TDS Payment Codes Under New Act for Finance Teams: FAQ for Founders, CFOs and Individuals
Reviewed by CA Nikhil Gupta · Last reviewed 23 June 2026
Every month, finance teams across India deposit TDS using Challan 281 — selecting a Nature of Payment (NOP) code that maps to an income tax section. With the Income-tax Act 2025 replacing the old Act from 1 April 2026, those section numbers have changed. A wrong NOP code on your challan creates a 26AS mismatch for your vendor or employee, potentially delaying their ITR refund and triggering a compliance notice for you. This guide gives you the complete mapping, due dates, common mistakes, and a practical worked example for your April 2026 TDS run.
Why TDS Section Numbers Changed — The Consolidated Structure
Under the old Income Tax Act, 1961, TDS sections were scattered across individual provisions: 192 (salary), 194 (dividends), 194A (interest), 194C (contractors), 194H (commission), 194I (rent), 194J (professionals), 194Q (goods purchases), 195 (non-residents), and so on — over 30 individual TDS sections.
The Income-tax Act 2025 consolidates these into two master sections:
- Section 392(1) — TDS on salary payments (replaces old Section 192)
- Section 393 — TDS on all non-salary payments, with sub-categories replacing Sections 194/194A/194C/194H/194I/194J etc.
While the structure is consolidated, the CBDT / NSDL portal continues to use Nature of Payment (NOP) codes for granular identification. The codes themselves may be updated — always use the latest Challan 281 from the NSDL/Protean portal.
TDS Section Mapping: Old Act → Income-tax Act 2025
| Nature of Payment | Old Section | New Act Section | TDS Rate (General) | Threshold |
|---|---|---|---|---|
| Salary | 192 | 392(1) | As per slab | Basic exemption limit |
| Interest on securities | 193 | 393(a) | 10% | ₹10,000/year |
| Dividends | 194 | 393(b) | 10% | ₹10,000/year |
| Interest (banks / post office) | 194A | 393(c) | 10% | ₹50,000 (senior citizen) / ₹40,000 |
| Winnings from lottery/crossword | 194B | 393(d) | 30% | ₹10,000 per transaction |
| Horse race winnings | 194BB | 393(e) | 30% | ₹10,000 |
| Contractor / sub-contractor payments | 194C | 393(f) | 1% (individual/HUF) / 2% (others) | ₹30,000 single / ₹1 lakh annual |
| Insurance commission | 194D | 393(g) | 5% | ₹15,000 |
| Maturity proceeds of life insurance | 194DA | 393(h) | 5% on taxable portion | ₹1 lakh |
| NSS withdrawals | 194EE | 393(i) | 10% | ₹2,500 |
| Repurchase of MF units | 194F | Omitted (see note) | — | — |
| Commission / brokerage | 194H | 393(j) | 5% | ₹15,000 |
| Rent — land/building/furniture | 194I(a)/(b) | 393(k) | 2% (P&M) / 10% (land/building) | ₹2.4 lakh/year |
| Professional / technical fees | 194J | 393(l) | 2% (tech services) / 10% (professional) | ₹30,000 |
| Rent paid by individual/HUF (high-value) | 194IB | 393(m) | 5% | ₹50,000/month |
| Transfer of immovable property | 194IA | 393(n) | 1% | ₹50 lakh |
| Payments to e-commerce participants | 194O | 393(o) | 1% | ₹5 lakh |
| Purchase of goods | 194Q | 393(p) | 0.1% | ₹50 lakh/year from seller |
| Cash withdrawals | 194N | 393(q) | 2% (above ₹1 cr) / 5% (non-filer above ₹20L) | ₹1 crore (regular filer) |
| Payment to non-residents | 195 | 394 | Rates per DTAA / Act | Any amount |
| Salary to non-residents | 192 r/w 195 | 392(1) r/w 394 | As per slab | Basic exemption |
TDS Due Dates — Unchanged Under New Act
| Month of Deduction | Challan Payment Due Date | Note |
|---|---|---|
| April – February | 7th of the following month | If 7th falls on holiday, next working day |
| March | 30th April | Extended deadline — critical for year-end |
| Government deductors (Book Entry) | Same day as deduction | No 7-day window for govt deductors |
TDS Return Filing Due Dates
| Quarter | Period | Due Date — Form 24Q/26Q/27Q |
|---|---|---|
| Q1 | April–June | 31st July |
| Q2 | July–September | 31st October |
| Q3 | October–December | 31st January |
| Q4 | January–March | 31st May |
Case: TechVenture Pvt Ltd — First TDS Run Under New Act
Company profile: 35-person SaaS startup, Bengaluru. Monthly payroll ₹42 lakh. Vendor payments: ₹8 lakh to contractors, ₹3 lakh to professional consultants, ₹1.5 lakh cloud rent.
Old section mapping they were using: Salary → 192 | Contractors → 194C | Professionals → 194J | Rent → 194I
Problem in April 2026: Finance team filed challan using old sections 192, 194C, 194J, 194I — portal flagged them as "deprecated section" warnings (not errors — so TDS was deposited) but the NOP codes generated a data mismatch in TRACES against the new section map.
Correction approach:
- Salary TDS rebooked under Section 392(1) — filed correction challan via NSDL
- Contractor payments updated to 393(f) code in Q1 TDS return
- Professional fees updated to 393(l)
- Cloud infrastructure rent (data centre) mapped to 393(k) — equipment/P&M rate 2%
Key lesson: Update your accounting software's TDS master before the first payment of each quarter. Most ERP systems (Tally, Zoho Books, SAP) push an update with new section codes — apply it before running April payroll, not after.
Challan 281 — How to Fill Under the New Act
Log in → e-File → e-Pay Tax → New Payment → TDS/TCS (Challan 281). Or use NSDL's TIN-NSDL portal.
Choose "(0021) Income Tax (Other than Companies)" for individuals/HUF/firms, or "(0020) Corporation Tax" for companies. This selection determines the deductor type — not the nature of payment.
This is where the new Act section maps. Select the correct NOP from the dropdown. Verify against the mapping table above. For salary: NOP code matching Section 392(1). For non-salary: match Section 393 sub-category.
Always enter the month of deduction — not the month of payment. If salary was deducted in April 2026, enter April 2026 even if the challan is paid on 5 May 2026.
Save the BSR code, Challan Serial Number, and date of tender — these are required for your quarterly TDS return (Form 24Q/26Q). Without these, your TRACES filing will fail.
Penalties for TDS Defaults Under New Act
| Default Type | Old Section | New Act Section | Consequence |
|---|---|---|---|
| Late deduction of TDS | 201(1A) | 398(1) | Interest 1% per month from date amount was payable |
| Late deposit after deduction | 201(1A) | 398(2) | Interest 1.5% per month from date of deduction to deposit |
| Failure to deduct TDS | 271C | 442 | Penalty equal to TDS amount not deducted |
| Late filing of TDS return | 234E | 387 / fee provision | ₹200/day, max = TDS amount |
| Non-filing of TDS return | 272A(2)(k) | Corresponding provision | ₹10,000 to ₹1 lakh |
| Incorrect information in TDS return | 271H | 448 | ₹10,000 to ₹1 lakh |
Monthly TDS Compliance Checklist for Finance Teams
Monthly TDS Checklist (New Act — 2026-27)
- Update TDS section codes in ERP/accounting software to new Act sections (392, 393 sub-categories)
- Run payroll by the last working day of the month — deduct TDS under Section 392(1)
- Deduct TDS on vendor invoices at time of credit or payment, whichever is earlier
- Verify vendor PAN is active and linked to Aadhaar (higher TDS if PAN is inactive — 20%)
- Consolidate challans category-wise — one challan per NOP code is cleaner for TRACES reconciliation
- Deposit TDS by 7th of following month (30th April for March)
- Download and save BSR code + Challan Serial Number for each deposit
- Reconcile TDS deducted register vs challan payments — identify any shortfalls before return filing
- File quarterly TDS return by due date (Form 24Q for salary, 26Q for non-salary)
- Download Form 26AS for key vendors quarterly to verify credit reflection
Special Cases — TDS on Rent, Professional Fees, and Goods
Rent (Section 393(k))
The split between land/building (10%) and plant & machinery (2%) continues under the new Act. Cloud services (SaaS, IaaS) are generally treated as professional/technical services (Section 393(l) at 2%) not rent — unless the contract explicitly transfers a right to use specific equipment.
Professional vs Technical Services (Section 393(l))
A frequent source of wrong NOP codes. Legal, medical, engineering, architectural, accountancy, interior decoration, advertising = professional services (10%). Software development, IT support, testing, data processing = technical services (2%). If a single vendor invoice combines both, deduct at the higher rate (10%) or split the invoice.
Goods Purchase — Section 393(p)
0.1% TDS if your annual purchase from a single seller exceeds ₹50 lakh. This is a buyer's obligation — it does not apply if the seller has already collected TCS on the same transaction (to avoid double deduction). Verify the seller's TCS compliance before deducting Section 393(p) TDS.
✅ Key Takeaways
- Old TDS sections (192, 194A, 194C etc.) are replaced by new Act Sections 392 and 393 — update your ERP before April 2026 payroll
- TDS due dates are unchanged: 7th of following month (except March TDS → 30th April)
- NOP codes on Challan 281 must reflect new Act sections — wrong codes create 26AS mismatches for your deductees
- Inactive PAN attracts 20% TDS — verify PAN-Aadhaar link status before processing payments
- Section 194F (MF repurchase TDS) is omitted — do not deduct TDS on MF redemptions
- Late deposit interest: 1.5%/month — never delay deposit even if return filing is pending
Frequently Asked Questions
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- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
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