TAX PAYMENTS, COLLECTION AND REFUNDS UNDER NEW INCOME TAX ACT ,2025 & INCOME TAX RULE ,2026
A. OVERVIEW OF TDS PROVISIONS AND TDS PAYMENTS UNDER THE NEW ACT
Q2.1 Does the fundamental obligation to discharge income-tax through TDS/TCS, advance tax, or self-assessment tax continue under the Income-tax Act, 2025?
Ans. Yes. The core obligation to pay income-tax—whether by way of tax deducted or collected at source (TDS/TCS), advance tax, self-assessment tax, or regular assessment—continues unchanged under the Income-tax Act, 2025. The new Act does not modify the framework governing the manner of tax payments; it preserves the existing compliance structure while streamlining the statutory language.
Q2.2 Have the permissible modes of tax payment been altered under the Incometax Act, 2025?
Ans. No. The modes for remittance of taxes remain unchanged under the Income-tax Act, 2025. Taxes are to be paid through authorised banking channels, including electronic payment mechanisms, as may be notified by the Government from time to time.
Q2.3 What change has been introduced in the Income Tax Act, 2025 with respect to the Tax Deducted at Source (TDS) provisions contained in the Income Tax Act, 1961?
Ans: Broadly, there is no change in policy but new Act presents the TDS provisions in a simplified and tabular manner. All the TDS sections (Section 192 to 194T) in the Income Tax Act, 1961 are now consolidated under two sections, section 392 and section 393 of the income Tax Act, 2025. Section 392 of the new Act lays down the provisions relating to deduction of tax at source on payments made under the head ‘Salaries’. Section 393, on the other hand, provides for deduction of tax at source on other types of payments, such as commission or brokerage, rent, payment on transfer of certain immovable property (other than agricultural land) and other specified payments. Section
393 of the new Act contains 3 Tables applicable to three broad categories of PayeesResidents, Non-residents and any person. The respective Table for each category in turn specifies the nature of income or sum, monetary threshold, payer/person and the applicable rate of TDS. The rates of TDS/TCS as well as thresholds are largely the same as in new Act with that of old Act. For exact TDS/TCS rates, reference may be made to the relevant provisions of new Act and the Finance Act, as applicable.
Q2.4 Which Act will govern the TDS obligations during the transition period?
Ans: TDS obligations shall continue to be governed by the Act applicable to the financial year in which the sum is paid or credited. Accordingly, any sum paid or credited on or before 31st March, 2026 shall be governed by the provisions of the Income-tax Act,
1961. Further, any sum paid or credited on or after 1st April, 2026 shall be governed by the corresponding withholding provisions of the Income-tax Act, 2025.
Q2.5 Which section should be quoted for TDS/TCS made after 01st April 2026?
Ans: For transactions entered into on or after 01 April 2026, deductors/collectors must quote the relevant table item of section 393 (or section 394 for TCS) of the Income Tax Act, 2025. Quoting old section numbers such as 194C, 194J, or 194H of the Income Tax Act, 1961 for such transactions may result in system-level validation errors. Example: M/s. XYZ Industries makes a payment to a contractor on 5th April, 2026. While filing the TDS return for Q1 of Tax Year 2026-27, the firm must quote Section 393(1) [Table: Sl. No. 6(i)] of the new Act, and not Section 194C of the old Act.
Q2.6 How is TDS determined for contracts or services spanning over the period of March–April 2026?
Ans: Similar to the provisions under the repealed Income Tax Act, 1961, TDS applicability in Income Tax Act, 2025 also depends on the mechanism of “event earlier of credit or payment”.
If earlier event of credit or payment lies on or before 31 March 2026 → TDS provisions
under the Income Tax Act, 1961 apply.
If earlier event of credit or payment lies on or after 01 April 2026 → TDS provisions
under section 393 of Income Tax Act, 2025 apply.
Q2.7 What is the due date for depositing the TDS to the Government account and whether there is any change regarding these timelines in the Income Tax Act, 2025?
Ans. Under the Income-tax Act, 1961, the TDS must, in general, be deposited to the credit of the Central Government within the 7th of the month following the month of deduction. Exceptions to this general rule are; (i) TDS deducted in the month of March, where the due date is 30th April for non-government deductors; and (ii) TDS under Sections 194-IA, 194-IB, 194M, and 194S of the old Act (challan-cum-statement cases relating to purchase of immovable property, rent by specified individuals/HUFs, payments to contractors/professionals by individuals/HUFs, and transfer of virtual digital assets), where the due date is 30 days from the end of the month in which the tax is deducted. Under the Income-tax Act, 2025, the due date of payment to the Government account continues to be prescribed by Rules. The Income-tax Rules, 2026 (Rule 218, corresponding to Rule 30 of the old Rules) retain the same timelines without any policy change.
Q2.8 What is the due date for depositing the tax deducted at source in the month of March, 2026?
Ans. The tax deducted in the month of March, 2026 is required to be deposited in the Government account by 30th April, 2026 by non-government deductors. In case of Government Deductors depositing TDS by way of challan, the due date will be 7th April, 2026. In case of any default, interest and penal actions may be attracted.
Q2.9 For TDS to be deposited after 1st April 2026 on a sum paid/credited before 31.03.26, should the challan be of 1961 Act or 2025 Act?
Ans. The governing principle is that TDS deduction and deposit are linked to the date of deduction of tax at source. Since TDS obligation crystallises on the date of payment/credit to payee, the old challan will be applicable, if the payment/credit to the payee has been done on or before 31.03.2026. Thus, if tax is deducted under the 1961 Act prior to the transition date, deposit obligations will continue under the 1961 Act. Thus, existing challans and payment codes linked to the Income Tax Act 1961 will continue for depositing the tax deducted before
01.04.2026.
Q2.10 If tax has already been deducted at source prior to 01 April 2026 at the time of credit to the payee’s account, is there any requirement to deduct tax again upon actual payment made on or after 01 April 2026?
Ans: No. In such situations, once tax has been deducted under the Income Tax Act, 1961, on the date of credit of a sum in the account of payee, no further deduction is required on payment of the same sum under the Income Tax Act, 2025.
Q2.11 Where tax has been deducted under the Income-tax Act, 1961 pursuant to a lower withholding certificate valid up to 31 March 2026, will such deduction remain legally valid even if the corresponding tax is remitted to the Government after 1 April 2026?
Ans: Yes, where the event of payment or credit occurs on or before 31 March 2026, TDS compliances—including deduction of tax at the lower rate specified in a certificate valid up to 31 March 2026—shall continue to be governed by the Income Tax Act, 1961. Even if such tax is deposited with the Government treasury after 31 March 2026, the provisions of the Income Tax Act, 1961, along with the lower ithholding certificate issued thereunder, shall continue to apply.
Q2.12 Will a lower/nil withholding certificate issued under Section 197 of the old Act remain valid for payments/credits made on or after 1st April, 2026?
Ans. Yes. A certificate issued under Section 197 of the Income-tax Act, 1961 shall remain valid for payments/credits made on or after 1st April, 2026 provided that it is issued for lower/Nil deduction of tax in respect of projected receivable for tax year 2026-
Q2.13 Is there any change in the rate of interest for delayed deposit of TDS/TCS under the new Act?
Ans. No. The interest rates applicable for defaults in deducting or depositing TDS/TCS remain unchanged from those prescribed under the old Act. In accordance with Section 398(3)(a) of the Income-tax Act, 2025, interest is calculated as follows:
(i) Failure to deduct/collect TDS/TCS: Interest at 1% per month or part thereof, from the date the tax was deductible/collectible to the date it is actually deducted/collected — Section 398(3)(a)(i).
(ii)Failure to deposit TDS/TCS after deduction/collection: Interest at 1.5% per month or part thereof, from the date of deduction/collection to the date of actual payment — Section 398(3)(a)(ii).
B. ADVANCE TAX PAYMENT
Q2.14 Are there any changes in the provisions related to advance tax in the new Income Tax Act, 2025?
Ans: There are no policy changes regarding the provisions related to payment of Advance Tax. However, the provisions regarding payment of Advance Tax have been made easy to read with the following approach: (i) The provisions related to the payment by the assessee on his own accord and as per the order of the Assessing Officer have been segregated in two different sections to avoid confusion.
(ii) Redundant provisions have been removed.
(iii) A formula has been provided in section 405 of the new Act for the computation of the advance tax liability
Q2.15 How will Advance Tax be paid under the ‘Tax Year’ system as introduced in the Income Tax Act, 2025?
Ans: The only change after the introduction of concept of “Tax Year”, is that the liability of advance tax will now be referenced in terms of Tax Year instead of Assessment Year. Advance tax will be paid during the same year in which the income is earned likewise it is paid under the Income Tax Act, 1961. The quarterly instalment dates and quantum remain unchanged and are as under:
Sl. No. Due Date Cumulative Minimum Advance Tax
Payable
1 On or before 15th June Not less than 15% of advance tax
2 On or before 15th September Not less than 45% of advance tax
3 On or before 15th December Not less than 75% of advance tax
4 On or before 15th March 100% of advance tax
Q2.16 Last Advance tax instalment for Assessment year 2026-27 (FY 2025-26) is scheduled to be paid on 15 March 2026. Which Act governs this payment?
Ans. Advance tax liability is linked to the tax year to which the income pertains, not the date on which the new Act comes into force. Since this instalment relates to income earned during FY 2025-26 and is paid before 1 April 2026, The Income-tax Act, 1961 governs this advance tax payment.
Q2.17 If advance tax for FY 2025–26 (AY 2026-27) is short-paid, and interest is levied in FY 2026–27, which Act governs the interest?
Ans. The obligation to pay advance tax arose during FY 2025–26, and such obligation was created under the provisions of the Income-tax Act, 1961. The default in payment of the due advance tax also occurred prior to the commencement of the new Act. Accordingly, the consequential liability to pay interest shall be governed by the Incometax Act, 1961. In these circumstances, the assessee would be liable to pay interest for default in payment of advance tax under section 234B (default in payment of advance tax) and section 234C (deferment of instalments of advance tax) of the Income-tax Act, 1961.
Q2.18 What is the threshold for payment of advance tax under the new Act?
Ans. Under Section 404 of the Income-tax Act, 2025, advance tax is payable if the amount of tax payable during the year, computed under the advance tax provisions, is Rs. 10,000 or more. This threshold is unchanged from the old Act.
Q2.19 The first instalment of advance tax for tax year 2026-27 (Financial year 2026-is due to be paid on 15th June 2026. Which Act will apply to such payments?
Ans. Income earned during the financial year 2026–27 will be chargeable to tax in accordance with the provisions of the Income-tax Act, 2025. Accordingly, the liability to pay advance tax for the tax year 2026–27 shall arise and be discharged under the new Act.
Q2.20 For assesses paying taxes on business income under presumptive taxation scheme, what is the advance tax requirement under the new Act?
Ans. Under the new Act, assessees opting for the presumptive taxation scheme (Section 58) must discharge their entire advance tax liability in a single instalment on or before 15 March of the relevant financial year, in accordance with Section 408(2). This requirement remains the same as under the old Act.
Q2.21 Is there any change in the interest rates for shortfall in payment of advance tax under the new Act?
Ans. No. The interest rates applicable for defaults in payment of Advance tax remain unchanged from those prescribed under the old Act. Under the Income-tax Act, 2025,
interest is calculated as follows:
(i) Interest under Section 424 (corresponding to Section 234B of old Act) — 1% per month or part of the month for the specified period for failure to pay advance tax or where advance tax paid is less than 90% of assessed tax;
(ii) Interest under Section 425 (corresponding to Section 234C of old Act) — 1% or 3% for the specified period for deferment of advance tax instalments.
C. SELF ASSESSMENT TAX PAYMENT AND BROUGHT FORWARD MAT/AMT CREDIT
Q2.22 Self-assessment tax for AY 2026-27 (FY 2025-26) is paid in July 2026. Which Act governs this payment?
Ans. Self-assessment tax is merely a mode of discharging the tax liability, and the applicable law is determined by the year of income, not by the date of payment. The section 140A of the Income-tax Act, 1961 shall govern the payment of self-assessment tax in this situation.
Q2.23 What precautions should taxpayers take during the transition year (FY 2026-27) while making tax payments?
Ans: The government is taking appropriate measures to ensure simultaneous functionality for both Acts on the tax filing Portals, during this transition period. However, taxpayers should ensure correct selection of Assessment Year (AY 2026-27) for tax payments relating to FY 2025-26; and correct selection of Tax Year 2026-27 for tax payments relating to FY 2026-27, so that tax credit is granted in correct year.
Example: For self-assessment tax for FY 2025-26 paid in June 2026 – taxpayer will select AY 2026-27.
For advance tax on income earned during April 2026 to March 2027 – taxpayer will select Tax Year 2026-27.
Q2.24 Will the Annual Information Statement continue under the new Act?
Ans. Annual Information Statement will continue for tax periods governed by the Income-tax Act, 1961 (up to AY 2026–27), and from Tax Year 2026–27 onwards under the Income-tax Act, 2025, it will stand replaced by Form No. 168 as the evolved Annual Information Statement.
Q2.25 What happens to Minimum Alternate Tax (MAT)/Alternate Minimum Tax (AMT) credits allowable to be carried forward under the old Act but not yet utilised before 1 April 2026?
Ans: Any unutilised credit for MAT/AMT allowed to be carried forward under the provisions of section 115JAA or 115JD of the Income Tax Act, 1961, are treated as eligible credits under the Income Tax Act, 2025. For instance, if a taxpayer has carried forward MAT credit from AY 2024–25, that credit will be available under the new Act and can be used in future years, subject to the conditions prescribed in the Income Tax Act, 2025.
Q2.26 For how long can such carried-forward tax credits from the old Act be used under the new Act?
Ans: Unutilised credits can be carried forward for a total of 15 years from the year they first became available. The un-utilised MAT credit can be set off for a tax year commencing on or after 01.04.2026, subject to the conditions prescribed in the Income Tax Act, 2025.
D. OUTSTANDING TAX ARREARS
Q2.27 If a person had an outstanding tax liability under the old Act, is that tax still payable after the new Act comes into force?
Ans: Yes, the tax liability as computed under the old Act remains. For example, if a taxpayer was issued a tax demand notice for AY 2022–23 under the old Act, and he has not yet paid it, he still has to pay that amount even after the new Act comes into force.
Q2.28 Can the tax department recover old tax dues after the commencement of the Income Tax Act, 2025?
Ans: Yes. Any amount that was payable under the old law remains recoverable under the Income Tax Act, 2025. The department may use the recovery mechanisms provided in the Income Tax Act, 2025 to collect unpaid tax arrears raised under the Income Tax Act, 1961.
Q2.29 Are tax recovery certificates or attachment orders issued under the old Income Tax Act still enforceable after the new Act comes in to force?
Ans: Yes. Recovery actions already taken under the Income Tax Act, 1961 remain effective, and remaining amounts can also be recovered using the recovery machinery provided in the new Act. For example, if a property of a taxpayer was attached under the provisions of the Income Tax Act, 1961, that attachment remains valid even after the Income Tax Act, 2025 comes into force.
E. REFUND CLAIMS
Q2.30 What will happen to refund claims arising under the Income-tax Act, 1961 that are pending on the commencement of the Income-tax Act, 2025?
Ans. Rights, benefits, obligations or liabilities that arose under the old Act continue to exist. Thus, if a taxpayer was entitled to claim a refund under the old Act for any tax year prior to the commencement of the new Act, he still remains entitled to that refund even after the new Act comes into force.
Q2.31 A deductor deducted excess TDS during FY 2024–25. After the new Act comes into force on 1st April, 2026, can a refund claim for such excess deduction still be filed? If yes, which Act would apply—the law in force at the time of deduction or the new Act in force at the time of filing the claim?
Ans. As mentioned earlier, the rights, benefits, obligations or liabilities that arose under the old Act continue to exist. Thus, if a tax deductor was entitled to claim a refund under the old Act for any tax year prior to the commencement of the new Act, he still remains
entitled to that refund even after the new Act comes into force subject to the condition that the refund claim is filed within stipulated time of 2 years from the end of the financial year in which tax was deductible. This claim is required to be filed in Form No. 26B of Income Tax Rules, 1962 which shall be processed as per the provisions of the Income Tax Act, 1961.