TDS Rate Changes for FY 2026–27: What You Need to Know

The Finance Act 2026 has introduced a series of targeted revisions to Tax Deducted at Source (TDS) rates and threshold limits. These changes affect employers, businesses making professional payments, and individuals involved in property transactions. Staying on top of these updates is essential to avoid interest and penalty exposure under Sections 201 and 234E.

Key Rate and Threshold Changes

• Section 194C (contractor payments): annual threshold raised to ₹1,20,000; rate unchanged at 1%/2%
• Section 194J (professional fees): 10% rate now applies only to technical services; other professional services reduced to 5%
• Section 194-IA (property purchase): rate unchanged at 1%, now also applicable on stamp duty value if higher than actual consideration
• Section 192 (salary): revised tax slabs under the new regime require updated Form 16 templates from April
• Section 194O (e-commerce operators): deduction threshold raised from ₹5 lakh to ₹10 lakh annually

What Employers Need to Do Right Now

Employers must update payroll systems to reflect the new tax slabs for employees who opted for the new regime. The investment declaration window closes in April or May — ensure employees submit updated declarations so TDS is calculated correctly from April itself rather than requiring a large catch-up deduction in March.

Compliance Actions for Businesses

Review all standing agreements with contractors and professional service providers to determine if TDS rates need updating. Incorrect deduction — even an excess — creates reconciliation issues at year-end and complicates the vendor's tax return. Update your accounting software with the new thresholds before processing April payments. Accountrix provides quarterly TDS compliance reviews and Form 26Q/24Q filing services.