TDS Rate Chart 2026-27: Section Codes, Challan & Due Dates

 

TDS Rate Chart for FY 2026-27 (AY 2027-28)

Table of Contents

1. Introduction to TDS Rate Chart FY 2026-27
2. New Income Tax Act 2025 Overview
3. Latest TDS Rate Chart (Section 392 & 393)
4. Professional & Technical Fees Rules
5. Rent Payment TDS Rules
6. Key Compliance Changes 2026
7. Quarterly Return Filing Deadlines
8. Challan Payment Process
9. Penalties for Non-Compliance
10. Exemptions from TDS
11. NIL TDS Reporting Rules
12. Reason Codes (Form 138 & 140)
13. Transporter Declaration Format
14. Conclusion
15. FAQ

The TDS Rate Chart for FY 2026-27 (AY 2027-28) is governed by the Income Tax Act, 2025, which streamlines previous regulations into a new simplified tabular framework. While most rates remain consistent with previous years, all section codes have been renumbered and consolidated under Section 392 (Salary) and Section 393 (Non-Salary) of the new Act.

Latest TDS Rate Chart for FY 2026-27

The following rates apply for payments made on or after 1st April 2026.

New Section/Code	Nature of Payment	Threshold (₹)	TDS Rate (%)
392(1)	Salary (formerly Sec 192)	Slabs	Average Slab Rate
393(1) [Table 1: Sl. 6(i)]	Contractor (Indv/HUF)	₹30,000 (Single)	1%
393(1) [Table 1: Sl. 6(ii)]	Contractor (Others)	₹1,00,000 (Agg.)	2%
393(1) [Table 1: Sl. 10]	Professional/Technical Fees	₹30,000	10%
393(1) [Table 1: Sl. 8]	Rent - Plant & Machinery	₹2,40,000	2%
393(1) [Table 1: Sl. 8]	Rent - Land & Building	₹2,40,000	10%
393(1) [Table 1: Sl. 4]	Commission or Brokerage	₹15,000	5%
393(1) [Table 1: Sl. 31]	Purchase of Goods	> ₹50 Lakhs	0.1%
393(1) [Table 1: Sl. 25]	Transfer of Immovable Property	₹50 Lakhs	1%
393(1) [Table 1: Sl. 33]	Virtual Digital Assets (Crypto)	₹10,000 / ₹50,000	1%

Note: If the deductee does not furnish a PAN, the TDS rate will be 20% (or the applicable rate, whichever is higher) under Section 206AA.

Key Compliance Changes in 2026

• Renumbered Sections: Quoting old sections (like 194C or 194J) for FY 2026-27 transactions will lead to system validation errors. Use the new Section 393 table codes for reporting.
• New Form Numbers:
  • Form 130 replaces Form 16 (Salary Certificate).
  • Form 131 replaces Form 16A (Non-Salary Certificate).
  • Form 138 replaces Form 24Q (Salary TDS Return).
  • Form 140 replaces Form 26Q (Non-Salary TDS Return).
  • Form 141 is the new common Challan-cum-Statement for property, rent, and VDA.
• Property from NRIs: Resident buyers no longer need a TAN to deduct tax when buying property from an NRI; they can now use their PAN for deposit and filing.
• Manpower Services: Explicitly classified as "works contracts" under the new equivalent of Section 194C (Rate: 1% for Indv/HUF, 2% for others).

Important Due Dates for FY 2026-27

1. Monthly TDS Deposit Deadlines

• TDS deducted in any month must be deposited by the 7th of the following month (except March).
• Apr 2026 – Feb 2027: 7th of the next month
• Mar 2027: 30th April 2027
• Challan-cum-Statement (Form 141): Within 30 days from the end of the month of deduction.

2. Quarterly TDS Return Filing Deadlines

Returns must be filed by the last day of the month following the quarter.

• Q1 (Apr–Jun 2026): 31st July 2026
• Q2 (Jul–Sep 2026): 31st October 2026
• Q3 (Oct–Dec 2026): 31st January 2027
• Q4 (Jan–Mar 2027): 31st May 2027

Challan Payment Process

TDS payments are made using Challan ITNS 281 or through the e-Pay Tax service on the Income Tax Portal.

• Pre-login/Post-login: You can generate a Challan Reference Number (CRN) with or without logging into your TAN account.
• Major Heads: Use 0020 for Company deductees and 0021 for Non-Company deductees.
• Year Selection: For income earned in FY 2026-27, select Tax Year 2026-27.

Penalties for Defaults

• Late Filing Fee: ₹200 per day until the return is filed (capped at the total TDS amount).
• Late Payment Interest:
  • 1% per month: For failure to deduct tax.
  • 1.5% per month: For failure to deposit tax after deduction.

Effective 1st April 2026, the new Income Tax Act, 2025 has replaced the old TDS forms with a simplified, technology-driven filing process on the Income Tax Portal.

Which Form to Choose?

• Form 138 (replacing 24Q): For reporting TDS on Salary payments and senior citizen pensions.
• Form 140 (replacing 26Q): For reporting TDS on Non-Salary payments to residents (e.g., Rent, Professional Fees, Commission).

Step-by-Step Filing Guide for Form 138 & 140

1. Preparation of the Return File

• Download Utility: Access the updated Return Preparation Utility (RPU) and File Validation Utility (FVU) from the Protean TIN-PAN website.
• Data Entry: Input the following mandatory details into the RPU:
  • Deductor Details: Your TAN, PAN, and address.
  • Challan Information: BSR code, date of deposit, and challan serial number from your tax payments.
  • Deductee Records: PAN of the recipient, payment amount, and new Section Codes (e.g., under Section 393 for non-salary).
• Validation: Run the file through the FVU to check for errors. If valid, it will generate a .fvu file.

2. Uploading on the e-Filing Portal

• Login: Sign in to the Income Tax Portal using your TAN credentials.
• Navigate: Go to e-File > Income Tax Forms > File Income Tax Forms.
• Select Act: Choose "Forms as per Income-tax Act, 2025".
• Form Selection: Select Form 138 or Form 140 and choose the relevant Tax Year 2026-27 and Quarter.
• Upload: Attach the validated .fvu file (usually in .zip format).

3. Verification & Confirmation

• Verify: Complete the process using a Digital Signature Certificate (DSC) or Aadhaar OTP (EVC).
• Acknowledgment: Once submitted, download the Acknowledgment Receipt Number (ARN) for your records.

Key Compliance Reminder

Compliance Item	Timeline / Details
Quarterly Deadline	Last day of the month following the quarter (e.g., 31st July for Q1).
Late Filing Fee	₹200 per day under Section 427, up to the total TDS amount.
New Certificates	Issue Form 130 (Salary) or Form 131 (Non-Salary) within 15 days of filing the return.

Under the Income Tax Act, 2025, which is effective for FY 2026-27, the reporting system has shifted from old section numbers to 4-digit numeric payment codes used in the new Form 140 (Non-Salary).

Professional & Technical Fees (Section 393)

These payments, formerly under Section 194J, now have a unified threshold of ₹50,000 per year.

Payment Type	Returns Code	Standard Rate	Details
Technical Services	1026	2%	Engineering, managerial, or consultancy services.
Professional Fees	1027	10%	Legal, medical, accountancy, or architectural fees.
Royalty (Non-Film)	1027	10%	Includes non-compete fees and most royalties.
Film Royalty	1026	2%	Specifically for sale or exhibition of films.
Director's Fees	1028	10%	No threshold; TDS applies on the first rupee paid.

Rent Payments (Section 393)

The threshold for rent has been updated to ₹50,000 per month (or ₹6,00,000 per year) for most categories.

Payment Type	Returns Code	Standard Rate	Details
Rent — Plant & Machinery	1008	2%	Paid for industrial equipment or machinery.
Rent — Land & Building	1009	10%	Paid for office, factory, or residential space.
Rent (Individual/HUF)	1007	2%	Paid by non-audit individuals under Section 393(1).

Critical Filing Requirements

• Form Usage: These codes must be used while preparing the Form 140 return. Using old references like "194J" or "194I" will result in the return being marked as defective on the TRACES Portal.
• PAN Missing: If the service provider does not provide a valid PAN, tax must be deducted at a higher rate of 20%.
• Certificates: After filing, issue the new Form 131 (which replaces the old Form 16A) to vendors.

Under the Income Tax Act, 2025, certain payments are exempt from TDS even if they exceed the usual thresholds. Understanding these is crucial to avoid blocking your vendors' cash flow or making unnecessary deposits.

1. Payments to Government & Specific Bodies

No TDS is required for payments made to:

• The Government (Central or State).
• Reserve Bank of India (RBI).
• Statutory Corporations established by Central/State Acts that are exempt from Income Tax.
• Mutual Funds specified under Section 10(23D).

2. Threshold-Based Exemptions (FY 2026-27)

TDS is not applicable if the aggregate payment in a financial year is below these limits:

• Professional/Technical Fees: Up to ₹30,000 (Code 1026/1027).
• Rent (Land/Building/Furniture): Up to ₹2,40,000 (Code 1009).
• Contractor Payments: Individual payments up to ₹30,000 or aggregate up to ₹1,00,000 (Code 1006).
• Commission/Brokerage: Up to ₹15,000 (Code 1004).
• Bank Interest: Up to ₹40,000 (₹50,000 for Senior Citizens).

3. Certificates for Lower/Nil Deduction

If a vendor provides a valid certificate issued by the Assessing Officer under Section 401 (formerly Section 197), tax must be deducted at the lower rate specified in that certificate or not deducted at all.

Note: Ensure the certificate is valid for FY 2026-27 and matches the specific TAN of your organization.

4. Specific Exemptions for Residents

• Interest on Securities: No TDS if interest on debentures issued by a public company does not exceed ₹5,000 and is paid by account payee cheque.
• Purchase of Goods: No TDS (Code 1031) if the turnover of the buyer was less than ₹10 Crores in the previous financial year.
• Payment to Goods Transport Operators: No TDS if the contractor owns 10 or fewer goods carriages during the year and furnishes a declaration along with PAN.

5. Software Payments

Payments made by a resident for acquisition of software from another resident are exempt if the software is purchased without modification and is classified as a shrink-wrap/commercial product (treated as goods, not royalty).

Compliance Tip

Even if a payment is exempt due to threshold limits, it is advisable to maintain a "NIL TDS" record in internal accounts to justify non-deduction during audits.

To claim exemption from TDS on payments to Goods Transport Operators for FY 2026-27, you must collect a signed declaration along with a copy of their PAN card.

Under the Income Tax Act, 2025 (equivalent to the old Section 194C), no tax is to be deducted if the transporter owns 10 or fewer goods carriages at any time during the year.

Declaration Format for Nil TDS (FY 2026-27)

To,
[Your Company Name / Individual Name]
[Your Address]
[Your TAN]

Subject: Declaration for Non-Deduction of TDS under the Income Tax Act, 2025

I, [Name of the Proprietor/Partner/Director], as the authorized representative of [Transport Agency Name], hereby declare the following:

• PAN Details: Our Permanent Account Number (PAN) is [Insert PAN Number]. A self-attested copy of the PAN card is attached herewith.
• Vehicle Ownership: We are engaged in the business of plying, hiring, or leasing goods carriages. We do not own more than ten (10) goods carriages at any time during the Financial Year 2026-27.
• Exemption Request: In accordance with the provisions equivalent to Section 194C(6) of the Income Tax Act, we request you not to deduct TDS on payments made to us for transport charges.
• Verification: I certify that the information provided above is true and correct. If there is any change in the number of vehicles owned (exceeding 10), I undertake to inform you immediately.

For [Transport Agency Name],
(Signature)

Name: [Name of Authorized Signatory]
Designation: [Proprietor / Partner / Director]
Date: [Date of Signing]
Place: [City]

Compliance Checklist for You (The Payer)

• Verify PAN: Always verify the PAN on the Income Tax Portal to ensure it is active.
• Reporting: Even if you deduct 0% TDS, you must report these payments in your quarterly Form 140 (Non-Salary Return) using Reason Code 'B' (No deduction on account of declaration under transport provisions).
• Documentation: Keep this physical or digital declaration in your audit file for at least 8 years.

Step-by-Step Reporting of NIL TDS in RPU (Form 140) – FY 2026-27

1. Open the 'Deductee Details' Tab

Go to the specific sheet in the RPU where individual payment entries are recorded.

2. Enter Transaction Details

• Enter PAN, Name of Deductee, Date of Payment, and Total Amount Paid (e.g., ₹50,000).

3. Set TDS Amount to Zero

• In the columns for TDS, Surcharge, and Cess, enter 0.00.

4. Select the Payment Code

• For transport contractors, select code 1006 (Contractor/Sub-contractor).

5. Use 'Reason for Non-Deduction' (Remarks Column)

This is the most important step. Select the correct reason code from the dropdown menu:

• Code 'B': Transport operators with declaration (10 or fewer vehicles).
• Code 'A': Lower/Nil Deduction Certificate under Section 401.
• Code 'Y': Payment is below threshold limit (e.g., below ₹30,000).

Flag for Section 206AB

• Ensure the "Specified Person" flag is set to 'No'.
• If the vendor has not filed previous income tax returns, the system may apply a higher TDS rate automatically, regardless of declaration.

Validation Tip (FVU Check)

When you run the file through the File Validation Utility (FVU), it verifies whether the Reason Code correctly matches a zero TDS amount.

• If TDS is shown as 0.00 but the remarks/reason field is blank, the utility will generate a "Critical Error".
• Such errors will cause the return file to be rejected during validation.

What Happens After Filing?

Even if no tax is deducted, the transaction will still be reflected in the deductee’s Form 26AS and Annual Information Statement (AIS).

• It will show as an entry where "No TDS was deducted".
• This helps the Income Tax Department track the total income of the transporter or vendor.

Reason Codes (Remarks Column) – Form 140 & Form 138 (FY 2026-27)

For Tax Year 2026-27, the “Remarks” / “Reason Code” column in Form 140 (Non-Salary) and Form 138 (Salary) is used to justify why tax was deducted at a rate different from the standard rate.

Using the correct code is mandatory to avoid a defective return notice from TRACES.

Form 140 Reason Codes (Non-Salary)

• A: Lower deduction due to certificate under Section 395 (formerly Section 197) issued by the Assessing Officer.
• B: Nil deduction based on a valid certificate under Section 395.
• C: Higher deduction due to non-availability of valid PAN (20% default rate applies).
• T: Transporter exemption where PAN and declaration (≤10 vehicles) is provided.
• Y: Threshold exemption where payment is below the prescribed limit (e.g., professional fees below ₹30,000).
• S: Software payment exemption for eligible commercial software purchases.
• Z: Self-declaration under Section 197A (Form 15G / 15H).

Form 138 Reason Codes (Salary)

• A: Lower deduction as per certificate under Section 395.
• B: No deduction as per certificate under Section 395.
• C: Higher deduction due to non-availability of valid PAN.

Important Filing Tips

• Validation: If TDS amount is 0, a valid reason code (A, B, T, or Y) must be selected. Otherwise, RPU will generate an error.
• System Mapping: Ensure software is updated for Income Tax Act, 2025. Old sections (194C/194J) are replaced with 4-digit payment codes like 1006.
• Certificates: For codes A and B, enter the certificate number issued by the vendor in the return filing utility.

Frequently Asked Questions (FAQ)

1. What is the TDS Rate Chart for FY 2026-27?

It is a structured list of tax deduction rates under the Income Tax Act, 2025, applicable for salary and non-salary payments from 1st April 2026.

2. Which forms are used for TDS filing in 2026-27?

Form 138 is used for salary TDS and Form 140 is used for non-salary TDS reporting.

3. What happens if I use old section numbers like 194C or 194J?

The return may be marked defective in the TRACES system due to mismatch with new payment codes.

4. Is TDS required if PAN is not available?

Yes, in most cases TDS will be deducted at a higher rate of 20% under Section 206AA.

5. What is NIL TDS reporting?

Even when no tax is deducted, transactions must still be reported with correct reason codes in Form 140.

6. What is the penalty for late TDS filing?

A late fee of ₹200 per day is applicable, subject to a maximum of the total TDS amount.

7. Are transport operators eligible for TDS exemption?

Yes, if they provide PAN and declare ownership of 10 or fewer goods carriages.

Conclusion

The TDS system for FY 2026-27 under the Income Tax Act, 2025 introduces a fully digitized and structured reporting mechanism with new section codes, updated return forms, and simplified compliance rules.

Taxpayers and businesses must ensure accurate use of Form 138 and Form 140, along with correct reason codes, payment codes, and validation rules to avoid defective returns or penalties.

Proper documentation, timely filing, and correct classification of transactions (salary, rent, professional fees, transport, and exemptions) will ensure smooth compliance and avoid unnecessary interest or late fees.

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Reference Sources

• Income Tax Department – Official Website (India)
• Protean (NSDL e-Gov) – TDS Filing Utilities & RPU/FVU Tools
• ClearTax – TDS Rules & Compliance Guides
• Income Tax e-Filing Portal – Government of India
• TRACES Portal – TDS Statement & Certificate Verification

Note: This article is prepared for informational and educational purposes only. Readers should refer to official government portals for final compliance updates.

Disclaimer

This article is for informational and educational purposes only. It does not constitute legal advice. Readers should consult a qualified legal professional or company secretary before making any decisions related to corporate compliance or financial year changes.

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