Update TDS and TCS Rates For Income Tax Act, 2025
The Income Tax Act, 2025 replaces the Income Tax Act, 1961, effective April 1, 2026. The new act introduces several structural changes to how Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are governed, including:
- Renumbered sections: Existing TDS and TCS sections have been reassigned new section numbers.
- Revised TCS rates: Certain TCS rates have been updated to align with the new tax structure.
- Deprecated sections: The TDS section 194LD has been removed entirely and will no longer be applicable after March 31, 2026.
- Split sections: Certain sections have been divided into two or more sections under the Income Tax Act, 2025.
To comply with the latest regulations, update the TDS and TCS rates, so that Zoho Books can apply the revised rates to your future transactions. Learn more about the Income Tax Act, 2025.
What Zoho Books Updates Automatically
When you initiate the update, Zoho Books automatically handles the following changes to bring your organisation in compliance with the ITA 2025:
TDS Rates
- All TDS sections that have been renumbered under the ITA 2025 will reflect their new section numbers in the TDS Rates page, available under Direct Taxes in Settings.
- For every TDS rate linked to a renumbered section, the effective end date will be automatically set to March 31, 2026. This ensures the old rate stops being applied after the ITA 1961 is no longer in effect.
- A corresponding new TDS rate will be created for each renumbered section, with a start date of April 1, 2026. This rate will reflect the updated section number and applicable rate.
- TDS rates applied to active recurring invoices associated with renumbered sections will be updated automatically by March 31, 2026. You can download the list of affected recurring invoices in .xls format to review the changes before they take effect. Similarly, TDS rates applied to recurring bills associated with renumbered sections will also be updated automatically by March 31, 2026.
- TDS rates associated with vendors under renumbered sections will be updated to reflect the revised rates. This ensures future transactions created for those vendors use the correct TDS section.
TCS Rates
- Existing TCS rates will be automatically assigned an end date of March 31, 2026, and will be deprecated thereafter. They will no longer be available for selection in new transactions.
- New TCS rates reflecting the revised percentages under the ITA 2025 will be created with a start date of April 1, 2026. These will be available in all TCS-applicable modules from that date.
Note:
There are certain limitations when you updated TDS rates in your Zoho Books organisation:
- A new TDS rate will not be created if the existing rate’s end date is before April 1, 2026.
- TDS rates for split or deprecated sections associated with vendors will not be updated automatically. You can update them manually once the TDS rates are updated in Zoho Books.
The following TDS sections from the Income Tax Act, 1961 have either been split into multiple new sections or deprecated. These cannot be updated automatically and require manual review.
Split Sections
| Old TDS Section | Current Section | Nature of Payment |
|---|---|---|
| 194S | 393(1) [T: Sl.8(vi)] | Transfer of Virtual Digital Assets (VDA) |
| 194J(b) | 393(1) [T: Sl.6(iii).D(a)] | Technical fees, royalty, cinematographic films, call centre payments |
| 194J(b) | 393(1) [T: Sl.6(iii).D(b)] | Fees for professional services; director fees/commission |
| 194A | 393(1) [T: Sl.5(ii)] | Interest other than securities - bank/post office deposits (senior citizens) |
| 194A | 393(1) [T: Sl.5(ii)] | Interest other than securities - bank/post office deposits (others) |
| 194A | 393(1) [T: Sl.5(iii)] | Interest other than securities - other payers (non-bank) |
| 194C | 393(1) [T: Sl.6(i)] | Contract payments - Individual/HUF |
| 194C | 393(1) [T: Sl.6(i)] | Contract payments - Others |
| 194LC(ic) | 393(2) | Interest from Indian company or business trust payable to non-residents |
| 196C | 393(2) | Income from foreign currency bonds or GDR of an Indian company; LTCG from foreign currency bonds or GDR |
| 196B | 393(2) | Income and LTCG from units of an offshore fund |
Deprecated TDS Section
| Old TDS Section | Nature of Payment |
|---|---|
| 194LD | Interest on certain bonds and government securities payable to FIIs/QFIs |
The following TCS rates have been changed for a few TCS sections:
| TCS Section | Description | Existing Rate | New Rate |
|---|---|---|---|
| 206C(1G) | 1. Remittance under LRS for purpose other than for purchase of overseas tour package or for education loan taken from financial institutions. 2. Purchase of overseas tour program package. | 5% or 20% | 2% |
| 206C(1) | 1. Alcoholic liquor for human consumption. 2. Scrap 3. Sale of minerals, being coal or lignite or iron core. | 1% | 2% |
| 206C(1) | Tendu leaves | 5% | 2% |
The following table denotes the threshold updates for TCS rates:
| TCS Section | Description | Existing Threshold | New Threshold |
|---|---|---|---|
| 206C(1G) | Purchase of overseas tour program package. | Earlier, the TCS was 5% up to ₹10 lakhs, and 10% for above ₹10 lakhs. | No updates |
Update TDS and TCS Rates
To update the TDS and TCS rates in your organisation:
- Log into your Zoho Books organisation.
- Click View Details in the banner displayed at the top of the Home page.
- In the pop-up that appears, review the changes that will be applied, and click Update Now.
The TDS and TCS rates will be updated to comply with the New Income Tax Act.
Pro Tip: You can download the list of recurring transactions for which TDS sections must to be revised to comply with the Income Tax Act, 2025.
Update Split and Deprecated TDS Sections
If your recurring bills or invoices use deprecated TDS rates or belong to sections that have been split, you must update them manually. If not, Zoho Books will apply the outdated TDS rates, which can result in incorrect tax deductions and compliance issues.
Zoho Books displays all recurring transactions with deprecated or split TDS sections at the top of the Home page. Review the list, then edit and update TDS manually for each transaction to stay compliant.
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