The Government of India has introduced major reforms under the new Income Tax framework through the Income Tax Department and the updated Income Tax Act 2025. These changes are designed to simplify Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) compliance for businesses, professionals, employers, and financial institutions. The new provisions officially apply to payments made on or after April 1, 2026. (Income Tax Department)

One of the biggest structural changes is the replacement of multiple old TDS sections like 194C, 194J, 194H, and others with a simplified numeric code system ranging from 1001 to 1092. The government has also introduced a consolidated challan system to make TDS payments easier and faster for taxpayers. (Income Tax Department)

What is Changing in the New TDS System?

Under the old Income Tax Act 1961, taxpayers had to remember several alphanumeric sections for different TDS deductions. The Income Tax Act 2025 simplifies this framework by consolidating provisions mainly into:

• Section 392 – Salary Payments
• Section 393 – Non-Salary Payments
• Section 394 – TCS Provisions

The objective is to reduce complexity, improve compliance, and streamline tax administration. (Income Tax Department)

For example:

• Old Section 194C → New Code 1023/1024
• Old Section 194J → New Code 1026/1027
• Old Section 194H → New Code 1006

This new numeric structure helps businesses avoid confusion while filing TDS returns and making online tax payments.

Step-by-Step Process to Pay TDS Under Income Tax Act 2025

Businesses can now pay TDS online through the official tax portal in a simplified manner.

Step 1: Login to the Income Tax Portal

Visit the official Income Tax portal and login using your TAN credentials.

Step 2: Access e-Pay Tax

Go to the “e-File” menu and select the “e-Pay Tax” option.

Step 3: Create New Payment

Click on “New Payment” to begin the TDS payment process.

Step 4: Select Income Tax Act 2025

Choose “Income Tax Act 2025” for all tax payments made after April 1, 2026.

Step 5: Select TDS/TCS Module

Proceed under the TDS/TCS section available on the portal.

Step 6: Enter Required Details

Businesses must provide:

• Tax Year
• Major Head
• Deductee Type
• Residential Status
• Applicable Numeric TDS Code

After verification, the payment can be completed through net banking or other authorized payment methods.

Major Benefit: Consolidated TDS Challan

One of the most important updates is the consolidated challan facility.

Earlier, companies had to deposit separate challans for:

• Salary TDS
• Contractor Payments
• Professional Fees
• Rent
• Commission

Now, businesses can combine multiple TDS categories under a single challan. This significantly reduces paperwork and simplifies compliance management. (CompuTax)

However, during the transition period, businesses may still use separate challans for salary and non-salary TDS if preferred.

Important New TDS Codes Businesses Should Know

Salary Payments

• Code 1001 – Government Employees Salary
• Code 1002 – Non-Government Employee Salary
• Code 1004 – EPF Withdrawal

Contractor & Professional Payments

• Code 1023 – Contractor Payment (Individual/HUF)
• Code 1024 – Contractor Payment (Others)
• Code 1026 – Technical Services
• Code 1027 – Professional Services

Rent Payments

• Code 1007 – Rent by Individual/HUF
• Code 1008 – Plant & Machinery Rent
• Code 1009 – Land/Building Rent

Commission Payments

• Code 1005 – Insurance Commission
• Code 1006 – Brokerage & Commission

Non-Resident Payments

• Code 1039 – Sportsman/Entertainer Income
• Code 1057 – Other Non-Resident Payments

TCS Codes

• Code 1075 – Motor Vehicle Sales
• Code 1086 – Foreign Remittance for Education/Medical
• Code 1087 – Other LRS Remittances

These updated codes are essential for accurate TDS filing and return preparation.

Impact on Businesses and Accountants

The new TDS structure will directly affect:

• Companies
• Startups
• Chartered Accountants
• Payroll Teams
• Freelancers
• Contractors
• E-commerce Operators

Businesses must update:

• Payroll software
• Accounting systems
• ERP configurations
• Compliance workflows
• Vendor onboarding processes

Failure to adopt the new code system may lead to:

• Incorrect TDS filing
• Penalties
• Interest liabilities
• Notice from tax authorities

Changes in TDS Forms

The Income Tax Act 2025 has also introduced revised TDS forms. According to recent compliance discussions and updates, old forms like Form 24Q and 26Q are being replaced with new formats such as Form 138, 140, 143, and 144. (Reddit)

For example:

• Form 138 – Salary TDS
• Form 140 – Resident Non-Salary Payments
• Form 143 – TCS Returns
• Form 144 – Non-Resident Payments

This restructuring aligns with the new simplified tax framework.

Why the Government Introduced These Changes

The main objective behind the Income Tax Act 2025 is simplification. According to official FAQs issued by the tax department, the government aims to make tax compliance easier, clearer, and more transparent for taxpayers. (Income Tax Department)

Key goals include:

• Reducing legal complexity
• Simplifying TDS sections
• Improving taxpayer experience
• Enhancing digital compliance
• Faster tax administration

Final Thoughts

The new TDS payment rules under Income Tax Act 2025 represent one of the biggest tax compliance reforms in recent years. Businesses should begin preparing early by updating internal systems, training finance teams, and understanding the new TDS code structure.

Although the rates and core tax policies remain largely unchanged, the compliance process has been modernized significantly. Companies that adapt quickly will find TDS filing easier, faster, and more efficient under the new regime.