Every tax practitioner in the country has some version of muscle memory for Section 194C, 194J, 194H, 194I — the old TDS sections, each governing a different kind of payment, each with its own quirks. As of 1 April 2026, all of them are gone, folded into a single provision: Section 393. The government insists nothing substantive has changed. We think that's true in law and slightly misleading in practice — and the gap between those two things is exactly where reconciliation errors are going to happen this year.
The Income-tax Act, 2025 consolidates what were previously more than fifty separate TDS sections scattered across the 1961 Act — covering everything from contractor payments to professional fees to rent to virtual digital assets — into a single umbrella provision. Section 392 governs TDS on salary. Section 393 governs TDS on essentially everything else, organised into a set of tables by category of payment, replacing the old approach of a standalone, narratively written section for each payment type. TCS gets the same treatment under Section 394.
The Official Line, and Why It's Genuinely True
The Income Tax Department has been explicit that this is a structural, not substantive, change: the rates and thresholds under Section 393 remain, with a few specific exceptions, the same as they were under the old numbered sections. This is, as far as the letter of the law is concerned, accurate — a payment that attracted 10% TDS under old Section 194J generally still attracts 10% under the relevant table in Section 393. If you're asking "did my TDS obligations change," for most categories, the honest answer is no.
The Question That Actually Matters Is a Different One
But "did the rate change" isn't the risk we'd flag here — "will your systems correctly reconcile across the transition" is. Every accounting system, ERP, and payroll platform in the country has spent years built around section-code-based logic: a specific old section number mapped to a specific TDS line item, a specific row in Form 26AS, a specific challan classification. From 1 April 2026, new transactions carry Section 393 sub-clause references instead. Any transaction spanning the boundary — a contract payment invoiced in March 2026 but settled in April, a running vendor relationship straddling both financial years — now sits in what practitioners are already calling a "dual-code" environment, where historical records use old section numbers and current records use the new sub-clause structure, and cross-year matching has to bridge both simultaneously.
This is precisely the kind of transition that tends to produce genuine reconciliation errors — not because anyone did anything wrong, but because the mapping between an old section code and a new sub-clause isn't always a clean one-to-one correspondence, and a system that hasn't been carefully updated to handle both can silently misclassify a transaction, understate a TDS credit, or trigger a mismatch notice for a taxpayer who did everything correctly.
The Penalty Provision Worth Knowing About
Section 35(b) of the new Act — the direct successor to the old Section 40(a)(ia) — is worth understanding in this context specifically. It disallows 30% of any sum payable to a resident where tax was deductible but wasn't deducted, or was deducted but not deposited by the due date, when computing business income. A business paying Rs 5 lakh in professional fees without correctly deducting TDS doesn't just face interest and penalty on the TDS itself — it loses the ability to claim Rs 1.5 lakh (30% of that payment) as a business expense entirely. In a transition year where section-code confusion could plausibly cause a deduction to be missed or misclassified, this provision has real teeth attached to what might otherwise look like a purely administrative slip.
What We'd Actually Recommend Doing
This is squarely the kind of transition risk we spend a lot of our own time thinking about, given how much of our work involves reconciling TDS records against Form 26AS and vendor filings — and our honest advice is to treat this financial year's TDS reconciliation as a genuinely higher-risk exercise than usual, not a routine repeat of last year's process. Specifically: don't assume your accounting or payroll software has correctly mapped every old section code to its new Section 393 sub-clause without independently verifying a sample of transactions against both; be especially careful with any transaction spanning the March-April 2026 boundary; and build in extra review time before your quarterly TDS return filings this year, rather than assuming the "no substantive change" framing means no additional diligence is warranted.