From 1 April 2026, taxpayers, businesses, accountants and tax professionals will need to follow a restructured TDS framework under the Income-tax Act, 2025. Familiar form numbers and section references are changing, so understanding the new provisions before the transition will help make deductions, deposits and returns easier to manage.
This guide follows the topics covered in the video: the basic meaning of TDS, the parties involved, deduction timing, PAN requirements, the new section structure, tax rates and the compliance areas discussed across the 11-part module.
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What changes for TDS from 1 April 2026?
The Income-tax Act, 1961 applies up to 31 March 2026. From 1 April 2026, taxpayers will move to the Income-tax Act, 2025, along with its new rules and forms.
This transition affects the way taxpayers refer to TDS provisions. Many people have memorised familiar references such as section 192, Form 24Q and Form 16 for salary TDS. Under the new framework, those old references will give way to the new structure.
The video introduces a detailed TDS module divided into 11 parts. It covers who deducts TDS, the applicable rates and provisions, compliance requirements and penalties. The aim is to understand how the new framework works before applying it to transactions from 1 April 2026.
What is TDS?
Tax Deducted at Source, or TDS, is a system in which the person making a specified payment deducts tax before paying the recipient and deposits that tax directly with the government.
In simple terms, the payer does not always transfer the entire gross amount to the recipient. Where a TDS provision applies, the payer deducts the relevant tax and pays the balance to the recipient. The deducted amount is deposited with the government against the recipient’s tax details.
TDS is described in the video as a direct, transparent and traceable system. It is a mechanism for collecting income tax at the time of specified payments.
The parties and terms involved in a TDS transaction
A TDS transaction involves two principal parties:
- Deductor or payer: The person responsible for making the payment and deducting tax where the law requires it.
- Deductee or payee: The person receiving the payment after the applicable tax has been deducted.
The payer makes the payment, deducts the applicable TDS and deposits it with the government. The recipient receives the net amount, while the deducted tax is treated as a credit against the recipient’s tax liability.
Example: ₹100 gross payment
Suppose an employee’s gross salary is ₹100 and ₹10 is deducted as TDS. The employee receives ₹90, while ₹10 is deposited with the government.
The employee’s income is still considered on the gross amount of ₹100 for tax purposes. The TDS is not a reduction in the amount of income earned; it is tax collected in advance and credited to the recipient.
This also explains why the recipient should not assume that a short payment automatically means the bank or employer has made an error. The deduction may represent TDS required under the applicable provision.
When does a payment attract TDS?
The video explains that TDS provisions apply to specified payments made by a person—whether an individual or another type of taxpayer—to a resident or non-resident, depending on the relevant provision.
The deductor’s responsibility is to identify whether the payment falls within a TDS provision, deduct the tax at the appropriate time and deposit it with the government. If the deductor fails to deduct tax when required, consequences such as penalties may apply.
The video also notes that, for the calculation discussed, the GST amount is excluded when computing TDS. This point should be applied in the context of the relevant payment and applicable provision.
PAN and the higher rate of TDS
The deductor needs the deductee’s PAN for the TDS process. According to the video, when the deductee does not provide PAN, tax may be deducted at a higher rate: the higher of twice the specified rate or 20%.
This makes it important for the payer to obtain and verify the recipient’s PAN before making a payment that is subject to TDS.
Understanding the timing of TDS deduction
A key practical point in the video is the timing of deduction. The example uses a professional service provided by a chartered accountant to a company.
The professional raises an invoice for ₹80,000 on 4 January 2026. The company records the amount in its books on the same date, but makes payment on 7 February 2026.
The video explains that the deduction point is determined by whichever of these two events happens first:
- Credit in the books: When the amount is credited to the payee’s account in the payer’s books.
- Payment: When the payer makes the payment.
In this example, the company records the credit on 4 January, before paying on 7 February. Therefore, the earlier event is the credit date. The example shows why a payer cannot always wait until the money is transferred to deduct TDS; the accounting entry may trigger the obligation first.
The new TDS structure under the Income-tax Act, 2025
The video places TDS provisions in Chapter 19, covering sections 392 to 402 under the new framework.
It identifies sections 392 and 393 as the main sections that consolidate the TDS provisions into a tabular structure. The earlier law spread TDS provisions across a series of sections, including references such as sections 192, 193, 194 and 195. Under the new structure, the provisions are reorganised, while related sections continue to address other connected requirements.
The video notes that there are more than 30 provisions and that the rates discussed range from 1% to 30%, depending on the applicable provision and transaction. The specific rate cannot be determined from the rate range alone; it depends on the nature of the payment and the relevant TDS rule.
TDS return and certificate references are changing
The video points out that familiar TDS references are changing under the new system. For example, taxpayers have long associated salary TDS with Form 24Q and Form 16. The new Act introduces a different numbering structure, so taxpayers will need to learn the applicable forms and references for the new regime.
The video also flags a change to the form reference used to review TDS information. It cautions that relying on the old Form 26AS reference after the transition may no longer be correct. The new form and reporting references need to be checked under the rules applicable from 1 April 2026.
What the recipient should understand about TDS credit
The recipient receives the net amount after deduction, but the income is considered on the gross amount. In the video’s example, the recipient receives ₹90 after ₹10 is deducted from a gross payment of ₹100. Tax is calculated with reference to the gross income of ₹100, and the TDS amount is available as a credit to be adjusted against the recipient’s tax liability, subject to the applicable reporting and credit rules.
For this reason, both parties have responsibilities: the payer must deduct and deposit TDS correctly, while the recipient should track the tax deducted and confirm that the credit is reflected under the applicable system.
What the 11-part TDS module covers
The video introduces an 11-part learning module for the new TDS framework. Across the modules, it plans to explain:
- The basic TDS mechanism and who deducts tax
- Rates applicable to different provisions
- Section-wise treatment
- Compliance requirements
- Penalties
- Related case laws
The module is intended for business owners, accountants, tax practitioners, students and taxpayers who need to understand how the new provisions work in practice.
How to prepare for the transition
The first step is to stop relying only on familiar section and form numbers from the 1961 Act. From 1 April 2026, taxpayers will need to identify the applicable provision under the Income-tax Act, 2025.
Businesses should also review their payment processes. The date an expense is credited in the books may be earlier than the payment date, and that earlier event can determine when TDS must be deducted. Collecting the payee’s PAN and checking the relevant rate and reporting requirements are also part of the process described in the video.
Frequently asked questions
What does TDS stand for?
TDS means Tax Deducted at Source. The payer deducts tax from a specified payment and deposits it with the government.
Who are the deductor and deductee?
The deductor is the payer responsible for deducting tax. The deductee is the recipient whose payment is subject to the deduction.
When should TDS be deducted?
As explained in the video’s example, the relevant point is the earlier of credit in the payer’s books or actual payment.
What happens if PAN is not provided?
The video states that a higher rate may apply: the higher of twice the specified rate or 20%.
Which chapter contains the TDS provisions under the new Act?
The video identifies Chapter 19, covering sections 392 to 402, as the chapter for TDS provisions under the Income-tax Act, 2025.
Are the old TDS forms and section references still relevant after 1 April 2026?
The video explains that the framework is being restructured from 1 April 2026, including section and form references. Taxpayers should use the references applicable under the new Act for the relevant period.
Conclusion
The TDS framework under the Income-tax Act, 2025 brings new section and form references from 1 April 2026. The basic mechanism remains important to understand: the deductor identifies a specified payment, deducts tax at the required time, deposits it with the government and reports it under the applicable system. For taxpayers and businesses, learning the new references and tracking the earlier of credit or payment will be central to handling TDS correctly.
