New Section Reference | Rate | Notes |
|---|---|---|---|---|---|
| SPORTS, ENTERTAINMENT & NON-RESIDENT ATHLETES | |||||
| 1039 | 195 | Income of non-resident sportsman / entertainer / sports association (not Indian citizen) | 393(2)[Sl.1] | Treaty/Act | +4% HEC. Rate per applicable DTAA or Act, whichever is beneficial. |
| INTEREST ON FOREIGN CURRENCY BORROWINGS & BONDS | |||||
| 1040 | 194LC | Interest on foreign currency loan / long-term infrastructure bond (approved, issued 1 Jul 2012 to 30 Jun 2023) | 393(2)[Sl.2] | 5% | +4% HEC. |
| 1041 | 194LC | Interest on Rupee Denominated Bond (Masala Bond) borrowed outside India — issued before 1 Jul 2023 | 393(2)[Sl.3] | 5% | +4% HEC. |
| 1042 | 194LC | Interest on LT bond / Rupee Bond listed only on IFSC stock exchange — issued 1 Apr 2020 to 30 Jun 2023 | 393(2)[Sl.4.E(a)] | 4% | +4% HEC. Special reduced rate for IFSC-listed bonds. |
| 1043 | 194LC | Interest on LT bond / Rupee Bond listed only on IFSC stock exchange — issued on or after 1 Jul 2023 | 393(2)[Sl.4.E(b)] | 9% | +4% HEC. |
| 1044 | 194LB | Interest from Infrastructure Debt Fund (Schedule VII, Sl. 46) — to non-resident / foreign company | 393(2)[Sl.5] | 5% | +4% HEC. |
| BUSINESS TRUST / INVESTMENT FUND — NON-RESIDENT UNITHOLDERS | |||||
| 1045 | 194LBA | Business Trust distributed income — interest-type [Schedule V Sl. 3.B(a)] — to non-resident unit holder | 393(2)[Sl.6.E(a)] | 5% | +4% HEC. |
| 1046 | 194LBA | Business Trust distributed income — dividend-type [Schedule V Sl. 3.B(b)] — to non-resident unit holder | 393(2)[Sl.6.E(b)] | 10% | +4% HEC. |
| 1047 | 194LBA | Business Trust distributed income — rental-type [Schedule V Sl. 4] — to non-resident unit holder | 393(2)[Sl.7] | 10% | +4% HEC. |
| 1048 | 194LBB | AIF (Section 224) income — non-exempt portion — to non-resident unitholder | 393(2)[Sl.8] | 10% | +4% HEC. |
| 1049 | 194LBC | Income from Securitisation Trust (Section 221) — to non-resident investor | 393(2)[Sl.9] | 30% | +4% HEC. |
| OFFSHORE FUNDS, GDR, FII / FPI INCOME | |||||
| 1050 | 196A | Income from units of specified Mutual Fund or specified company — to non-resident | 393(2)[Sl.10] | 10% | +4% HEC. |
| 1051 | 196B | Income (other than dividend / LTCG) from units of Offshore Fund (Section 208) | 393(2)[Sl.11] | 10% | +4% HEC. |
| 1052 | 196B | LTCG on transfer of Offshore Fund units (Section 208) | 393(2)[Sl.12] | 10% | +4% HEC. |
| 1053 | 196C | Interest / dividends on bonds or Global Depository Receipts (GDR) of Indian company — non-resident | 393(2)[Sl.13] | 10% | +4% HEC. |
| 1054 | 196C | LTCG on transfer of bonds or GDR (Section 209) — non-resident | 393(2)[Sl.14] | 10% | +4% HEC. |
| 1055 | 196D | Income from securities — Foreign Institutional Investors (FII / FPI) [Section 210(1) Sl.1] | 393(2)[Sl.15] | 20% | +4% HEC. |
| 1056 | 196D | Income from securities — Specified Fund (Schedule VI Note 1(g)) [Section 210(1) Sl.1] | 393(2)[Sl.16] | 10% | +4% HEC. Reduced rate for specified funds. |
| GENERAL — ANY OTHER SUM PAYABLE TO NON-RESIDENT (old Section 195) | |||||
| 1057 | 195 | Any interest (other than Sl. 2–5) or any other sum chargeable under the Act — not salary — to any non-resident or foreign company | 393(2)[Sl.17] | Act/DTAA | +4% HEC. Catch-all code for all NRI/foreign payments not covered above. DTAA reduces if Form 10F + TRC submitted. |
🌐 DTAA Override & NRI Property — New Rule from 1 April 2026Non-residents may claim TDS at lower DTAA rates by submitting Form 10F and a valid Tax Residency Certificate. From 1 April 2026, CBDT circulars on DTAA application are mandatorily binding. Also — buyers purchasing immovable property from an NRI seller must now use PAN instead of TAN for TDS deduction (reported under Code 1057).
🔷 Section 393(3) — Any Person Codes (1058–1067)
These codes apply regardless of whether the payee is resident or non-resident. They appear in both Form 140 (residents) and Form 144 (non-residents).
| TRACES Code | Old Section | Nature of Payment | New Section Reference | Rate | Threshold | Notes |
|---|---|---|---|---|---|---|
| WINNINGS — LOTTERY, GAMES, HORSE RACE | ||||||
| 1058 | 194B | Winnings from lottery / crossword puzzle / card game / gambling / betting — cash payment | 393(3)[Sl.1] | 30% | ₹10,000 per single transaction | Aggregate across all winnings of same event. |
| 1059 | 194B Note 2 | Winnings from lottery/crossword/card game/gambling — paid in kind; tax deposited before winnings released | 393(3)[Sl.1 Note 2] | 30% | ₹10,000 per transaction | Organiser deposits tax first; then releases prize in kind. |
| 1060 | 194BA | Winnings from online games — net winnings at year end in user account — cash payment | 393(3)[Sl.2] | 30% | No threshold — on full net winnings | Also applies at withdrawal during the year if mid-year withdrawal occurs. |
| 1061 | 194BA Note 2 | Online game winnings — paid in kind or partially in cash; tax deposited before release | 393(3)[Sl.2 Note 2] | 30% | ₹10,000 per transaction | Platform deposits tax; then releases winnings. |
| 1062 | 194BB | Winnings from horse race | 393(3)[Sl.3] | 30% | ₹10,000 per transaction | Bookmaker or licensed turf club deducts TDS. |
| LOTTERY TICKET DISTRIBUTORS | ||||||
| 1063 | 194G | Commission / remuneration / prize on lottery tickets — paid to stockist, distributor or seller of tickets | 393(3)[Sl.4] | 5% | ₹20,000 p.a. | Applies to the ticket seller — not to the lottery winner (that is Code 1058). |
| CASH WITHDRAWALS | ||||||
| 1064 | 194N | Cash withdrawal from bank/PO/co-op — deductee is a co-operative society | 393(3)[Sl.5.D(a)] | 2% | ₹3 crore | Higher threshold for co-operatives. Sections 206AB/206CCA removed — non-filer surcharge no longer applies. |
| 1065 | 194N | Cash withdrawal from bank/PO/co-op — deductee is any person other than co-operative society | 393(3)[Sl.5.D(b)] | 2% | ₹1 crore | Applied per financial institution, not aggregate. |
| NSS WITHDRAWAL | ||||||
| 1066 | 194EE | Payment from National Savings Scheme (NSS) — withdrawal as per Section 80CCA(2)(a) | 393(3)[Sl.6] | 10% | ₹2,500 | Applies on NSS deposits made before 1989 scheme closure. |
| PARTNER / LLP PAYMENTS | ||||||
| 1067 | 194T | Salary / remuneration / commission / bonus / interest credited or paid to partner of a firm or LLP | 393(3)[Sl.7] | 10% | ₹20,000 p.a. aggregate | Firm / LLP is the deductor. Covers all payments to partners including interest on capital account. |
🔷 Section 394 — TCS Codes (1068–1092)
All Tax Collected at Source (TCS) provisions are now under Section 394, replacing old Section 206C. Reported in Form 143 (replaced old Form 27EQ). The biggest change: the Income Tax Act 2025 has introduced entirely new TCS obligations on luxury goods (Codes 1076–1085) with no equivalent in the old Act.
| TRACES Code | Old Section | Nature of Transaction (Seller collects from Buyer) | New Section Reference | Rate | Notes |
|---|---|---|---|---|---|
| TRADITIONAL GOODS [Sl. No. 1–5] — Same as Old Act | |||||
| 1068 | 206C(1) | Sale of Alcoholic Liquor for human consumption | 394(1)[Sl.1] | 1% | On every sale — no threshold. |
| 1069 | 206C(1) | Sale of Tendu Leaves | 394(1)[Sl.2] | 5% | On every sale. |
| 1070 | 206C(1) | Sale of Timber — obtained under a forest lease | 394(1)[Sl.3] | 2.5% | On every sale. |
| 1071 | 206C(1) | Sale of Timber — obtained by any mode other than a forest lease | 394(1)[Sl.3] | 2.5% | On every sale. |
| 1072 | 206C(1) | Sale of any other Forest Produce (not timber or tendu leaves) — under a forest lease | 394(1)[Sl.3] | 2.5% | On every sale. |
| 1073 | 206C(1) | Sale of Scrap | 394(1)[Sl.4] | 1% | On every sale. |
| 1074 | 206C(1) | Sale of Minerals — coal, lignite, or iron ore | 394(1)[Sl.5] | 1% | On every sale. |
| MOTOR VEHICLES [Sl. No. 6.D(a)] | |||||
| 1075 | 206C(1F) | Sale of Motor Vehicle — consideration exceeds prescribed threshold | 394(1)[Sl.6.D(a)] | 1% | Threshold: ₹10 lakh per vehicle (as under old Act). |
| NEW — LUXURY GOODS TCS [Sl. No. 6.D(b)] — No Equivalent in Old Act | |||||
| 1076 | — | Sale of Wrist Watch — consideration exceeds prescribed threshold NEW | 394(1)[Sl.6.D(b)] | 1% | Threshold to be notified by CBDT. No equivalent in old Act. |
| 1077 | — | Sale of Art Piece (antiques, paintings, sculptures) — consideration exceeds threshold NEW | 394(1)[Sl.6.D(b)] | 1% | Threshold to be notified by CBDT. |
| 1078 | — | Sale of Collectibles (coins, stamps) — consideration exceeds threshold NEW | 394(1)[Sl.6.D(b)] | 1% | Threshold to be notified by CBDT. |
| 1079 | — | Sale of Yacht, Rowing Boat, Canoe or Helicopter — consideration exceeds threshold NEW | 394(1)[Sl.6.D(b)] | 1% | Threshold to be notified by CBDT. |
| 1080 | — | Sale of Pair of Sunglasses — consideration exceeds threshold NEW | 394(1)[Sl.6.D(b)] | 1% | Threshold to be notified by CBDT. |
| 1081 | — | Sale of Bag (handbag, purse) — consideration exceeds threshold NEW | 394(1)[Sl.6.D(b)] | 1% | Threshold to be notified by CBDT. |
| 1082 | — | Sale of Pair of Shoes — consideration exceeds threshold NEW | 394(1)[Sl.6.D(b)] | 1% | Threshold to be notified by CBDT. |
| 1083 | — | Sale of Sportswear and Equipment (golf kits, ski-wear etc.) — consideration exceeds threshold NEW | 394(1)[Sl.6.D(b)] | 1% | Threshold to be notified by CBDT. |
| 1084 | — | Sale of Home Theatre System — consideration exceeds threshold NEW | 394(1)[Sl.6.D(b)] | 1% | Threshold to be notified by CBDT. |
| 1085 | — | Sale of Horse for horse racing in race clubs or polo horse — consideration exceeds threshold NEW | 394(1)[Sl.6.D(b)] | 1% | Threshold to be notified by CBDT. |
| LRS REMITTANCES [Sl. No. 7] | |||||
| 1086 | 206C(1G) | LRS Remittance — for education or medical treatment | 394(1)[Sl.7.D(a)] | 0.5% | Amount > ₹7 lakh per year. Reduced from earlier 5% for education/medical. |
| 1087 | 206C(1G) | LRS Remittance — for any purpose other than education/medical (investments, foreign travel etc.) | 394(1)[Sl.7.D(b)] | 20% | Amount > ₹7 lakh per year. |
| OVERSEAS TOUR PACKAGES [Sl. No. 8] | |||||
| 1088 | 206C(1G) | Sale of Overseas Tour Package — amount up to prescribed threshold | 394(1)[Sl.8.D(a)] | 5% | Two-tier TCS on overseas tour packages. |
| 1089 | 206C(1G) | Sale of Overseas Tour Package — amount above prescribed threshold | 394(1)[Sl.8.D(b)] | 20% | Higher rate for packages above threshold. |
| PARKING, TOLL, MINING & OTHER [Sl. No. 9–10] | |||||
| 1090 | 206C(1C) | Grant of lease or licence for use of Parking Lot for business purposes | 394(1)[Sl.9] | 2% | Excluding Central / State Government. |
| 1091 | 206C(1C) | Grant of lease or licence for Toll Plaza | 394(1)[Sl.9] | 2% | Excluding Central / State Government. |
| 1092 | 206C(1C) | Grant of lease or licence for Mining or Quarrying (other than petroleum or natural gas) | 394(1)[Sl.9] | 2% | Excluding Central / State Government. |
🆕 Major New TCS — Luxury Goods (Codes 1076–1085)Codes 1076 to 1085 are entirely new TCS obligations with no equivalent in the old Income Tax Act 1961. Sellers of luxury goods — wrist watches, art, collectibles, yachts, helicopters, sunglasses, bags, shoes, sportswear, home theatres, and polo/racing horses — must now collect TCS at 1% when sale consideration exceeds the threshold to be notified by CBDT. Update your billing and accounting systems accordingly.
🔷 New TDS/TCS Return Forms — Income Tax Rules 2026
Every quarterly TDS and TCS return form has been redesignated under the new rules. Challan-cum-statement forms are also consolidated.
Form 138
was Form 24Q
Quarterly Salary TDS Return
Codes: 1001–1004
Form 140
was Form 26Q
Quarterly Non-Salary TDS Return (Residents)
Codes: 1005–1038, 1058–1067
Form 144
was Form 27Q
Non-Resident TDS Return
Codes: 1004, 1039–1067
Form 143
was Form 27EQ
Quarterly TCS Return
Codes: 1068–1092
Form 141
was 26QB/C/D/E
Single Challan-cum-TDS Statement (replaces 4 old forms)
Property, Rent, VDA etc.
Form 130
was Form 16
Annual TDS Certificate — Salary
Issued to employee
Form 131
was Form 16A
TDS Certificate — Non-Salary
Issued to deductee
Form 133
was Form 27D
TCS Certificate
Issued to buyer
🔷 TDS Deposit & Return Filing Deadlines
| Deductor Type | Month of Deduction | Deposit By |
|---|---|---|
| Government (without challan) | Any month | Same day as deduction |
| Government (with challan) | Any month | 7th of following month |
| All other deductors | April – February | 7th of following month |
| All other deductors | March | 30th April |
| Immovable property (Code 1010 / Form 141) | Month of deduction | 30 days from end of that month |
| Quarter | Period | Due Date | Forms to File |
|---|---|---|---|
| Q1 | April – June 2026 | 31 July 2026 | Form 138 / 140 / 143 / 144 |
| Q2 | July – September 2026 | 31 October 2026 | Form 138 / 140 / 143 / 144 |
| Q3 | October – December 2026 | 31 January 2027 | Form 138 / 140 / 143 / 144 |
| Q4 | January – March 2027 | 31 May 2027 | Form 138 / 140 / 143 / 144 |
🔷 Penalties & Consequences of Non-Compliance
💸
Interest — Not Deducted
1% per month (or part thereof) from date TDS was deductible to date of actual deduction.
🏦
Interest — Not Deposited
1.5% per month (or part thereof) from date of deduction to date of actual deposit.
📋
Late Filing Fee
₹200 per day for delayed quarterly TDS return. Maximum = total TDS in that return.
⚖️
Penalty — Non-Deduction
AO can levy 100% of tax not deducted as penalty — you pay the tax twice.
🚫
Expense Disallowance
30% of payment disallowed as business expense — inflating your taxable profit.
🔍
New Audit Obligation
Form 26 Clauses 49–51 require exact count & amount of every unreported TDS transaction.
⚠️ Part Month = Full Month InterestInterest is charged per month or part of a month. If TDS of ₹1,00,000 is deducted on 1 May 2026 but deposited on 10 June 2026 (due 7 June), two full months’ interest applies: ₹1,00,000 × 1.5% × 2 = ₹3,000. Even one day’s delay into a new month counts as a full month.
🔷 Key Changes — Finance Act 2026
| Change | Prior Position (ITA 1961) | New Position from 1 April 2026 |
|---|---|---|
| CBDT Circulars — Binding | Advisory only | Section 400(2): Mandatorily binding on all deductors and tax authorities |
| MACT Interest Exemption | TDS on MACT interest above ₹50,000 | Full exemption — NIL TDS on any MACT interest to natural persons |
| NRI Property — PAN replaces TAN | Buyer needed TAN for TDS on NRI property | Buyer uses PAN — simplifies compliance for individual buyers |
| Manpower Supply — Explicit | Ambiguity under old 194C | Explicitly covered under Section 393 contractor provisions (Codes 1023/1024) |
| New Luxury Goods TCS | No TCS on luxury goods except motor vehicles | New Codes 1076–1085 under Section 394 — watches, art, yachts, bags, shoes, sportswear, home theatres, polo horses etc. |
| 206AB & 206CCA Removed | Higher TDS/TCS for ITR non-filers | Both sections deleted from 1 April 2025 — ITR filing status no longer relevant |
| Section 194LD Deprecated | 5% TDS on Masala Bond interest to FII/QFI | Section 194LD deleted entirely from 31 March 2026 |
| Audit Report — Form 26 | Form 3CD Clause 34 — Yes/No for unreported TDS | Clauses 49–51 in Form 26 — exact count + monetary amount of each unreported transaction |
🔷 12-Point Compliance Checklist — Tax Year 2026-27
✅ Action Checklist
- Update accounting software (Tally, SAP, Zoho Books) to use new payment codes 1001–1092 — old section numbers discontinued on TRACES. Returns using old section numbers will be defective.
- Update payroll to issue Form 130 (was Form 16) — mandatory from Tax Year 2026-27.
- Update quarterly TDS return filing to Forms 138, 140, 143, 144 — old Forms 24Q/26Q/27Q/27EQ discontinued for Tax Year 2026-27.
- Run bulk PAN verification of all vendors on TRACES portal — flag unlinked/invalid PANs for 20% TDS (5% for goods/e-commerce Codes 1031/1035).
- Deduct TDS on manpower supply invoices at 1% (Code 1023) or 2% (Code 1024) — explicitly mandatory from 1 April 2026.
- Stop TDS on MACT interest payments — fully exempt, NIL TDS from Finance Act 2026.
- For NRI property purchases: use PAN instead of TAN — report under Code 1057/Form 144.
- Identify sellers of luxury goods (watches, art, bags, shoes, yachts, sportswear etc.) — start collecting TCS using Codes 1076–1085 from 1 April 2026.
- Update vendor contracts for revised rates — insurance commission 5% (Code 1005), general commission 2% (Code 1006), life insurance 5% (Code 1030), LRS education TCS 0.5% (Code 1086).
- Implement system-level transaction tracking to support exact count/amount reporting in Form 26 Clauses 49–51 (tax audit report).
- Collect Form 10F + Tax Residency Certificates from all non-resident payees for DTAA-rate TDS deduction.
- Review all partner drawings in firms/LLPs — TDS at 10% under Code 1067 mandatory if aggregate partner payments exceed ₹20,000.
🔷 Frequently Asked Questions
What are TRACES payment codes and how many are there? +
TRACES payment codes are 4-digit numeric codes (1001 to 1092) introduced under the Income Tax Act 2025 to identify each type of TDS/TCS payment in quarterly returns. They replace the old practice of citing section numbers (194C, 194J etc.). There are 92 total codes — 42 TDS codes for residents, 19 for non-residents, and 25 TCS codes (plus 4 inferred codes not yet officially notified). Using old section numbers in new returns filed from April 2026 will make the return defective.
Which section governs TDS from 1 April 2026? +
TDS on salaries — Section 392 (Codes 1001–1004, Form 138). All non-salary payments to residents — Section 393(1) (Codes 1005–1038, Form 140). Non-resident payments — Section 393(2) (Codes 1039–1057, Form 144). Winnings, cash, partners — Section 393(3) (Codes 1058–1067). TCS — Section 394 (Codes 1068–1092, Form 143).
What replaced Form 24Q, 26Q, 27Q and 27EQ? +
Form 24Q is replaced by Form 138. Form 26Q is replaced by Form 140. Form 27Q is replaced by Form 144. Form 27EQ (TCS) is replaced by Form 143. The old challan-cum-statement forms 26QB, 26QC, 26QD, and 26QE are all consolidated into a single Form 141.
What is the TDS rate when PAN is not furnished? +
Under Section 397(2) (old Section 206AA): 20% in most cases. Exception: for purchase of goods (Code 1031) and e-commerce (Code 1035), the rate is 5% where 5% exceeds the applicable TDS rate. Note: Sections 206AB and 206CCA (higher TDS for ITR non-filers) have been deleted — ITR filing status of payees no longer needs to be verified.
What are the new luxury goods TCS codes? +
Codes 1076 to 1085 under Section 394 are entirely new — no equivalent existed in the old Act. Sellers must collect TCS at 1% on sale of wrist watches (1076), art pieces (1077), collectibles (1078), yachts/boats/helicopters (1079), sunglasses (1080), bags/purses (1081), shoes (1082), sportswear/equipment (1083), home theatres (1084), and polo/racing horses (1085) when consideration exceeds the threshold notified by CBDT.
What is the TDS code for professional fees vs technical services? +
Code 1026 at 2% — fees for technical services (not professional), royalty on cinematographic films, call centre operations. Code 1027 at 10% — fees for professional services (doctors, lawyers, CAs, architects, engineers etc.) and royalty other than films. Code 1028 at 10% — director remuneration/fees/commission (no threshold). Old Section 194J is now split into these three separate codes — using the wrong code is a compliance error.
Is TDS applicable on partner salary/remuneration in a firm? +
Yes. Under Code 1067 / Section 393(3) Sl.7 (old Section 194T): TDS at 10% is mandatory on salary, remuneration, commission, bonus or interest paid to any partner, if the aggregate annual payment exceeds ₹20,000. This applies to both partnership firms and LLPs. The firm/LLP is the deductor.
Are CBDT circulars on TDS now binding? +
Yes. Section 400(2) of Income Tax Act 2025 (amended by Finance Act 2026) makes all CBDT circulars on TDS and TCS mandatorily binding on all deductors and tax authorities. The earlier argument that CBDT circulars are “merely advisory” is overturned. This covers circulars on perquisites (Code 1033/1034), VDA (Codes 1037/1038), DTAA application, and all other TDS areas.
What is the penalty for not depositing TDS on time? +
Interest at 1.5% per month (or part thereof) from date of deduction to date of deposit. Additionally, late filing of quarterly TDS return attracts ₹200 per day fee. The TRACES portal auto-generates notices. Even one day’s delay into a new month = full month’s interest charged.
Can a payee submit Form 15G or 15H to avoid TDS? +
Yes. Resident individuals below 60 (Form 15G) or senior citizens (Form 15H) can submit a self-declaration if their total income is below the taxable limit. The payer is then not required to deduct TDS on interest, rent, professional fees etc. These forms are not valid for salary (Codes 1001–1003), lottery winnings (Codes 1058–1062), VDA (Codes 1036–1038), or any payment where TDS is mandatory regardless of income level.
Need Expert TDS Compliance Support?
TDS return filing (Forms 138/140/143/144), vendor deduction compliance, defaults rectification, lower certificate applications, and TDS notices — our CA team handles it all. Serving Delhi, Noida, Gurgaon and pan-India.
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Disclaimer: This article is prepared by CA Ankush Aggarwal based on the Income Tax Act 2025, Finance Act 2026, and Income Tax Rules 2026 as available on 2 April 2026. Codes 1007, 1010, 1025, and 1036 are inferred from sequential gaps in the draft forms and have not been formally confirmed by CBDT — do not use them in returns until officially notified. Thresholds for luxury goods TCS (Codes 1076–1085) are yet to be notified by CBDT. This content is for general educational purposes only and does not constitute professional tax advice. Verify all codes on the official TRACES portal and incometaxindia.gov.in before filing. Ankush Aggarwal & Associates accepts no liability for any loss arising from reliance on this content.
