TDS Return: Old Income Tax Act vs New Income Tax Act 2025

Section 192

Income Tax Act, 1961 — Chapter XVII-B

Section 196(1)

New Income Tax Act, 2025 — Schedule on Employment Income

Under Section 192 of the Income Tax Act, 1961, every employer — whether a company, firm, or individual — who pays salary to an employee is required to deduct income tax at the applicable slab rate. There is no fixed percentage. The employer estimates the employee's total income for the year, factors in any investment declarations (under Section 80C, HRA exemption, etc.), calculates the tax liability, and spreads the monthly deduction across the financial year.

The form issued to employees at the end of the year is Form 16, which serves as both the TDS certificate and the summary of salary paid. For government employees, Part A of Form 16 is downloaded from TRACES; for private employees, employers generate both parts.

The New Income Tax Act 2025 renumbers this provision to Section 196(1) under the chapter on Employment Income. The mechanics remain identical — monthly deduction based on estimated annual income — but the new act introduces a few notable changes:

• Perquisite valuation rules are simplified and brought directly into the main act instead of being scattered across rules
• The new act explicitly codifies the treatment of stock options, ESOPs, and deferred compensation — areas where the old act had gaps filled only by circulars and case law
• Form 16 equivalent under the new act is redesigned to align with the updated Annual Information Statement (AIS), making reconciliation easier

Section 194A

Income Tax Act, 1961 — Chapter XVII-B

Section 197

New Income Tax Act, 2025 — Passive Income Schedule

Section 194A of the Income Tax Act, 1961 requires banks, cooperative societies, post offices, and NBFCs to deduct TDS at 10% on interest income before crediting it to a depositor's account. The threshold under 194A is Rs. 40,000 per year for regular depositors and Rs. 50,000 for senior citizens (raised from Rs. 10,000 and Rs. 50,000 respectively in recent years). A depositor whose total income is below the taxable limit can submit Form 15G (individuals below 60) or Form 15H (senior citizens) to prevent deduction.

Under the New Income Tax Act 2025, interest TDS is consolidated into Section 197, which covers all passive income TDS — interest, dividends, and rental income from a single unified framework. For interest specifically, the new act proposes to raise the senior citizen threshold to Rs. 1,00,000 per year, a relief that has been demanded for years. The TDS rate remains at 10%. The self-declaration mechanism (Form 15G/15H equivalent) is retained under the new act, though the forms are redesigned and can be submitted digitally once.

Section 194C

Income Tax Act, 1961 — Chapter XVII-B

Section 198(1)

New Income Tax Act, 2025 — Business Payments Schedule

Section 194C of the Income Tax Act, 1961 is one of the most commonly invoked TDS provisions in business. It applies to any payment made to a contractor or sub-contractor for carrying out work — which the section defines broadly to include labour, manufacturing, supply of labour, advertising, broadcasting, transport, catering, and more. The trigger thresholds are Rs. 30,000 per single payment or Rs. 1,00,000 in aggregate payments to the same contractor during a financial year. The rate is 1% for individual or HUF contractors and 2% for companies and firms.

The New Income Tax Act 2025 moves contractor TDS to Section 198(1) within a restructured Business Payments chapter. The definitional scope of 'work contract' is expanded under the new act to explicitly include digital services, platform-based work, and gig economy contracts — areas that were ambiguous under Section 194C. The aggregate annual threshold is proposed to be raised from Rs. 1,00,000 to Rs. 2,00,000 to account for inflation and the increase in sub-contracting costs. The 1% and 2% rate structure is retained.

Section 194H

Income Tax Act, 1961 — Chapter XVII-B

Section 198(4)

New Income Tax Act, 2025 — Business Payments Schedule

Section 194H of the Income Tax Act, 1961 requires any person paying commission or brokerage to a resident to deduct TDS at 5% if the annual amount crosses Rs. 15,000. The provision covers commission paid for services rendered, excluding insurance commission (which has its own section under 194D). Distribution businesses, franchisors, and channel-based companies are the primary entities affected. The 5% rate makes this one of the higher non-salary TDS rates in the existing framework.

Under the New Income Tax Act 2025, commission and brokerage TDS is moved to Section 198(4), consolidated within the Business Payments chapter. The new act clarifies that digital referral fees, affiliate marketing payouts, and performance-based commissions paid through online platforms all fall within this provision — something that was disputed under the old act. The threshold is proposed to be raised to Rs. 20,000 and the rate remains at 5%.

Section 194I / 194-IB

Income Tax Act, 1961 — Chapter XVII-B

Section 199

New Income Tax Act, 2025 — Property Income Schedule

Rent TDS under the old act runs across two separate sections. Section 194I applies to businesses, firms, companies, and individuals who are subject to tax audit under Section 44AB. Under 194I, TDS at 10% applies on rent paid for land, buildings, or furniture once the annual rent exceeds Rs. 2,40,000. For plant and machinery, the rate drops to 2%. Section 194-IB, introduced in 2017, covers a different situation entirely: individual tenants who are not under tax audit but are paying monthly rent exceeding Rs. 50,000. Under 194-IB, these individuals must deduct TDS at 5% — but only once, either in the last month of the year or in the last payment of the tenancy.

The New Income Tax Act 2025 merges the two rent TDS provisions into a single Section 199, with separate sub-clauses distinguishing business entities from individuals. This consolidation makes the compliance path clearer. The threshold for business rent TDS remains at Rs. 2,40,000 annually. For high-value individual tenants, the monthly threshold of Rs. 50,000 is retained but the new act clarifies that it applies per residential or commercial unit, not per landlord — addressing a gap that led to disputes when tenants rented multiple units from different owners. The 5% rate for individual tenants and 10% for business entities are unchanged.

Section 194J

Income Tax Act, 1961 — Chapter XVII-B

Section 200

New Income Tax Act, 2025 — Professional Services Schedule

Section 194J of the Income Tax Act, 1961 covers TDS on professional services, technical services, royalties, and director's remuneration. The threshold for triggering TDS is Rs. 30,000 per year per payee. The rate structure was split in 2020: professional services (doctors, lawyers, CAs, architects, consultants) attract TDS at 10%, while technical services (which includes IT development, maintenance, and similar work) and call centre services are taxed at only 2%. Director's remuneration that is not in the nature of salary has no threshold — TDS applies on every rupee paid.

Under the New Income Tax Act 2025, professional and technical fees TDS is relocated to Section 200. The new act retains the 10%/2% dual rate structure introduced in 2020 but raises the threshold from Rs. 30,000 to Rs. 50,000 to better reflect current market rates. The new act also explicitly defines what constitutes a 'technical service' in the digital age — covering AI, SaaS, cloud computing, and data analytics services, which previously sat in a grey zone under Section 194J.

Section 194Q

Income Tax Act, 1961 — Chapter XVII-B (inserted 2021)

Section 201

New Income Tax Act, 2025 — Business Transactions Schedule

Section 194Q of the Income Tax Act, 1961 was inserted with effect from 1 July 2021. It requires any buyer whose total sales or gross receipts exceed Rs. 10 crore in the preceding financial year to deduct TDS at 0.1% on purchase of goods from a resident seller, once the aggregate purchase from that seller crosses Rs. 50 lakh in a year. This provision was introduced as a counterpart to Section 206C(1H) — the TCS on sale of goods — with the rule that once 194Q applies, 206C(1H) does not. At 0.1%, the rate is low, but tracking purchases per seller is an administrative overhead for large businesses.

The New Income Tax Act 2025 retains this provision under Section 201. The buyer turnover threshold of Rs. 10 crore is maintained. The Rs. 50 lakh per-seller annual threshold is retained. One important clarification in the new act: it explicitly states that goods purchased for personal use (as opposed to business use) do not attract TDS under this provision — addressing ambiguity that arose when proprietors made purchases that blended personal and business use.

Old Act: Section 194-O (inserted 2020) — New Act: Section 202(1)

Under Section 194-O of the old act, e-commerce operators — platforms like Amazon, Flipkart, and similar marketplaces — are required to deduct TDS at 1% when making payments to sellers on their platform. The threshold was Rs. 5 lakh per seller per year, with a carve-out for individual sellers with PAN. Under the new act's Section 202(1), this provision is extended to cover payment aggregators, subscription platforms, and delivery-based gig platforms that were excluded or disputed under the old act. The 1% rate is retained and the threshold is lowered to Rs. 2 lakh to widen the compliance base.

Old Act: Section 194S (inserted 2022) — New Act: Section 202(3)

Section 194S of the old act, introduced in 2022, requires anyone facilitating or making payment for the transfer of a virtual digital asset (VDA) — which includes cryptocurrency, NFTs, and other digital tokens — to deduct TDS at 1%. The threshold is Rs. 50,000 per year for most persons and Rs. 10,000 for specified persons (related parties or if TAN is not available). The new act's Section 202(3) retains the 1% rate but broadens the definition of VDA to explicitly include tokens issued on emerging blockchain protocols, staking rewards, and DeFi income — areas that were not addressed in the 2022 insertion.

Old Act: Section 194N — New Act: Section 203

Section 194N of the old act requires banks, cooperative societies, and post offices to deduct TDS on cash withdrawals exceeding Rs. 1 crore in a financial year from a single account holder. The rate is 2% on the amount exceeding Rs. 1 crore, rising to 5% if the account holder has not filed income tax returns for the last three years. The New Income Tax Act's Section 203 retains the structure but reduces the non-filer threshold from three years to two — creating stronger pressure on persistent non-filers.