TDS on salary payments,
Under the old Income Tax Act, 1961, the deduction of tax on salary was governed by Section 192. Employers were required to calculate the estimated tax liability of their employees and withhold tax accordingly. Under the new Income Tax Act, 2025, this provision has been seamlessly transitioned to Section 392. Specifically, Section 392(1) now serves as the direct equivalent to the old Section 192 for calculating and withholding tax on salary payouts based on the applicable slab rates. While the core calculation logic remains similar, classifying it correctly under Section 392(1) is now mandatory for all payroll compliance. Furthermore, premature withdrawals from the Provident Fund, which used to fall under Section 192A in the old law, are now precisely mapped to Section 392(7) of the new Act.
TDS on Non-Salary Payments: The Great Consolidation
The most dramatic and welcome reform in the 2025 Act is the creation of Section 393. Every single non-salary TDS provision that used to exist between Section 193 and Section 194T under the old 1961 Act has been absorbed into this one umbrella section. The new system uses a highly organized tabular format within the law itself, assigning serial numbers and numeric codes to specific transaction types, removing the need to memorize dozens of alphabetic sub-sections.
Payments to Contractors and Sub-contractors
Under the 1961 Act, businesses deducted 1% (for individuals and HUFs) or 2% (for others) on contractor payments under the heavily utilized Section 194C.
In the 2025 Act, this exact requirement is now housed under Section 393(1), specifically located at Serial Number 6(i). A crucial substantive change here is the explicit, legally binding inclusion of manpower supply. Previously, there was genuine industry ambiguity regarding whether deploying contract workers constituted a “works contract” under old Section 194C. The 2025 Act unequivocally resolves this by classifying manpower supply services directly as “work” under Section 393. Therefore, businesses must strictly apply the 1% or 2% TDS to all labour supply contracts moving forward.
Interest on Securities and Other Interest
Interest on securities, previously governed by Section 193 of the 1961 Act, is now clearly located at Section 393(1), Serial Number 5(i) in the 2025 Act.
More significantly, interest from banks and post officesโfamously governed by Section 194A under the old Actโhas moved to Section 393(1), Serial Number 5(ii). The new Act brings massive relief for senior citizens in this category: the threshold for TDS deduction on interest income for senior citizens has been doubled from โน50,000 to โน1,00,000 per Tax Year. For non-senior citizens, the threshold remains steady at โน50,000. Furthermore, the new Act removes the timing mismatch for interest TDS, adopting a single-condition model where no TDS applies if total interest is under the threshold in a tax year, significantly reducing taxpayer hardship.
Rent Payments
Rental income compliance has also experienced a structural shift. Under the 1961 Act, Section 194I dictated a 2% TDS on plant and machinery, and a 10% TDS on land and building rent. Under the 2025 Act, this is governed strictly by Section 393(1), Serial Number 2(ii). A vital update in the 2025 Act is the expanded definition of rent. The new law explicitly includes factory buildings and land appurtenant to buildings within this definition. This means that individuals and HUFs are now clearly and undeniably liable for industrial rent TDS, closing a long-standing loophole.
Professional and Technical Fees
The highly debated Section 194J of the 1961 Act, which covered professional and technical services, has been seamlessly moved to Section 393(1), Serial Number 6(iii). A brilliant and much-needed clarification in the new Act’s definitions is that advertising is now definitively included under “professional services”. This entirely eliminates the old legal conflicts where businesses struggled to decide whether to apply Section 194H (commission) or Section 194J (professional fees) for advertising expenses.
Cash Withdrawals
Section 194N of the 1961 Act previously mandated TDS on large cash withdrawals. It was controversial because it included a harsh 5% penal rate and a much lower โน20 lakh threshold specifically for taxpayers who had not filed their income tax returns for the preceding three years. The new Income Tax Act, 2025, operating under Section 393(10), Serial Number 5, has entirely removed these penal TDS provisions for non-filers. The punitive 5% rate and the lower โน20 lakh threshold no longer exist, reflecting the government’s broader goal of reducing compliance friction and simplifying the tax architecture.
Streamlined Compliance forms
Previously, property buyers and individuals paying rent had to juggle multiple PAN-based forms, such as Form 26QB, 26QC, 26QD, and 26QE. Effective for the Tax Year 2026-27 onwards, the Income Tax Act, 2025 has consolidated all of these into a single, unified document known as Form 141. This single form now effortlessly covers property transfers, rent paid by individuals, and even transactions involving virtual digital assets under Section 393(1).
