The Finance Bill 2026, which introduces the new Income-tax Act, 2025 effective from April 1, 2026, focuses on simplifying the Tax Deducted at Source (TDS) regime to enhance liquidity and reduce the compliance burden for small taxpayers.
Below are the specific changes related only to TDS:
1. New TDS on Manpower Services
A major structural change is the explicit inclusion of manpower services under the TDS framework.
- The supply of manpower services will now attract a TDS rate of either 1% or 2%.
- This move aims to resolve long-standing disputes regarding whether such services should be classified as “fees for technical services” (higher rate) or “contractual payments”.
2. Procedural Simplification for Small Taxpayers
The Bill introduces automated processes to help small taxpayers manage their cash flow better.
- Automated Lower/Nil Deduction Certificates: A new rule-based automated process has been proposed to allow small taxpayers to obtain lower or nil deduction certificates. This eliminates the need to file a manual application and wait for approval from an Assessing Officer.
- Single-Window for Form 15G/15H: For investors holding securities across multiple companies, depositories are now enabled to accept Form 15G or 15H. The depository will provide the form directly to all relevant companies, saving the investor from filing multiple separate declarations.
3. Removal of TDS on Motor Accident Claims
To support victims of accidents, interest awarded by the Motor Accident Claims Tribunal to a natural person is now exempt from Income Tax.
- Consequently, all requirements for TDS on such interest payments have been completely removed.
4. Simplification for NRI Property Sales
Compliance for resident buyers purchasing immovable property from Non-Resident Indians (NRIs) has been significantly eased.
- The requirement for a resident buyer to obtain a Tax Deduction Account Number (TAN) has been simplified, allowing them to use their Permanent Account Number (PAN) based challans to deposit the tax.
5. Administrative and Structural Reforms
- Post-Deadline Refunds: Under the new Act, taxpayers can now claim TDS refunds even if their Income Tax Returns (ITRs) are filed after the deadline, without attracting penalties specifically for the refund claim.
- Consolidation of Sections: The new Income-tax Act, 2025 renames and consolidates many TDS provisions into a schedule-based framework to reduce the volume of sections by nearly 50%.
- Uniform Thresholds: A uniform threshold of ₹10,000 for TDS on interest on securities has been introduced across all categories of recipients to ensure consistency.
What Has Not Changed?
Despite the structural overhaul, the core TDS rates for several major categories—such as salaries (slab rates), lotteries (30%), and professional services (10%)—remain unchanged from the previous assessment year to maintain revenue stability.
FCA, CWM (AAFM-US), CBV, CIFRS, R-ID, B.COM (H), RV* (IBBI)
Practising Chartered Accountant in Delhi NCR Since 2011. He can be contacted at ankitgulgulia@gmail.com or +91-9811653975.