Update TDS and TCS rates for Income Tax Act, 2025 (effective April 1, 2026)

Update TDS and TCS rates for Income Tax Act, 2025 (effective April 1, 2026)

Hello everyone,

The Income-tax Rules, 2026 (G.S.R. 198(E), dated March 20, 2026) have been notified, marking a significant structural shift in India’s direct tax framework. From April 1, 2026, the Income Tax Act, 2025 replaces the Income Tax Act, 1961.

While tax rates largely remain unchanged, TDS and TCS compliance workflows are being fundamentally restructured. To stay compliant, you need to update your TDS and TCS setup in Zoho Books before the new financial year begins.

What is changing
Here is a clear summary of the updates:
  1. All TDS sections are renumbered and consolidated under Section 393.
  2. All TCS provisions are restructured under Section 394.
  3. Section 194LD is deprecated and will not apply after March 31, 2026.
  4. Several TDS sections (194S, 194J(b), 194A, 194C, 194LC(ic), 196C , 196B) are split into more specific categories.
  5. Certain TCS rates are revised as per Budget 2026.
Although rates remain mostly the same, the underlying structure has changed completely.

Why this update really matters
Let’s say you run a business and:
  1. You pay a consultant ₹1,00,000 every month.
  2. You currently deduct TDS under Section 194J.
From April 1, 2026:
  1. Section 194J no longer exists.
  2. It is split into:
  1. Technical services
  2. Professional services
  3. Director remuneration
Now imagine this:
You don’t update your accounting system.
  1. Your system continues using the old section.
  2. You deduct TDS under an invalid section.
  3. Your return gets filed under the wrong mapping.
Result:
  1. TDS return mismatch
  2. Notices from IT department
  3. Time wasted on corrections
  4. Possible penalties
All this even though the rate didn’t change.

What Zoho Books updates automatically
Zoho Books provides an option to update TDS and TCS rates to align with the Income Tax Act, 2025.

TDS updates
When you initiate the update:
  1. Renumbered TDS sections will reflect new section numbers under Settings > Direct Taxes.
  2. Existing TDS rates will automatically:
  1. Be assigned an end date of March 31, 2026.
  2. Stop applying beyond this date.
  1. New TDS rates will be:
  1. Created automatically.
  2. Effective from April 1, 2026.
  1. TDS applied to:
  1. Recurring invoices & bills → Updated automatically.
  2. Vendor profiles → Updated with new section mapping.
  1. You can download impacted recurring transactions (.xls) to review changes.

TCS updates
  1. Existing TCS rates will:
  1. Be deprecated after March 31, 2026
  1. New TCS rates will:
  1. Reflect updated percentages.
  2. Be available from April 1, 2026.

What requires manual review
Certain updates are not handled automatically and require user intervention.

Split TDS sections
Recurring transactions linked to the following sections must be reviewed and updated manually:
  1. 194S → Virtual Digital Assets
  2. 194J(b) → Technical vs. Professional fees
  3. 194A → Interest (bank, senior citizens, others)
  4. 194C → Individual/HUF vs. Others
  5. 194LC(ic), 196C, 196B → Non-resident payments
Deprecated section
  1. Section 194LD must be removed or replaced wherever used.
Limitations
  1. A new TDS rate is not created if the existing rate’s end date is before April 1, 2026.
  2. TDS rates for split or deprecated sections associated with vendors are not updated automatically.

How to update TDS and TCS rates in Zoho Books
  1. Log in to your Zoho Books organisation.
  2. Click View Details in the banner on the homepage.
  3. Review the changes displayed.
  4. Click Update Now.
After completing these steps, your organisation will reflect the updated structure under the Income Tax Act, 2025.

Before you update
You can download the list of recurring transactions where TDS is applied. This helps you:
  1. Identify transactions linked to split or deprecated sections.
  2. Review and update them before changes take effect.
Zoho Books also highlights recurring transactions that require manual updates after the transition.

If you have any questions or need clarifications, please drop an email to support.india@zohobooks.com and we will be happy to assist you.