With the Income Tax Act 2025 replacing the 1961 Act effective 1 April 2026, every TDS section number has changed. Section 194C is gone — it's now Section 393(2). Section 194J is Section 393(11). Section 192 is Section 392(1). For finance teams, this isn't just a statutory curiosity — it directly impacts vendor master configurations in SAP, Oracle, Tally, and every other ERP. Get this wrong and TDS returns are defective, 26AS credits don't match, and vendors face deduction disputes. This guide gives you the complete old-to-new section mapping and a step-by-step update playbook.
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Immediate Action Required for Tax Year 2026-27: The Income Tax Act 2025 came into force on 1 April 2026. All TDS deductions from Tax Year 2026-27 (April 2026 onwards) must reference the new Act's section numbers. ERP vendor masters carrying old section codes (194C, 194J, 194I, etc.) must be updated before your April 2026 TDS return cycle. Delayed updates will result in incorrect TDS returns, TRACES mismatches, and vendor 26AS discrepancies.
Why Vendor Master Update Matters
The vendor master in your ERP stores the TDS section applicable to each vendor/payment type. When you process a payment, the system automatically calculates TDS based on the vendor master configuration. If the master still shows Section 194C but the return must now reference Section 393(2), the TDS return filed via Form 26Q will contain incorrect section codes.
The downstream consequences are serious:
- Form 26AS / AIS mismatch: The TDS credit reflected in a vendor's 26AS will reference a section that no longer exists, creating confusion during their ITR filing
- TRACES rejection: TDS returns with section codes not recognised by the updated TRACES system will be flagged as defective
- Lower deduction certificate issues: Vendors holding lower deduction certificates (Form 13 / now Form 33 under new Act) issued under old section numbers will face problems
- Internal audit findings: Statutory auditors will flag ERP master data that doesn't match the applicable law
Complete TDS Section Mapping — Old Act to New Act
The following table maps every major TDS/TCS section from the Income Tax Act 1961 to the corresponding section in the Income Tax Act 2025. Rates and thresholds remain unchanged unless specifically mentioned.
| Payment Nature |
Old Section (Act 1961) |
New Section (Act 2025) |
Rate |
Threshold |
| Salary | 192 | 392(1) | As per slab | Basic exemption limit |
| Salary from other employer | 192A | 392(2) | As per slab | — |
| EPF premature withdrawal | 192A | 392(3) | 10% | ₹50,000 |
| Interest on securities | 193 | 393(1) | 10% | ₹10,000 |
| Interest other than securities (bank, etc.) | 194A | 393(4) | 10% | ₹50,000 (sr. citizen) / ₹40,000 (others) |
| Dividend | 194 | 393(2) | 10% | ₹5,000 |
| Winnings from lottery/puzzle/game | 194B | 393(3)(i) | 30% | ₹10,000 |
| Winnings from horse race | 194BB | 393(3)(ii) | 30% | ₹10,000 |
| Payment to contractors | 194C | 393(5) | 1% (individual/HUF) / 2% (others) | ₹30,000 single / ₹1L aggregate |
| Insurance commission | 194D | 393(6) | 5% | ₹15,000 |
| Life insurance maturity/surrender | 194DA | 393(7) | 5% on profit portion | ₹1,00,000 |
| Payment to NR sportsman/entertainer | 194E | 393(8) | 20% | Any amount |
| NSS withdrawal | 194EE | 393(9) | 10% | ₹2,500 |
| Mutual fund repurchase | 194F | Omitted (LTCG/STCG applies) | — | — |
| Commission/brokerage | 194H | 393(10) | 5% | ₹15,000 |
| Rent — plant, machinery, equipment | 194I(a) | 393(12)(i) | 2% | ₹2,40,000/year |
| Rent — land, building, furniture | 194I(b) | 393(12)(ii) | 10% | ₹2,40,000/year |
| Rent by individual/HUF (monthly above ₹50K) | 194IB | 393(13) | 2% | ₹50,000/month |
| Transfer of immovable property | 194IA | 393(14) | 1% | ₹50 lakh |
| Joint development — land owner payment | 194IC | 393(15) | 10% | Any amount |
| Professional/technical fees | 194J(a) | 393(11)(i) | 2% (technical) / 10% (professional) | ₹30,000 |
| Fees for professional services (royalty) | 194J(b) | 393(11)(ii) | 10% | ₹30,000 |
| Payment to call centre | 194J (call centre) | 393(11)(iii) | 2% | ₹30,000 |
| Payment to directors (non-salary) | 194J / 194PA | 393(16) | 10% | Any amount |
| Income from business trust units | 194LBA | 393(17) | 10% | — |
| Income from securitisation trust | 194LBC | 393(18) | 25%/30% | — |
| Payment from NPS on maturity | 194LBB / 194EEB | 393(19) | Exempt (60% lump sum) | — |
| Royalty / FTS payments to NR | 195 | 394(1) | Per DTAA or Act rates | Any amount |
| Long-term capital gains | 195 / 196C | 394(2) | 12.5% | — |
| Compensation on land acquisition | 194LA | 393(20) | 10% | ₹2.5 lakh |
| E-commerce operator payment | 194O | 393(21) | 1% | ₹5 lakh/year |
| Benefit/perquisite in business | 194R | 393(22) | 10% | ₹20,000/year |
| Virtual digital asset (crypto) payment | 194S | 393(23) | 1% | ₹10,000 / ₹50,000 |
| Payment for purchase of goods | 194Q | 393(24) | 0.1% | ₹50 lakh |
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Source: Section mapping based on Income Tax Act 2025 (536 sections, 23 chapters). Published at incometaxindia.gov.in/income-tax-act-2025. All TDS provisions are consolidated under Chapter XIX-B (Sections 390–399) of the new Act versus scattered across Chapter XVII-B in the 1961 Act. This consolidation is a major structural improvement.
Step-by-Step Vendor Master Update — SAP, Tally & Others
Phase 1: Audit Current Vendor Master
1
Extract vendor master TDS report: Pull a full vendor master extract showing current Section, Rate, and Threshold configured for each vendor/withholding tax type. In SAP: Transaction FK10N or MM60 with withholding tax fields. In Tally: Go to Accounts Info → Ledgers → export with TDS nature of payment.
2
Classify by payment type: Group vendors by their TDS section (all 194C vendors, all 194J vendors, all 194I vendors, etc.). This creates update batches. Most companies have 90% of vendors clustered in 194C (contractors), 194J (professional fees), and 194I (rent).
3
Identify exceptions: Flag vendors with lower deduction certificates (Form 13/new Form 33), NIL deduction certificates, or DTAA-based deductions. These need individual review — the section reference in their certificates may need re-examination.
Phase 2: Configure New Section Codes in ERP
4
SAP S/4 HANA / SAP ECC: Navigate to SPRO → Financial Accounting → Accounts Receivable and Accounts Payable → Business Transactions → Withholding Tax → Extended Withholding Tax → Calculation → Withholding Tax Codes. Create new withholding tax codes for each new Act section (e.g., WT code "Z93C" for Section 393(5) to replace "194C"). Set rate = same as before. Then mass-update vendor master using transaction XK99 (FI01/FK01 change) to assign new WT codes.
5
Tally Prime / Tally ERP 9: Go to Gateway of Tally → Accounts Info → Statutory Info → TDS Nature of Payments. Create new Nature of Payment entries for each new section (e.g., "Contractors - Sec 393(5)"). Then update each ledger under Accounts Info → Ledgers → alter → TDS Applicable → select new nature of payment. Tally typically releases an update patch for this — check Tally's Knowledge Base at tallysolutions.com for the Income Tax Act 2025 compatibility update.
6
Oracle Fusion / NetSuite: Update the Tax Withholding Type configuration. For Oracle Fusion: Navigator → Setup and Maintenance → Tax → Withholding Tax Rates. Create new rates linked to new Act section references. Then update supplier/payable records via mass update or FBDI template for large vendor sets.
7
Testing before go-live: Process test transactions in a sandbox/test environment. Verify that (a) TDS is calculated at the correct rate, (b) the withholding tax certificate generated references the new section, and (c) the TDS return generation tool picks up the new section code correctly.
Case Study: Precision Autoparts Ltd — 1,200-Vendor Master Migration
Manufacturing Company, Pune — Tax Year 2026-27 Transition
Precision Autoparts processes payments to ~1,200 active vendors across contractor, professional, and rent categories. Their SAP ECC had all vendor masters configured under old 1961 Act section codes. Here's how they executed the transition in 3 weeks:
- Week 1 — Audit: Pulled vendor master via SAP report RFWT0010. Found 680 vendors under 194C, 210 under 194J, 90 under 194I, 40 under 194H, rest miscellaneous. Identified 12 vendors with lower deduction certificates.
- Week 2 — Configuration: Created new withholding tax keys in SPRO. Mapped 194C → 393(5), 194J-technical → 393(11)(i) at 2%, 194J-professional → 393(11)(i) at 10%, 194I(a) → 393(12)(i), 194I(b) → 393(12)(ii), 194H → 393(10). Total 9 new WT keys created.
- Week 3 — Mass update & testing: Used XK99 to mass-update vendor masters. Ran test payment cycles for 15 sample vendors. Verified TDS certificates generated correctly. Ran a parallel April 2026 payables cycle with old and new codes to cross-check amounts.
The 12 vendors with lower deduction certificates were individually reviewed with their CA. Since the Act allows transition of certificates, no fresh applications were needed for TY2026-27 — the existing certificates were endorsed with the new section reference.
Transition Timeline
3 weeks
Lower Cert Cases
12 (individually reviewed)
TDS Return Filing — Section Codes in Form 26Q
Form 26Q (TDS on non-salary payments) requires the deductor to mention the Section under which TDS was deducted for each deductee transaction. From Tax Year 2026-27 onwards, this must reflect new Act section codes.
TRACES / RPU Update Timeline
The TRACES portal and the Return Preparation Utility (RPU) issued by NSDL are updated by the Income Tax department to accept new section codes. Check the following:
- NSDL's RPU version for Q1 Tax Year 2026-27 (April–June 2026) — download from tin.tin.nsdl.com
- TRACES portal update announcements — check under traces.gov.in → Latest Updates
- If your TDS return software (Saral TDS, Winman, ClearTDS) is third-party, ensure it has been updated to reflect new section codes
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Transition Period Guidance: CBDT typically issues a circular during major transitions clarifying whether old section codes will be accepted in TDS returns for a transitional period. For FY2025-26 (April 2025–March 2026) TDS returns still filed under the old Act — file with old section codes. For Tax Year 2026-27 (April 2026 onwards) — use new Act section codes. Watch for CBDT circulars on the official incometaxindia.gov.in website for any relaxation or extended timelines.
Lower Deduction Certificates — Impact and Transition
Vendors holding Form 13 certificates (lower/NIL TDS) issued under the 1961 Act may face questions about validity after 1 April 2026. The general principle under transitional provisions is:
- Certificates issued for FY2025-26 remain valid for that year's payments
- For Tax Year 2026-27, fresh applications may need to reference the new Act section numbers
- CBDT transitional circulars will clarify the specific procedure — vendors should file fresh Form 13 applications (now under new Act section references) via the TRACES portal early in Tax Year 2026-27
✅ Vendor Master Update Compliance Checklist
- Extract current vendor master TDS section codes from ERP (SAP/Tally/Oracle)
- Map each vendor to the new section using the old-to-new table above
- Create new withholding tax codes/keys in ERP for all new Act sections
- Handle split sections (e.g., 194J split into 393(11)(i) technical vs professional)
- Mass-update vendor masters with new section codes (effective 1 April 2026)
- Test payment cycles in sandbox before live transactions
- Identify all vendors with lower deduction certificates (Form 13)
- Advise lower-cert vendors to file fresh Form 13 under new Act sections
- Update TDS return software to latest version (RPU/FVU from NSDL)
- Configure new section codes in TDS return preparation tool
- Verify that withholding tax certificates issued post-April 2026 reflect new section numbers
- Brief accounts payable team on the section changes and their implications
- Review any vendor contracts quoting old TDS section numbers — update if needed
- Download CBDT transition circular when published and circulate internally
Special Situations in Vendor Master Update
194J Split — Technical vs Professional Services
The old Section 194J had two rates: 2% for technical services and 10% for professional services. Many ERP systems had a single 194J vendor code with both sub-types. Under the new Act, these map to:
- Technical services (e.g., IT maintenance, AMC) → Section 393(11)(i) @ 2%
- Professional services (e.g., CA fees, legal fees, consultancy) → Section 393(11)(i) @ 10%
- Call centre payments → Section 393(11)(iii) @ 2%
If your vendor master has a generic "194J" entry used for both, you must now split it into separate codes. This is the most common configuration error finance teams encounter during the transition.
194C — Contractor Payments
The contractor TDS section maps cleanly: 194C → Section 393(5). Rates are unchanged: 1% for individual/HUF contractors, 2% for company/firm contractors. The threshold structure (₹30,000 per payment, ₹1 lakh aggregate) is preserved. Validate that your ERP has vendor type (individual vs company) correctly configured — this drives the rate selection.
194I — Rent Split
Section 194I had two sub-clauses. The new Act splits these into 393(12)(i) for plant/machinery/equipment (2%) and 393(12)(ii) for land/building/furniture (10%). Separately, 194IB (rent paid by individuals above ₹50K/month) maps to 393(13). Ensure your property/equipment rent vendors are segregated correctly.
Vendor Master Update — Key Takeaways
- All TDS sections change from 1 April 2026 — old 194C, 194J, 194I etc. are replaced by new Act numbers
- Rates and thresholds remain the same — only section numbers change
- ERP vendor master update is mandatory before processing April 2026 TDS payments
- 194J requires special attention — split into technical (2%) and professional (10%) sub-types in new Act
- Lower deduction certificate vendors need fresh Form 13 applications referencing new Act sections
- Monitor TRACES portal and RPU utility updates for return-filing software readiness
- Watch for CBDT transitional circular on old section code acceptance in returns
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