Vendor TDS After the Income-tax Act, 2025: Updating Section Codes in Your Books
From 1 April 2026, vendor TDS that was under 194C, 194J, 194I, 194H and 194Q sits in the Section 393 table of the Income-tax Act, 2025, with numeric payment codes and Form 140 instead of Form 26Q. Rates are mostly unchanged. Update your TDS masters and check challan codes before the return due on 31 October 2026.
For years, accountants tagged vendor bills with 194C, 194J or 194I. The Income-tax Act, 2025, which applies from 1 April 2026, replaced those section numbers. Most rates have not changed, but the codes on challans and returns have, and mistakes are now showing up in the first returns.
What changed
- ✓Section 393 of the Income-tax Act, 2025 holds TDS on payments to residents, non-residents and specified transactions in tables, instead of separate sections. Salary TDS is in Section 392.
- ✓Challans and returns use numeric payment codes instead of old section numbers.
- ✓Form 140 replaces Form 26Q as the quarterly return for non-salary TDS. Form 138 replaces Form 24Q for salaries.
- ✓The year is called the tax year. Tax Year 2026-27 runs from 1 April 2026.
Old to new mapping
| Old section | Payment | Rate | Threshold | Payment code |
|---|---|---|---|---|
| 194C | Contractors and job work | 1% (individual or HUF), 2% (others) | ₹30,000 a bill or ₹1,00,000 a year | 1023, 1024 |
| 194J | Professional and technical fees | 10% professional, 2% technical | ₹50,000 a year | 1026 to 1028 |
| 194I | Rent | 10% land and building, 2% plant and machinery | ₹50,000 a month | 1008, 1009 |
| 194H | Commission and brokerage | 2% | ₹20,000 a year | 1006 |
| 194Q | Purchase of goods | 0.1% | Above ₹50 lakh a year | 1031 |
| 194T | Partners' salary and interest | 10% | ₹20,000 a year | 1067 |
Check the code against the current table when you pay. A wrong code is the most common reason for a mismatch notice.
A checklist before the October return
The return for July to September 2026 is due on 31 October 2026.
- Update the TDS master in your accounting software. Every vendor ledger with an old section tag needs the new nature of payment and code.
- Check challans paid since April. If a challan was paid under the wrong code, ask your bank or CA about a correction before you file.
- Check PAN-Aadhaar status for vendors. An inoperative PAN means TDS at a higher rate.
- Reconcile TDS deducted with TDS deposited, vendor by vendor.
- File Form 140 and issue TDS certificates to vendors on time.
A worked example
A Kochi software firm pays a freelance designer ₹80,000 for the quarter, an interior contractor ₹2,40,000 and office rent of ₹90,000 a month.
| Payment | Old tag | New code | TDS |
|---|---|---|---|
| Designer's professional fee | 194J | 1027 | ₹8,000 |
| Interior contractor (company) | 194C | 1024 | ₹4,800 |
| Office rent | 194I | 1009 | ₹9,000 a month |
Frequently asked questions
Do TDS rates go up under the new Act?
Mostly no. The new Act mainly renumbered and grouped the rules.
What about payments made before 1 April 2026?
Those follow the old Act and are reported in the old forms, including any late returns for FY 2025-26.
Do vendors need to do anything?
They should check that the TDS credited to their PAN matches what you deducted. Mismatches usually come from wrong PANs or codes.
Sources
- ✓Income-tax Act, 2025: TDS rates, thresholds and payment codes, TaxGuru
- ✓Section 393 TDS tables, OneFinOps
- ✓Income-tax Act, 2025 TDS compliance guide, CompuTax
This is a summary, not legal advice. Confirm with your chartered accountant before you rely on it.
Written by
Founder, Airwix Technologies (Sleet)
Vatsal Sutariya is the founder of Airwix Technologies in Ahmedabad, the company that builds Sleet: SleetHR for HR and payroll, and Sleet Accounting for GST billing and books. He writes about GST, invoicing, business tax and choosing software for Indian businesses, and checks each rule against the official notification before it is published.
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