Under the Income Tax Act of 2025, the new quarterly statement for tax deducted at source on non-salary payments is called Form 140. It is now the primary form required by Section 397(3)(b) for businesses and other deductors to report TDS on payments made to resident taxpayers.

The general concept is still recognisable. You still have to record who you paid, what you paid, the amount of tax you deducted, and how the tax was deposited. The form’s format and the deadlines for fixing any errors have changed.

What Form 140 Covers

Form 140 is used for TDS on various non salary payments made to resident taxpayers. It applies to a broad range of transactions:

• Interest other than interest on securities
• Payments to contractors and subcontractors
• Commission and broking
• Rent paid for land, buildings, plant, or machinery
• Professional fees and technical service fees
• Dividend payments
• Any other resident payment where TDS is required under the Act

The requirement to file Form 140 covers Companies, Partnership firms and LLPs, Government Departments, Banks, Trusts, and Individuals & HUFs who are liable to deduct TDS.

Each quarter, the deductor must file Form 140 to report all relevant non-salary payments and the TDS deducted on those payments.

The form collects basic details of the deductor, information about the challans used to deposit TDS, deductee-wise details for each transaction.

This is similar to the old Form 26Q, but the layout is more unified, and there are fewer separate annexures to handle.

Due dates and filing process

The quarterly due dates for Form 140 are the same as they were for Form 26Q:

• Quarter 1, April to June: due by 31 July
• Quarter 2, July to September: due by 31 October
• Quarter 3, October to December: due by 31 January
• Quarter 4, January to March: due by 31 May of the following year

There is an appropriate order to the filing process:

1. Compile all of the quarter’s non-salary payments that are subject to TDS.
2. Pay close attention to the deductee’s PAN data.
3. Verify that TDS has been timely deposited and deducted at the appropriate rate.
4. Form 140 should be prepared with:
   1. Deductive information
   2. Challan information, including the date of deposit, challan number, and BSR code
   3. Deductee-specific information, such as the kind of payment, amount, and TDS withheld
5. Run the file through the current File Validation Utility and correct any issues that are found.
6. Using an electronic verification code or digital signature, submit the verified statement via the e-filing portal.

The acknowledgement number should be securely saved upon submission. If there are any questions or if a correction statement needs to be submitted later, this number will be required.

Changes from Form 26Q

Although the core purpose of reporting non-salary TDS has not changed, Form 140 introduces some key differences:

• It now operates under Section 397(3)(b) of the Income Tax Act, 2025, instead of Section 200(3) of the earlier law.
• The structure has moved from multiple annexures to a single, standardised format, which makes data entry and review more straightforward.
• Validation checks in the File Validation Utility are stricter. This helps catch mistakes such as wrong PAN entries or incorrect challan references before filing.

Correction statements are still allowed. If an error is found after filing, the deductor can submit a correction statement. However, there is a clear time limit. TDS correction statement can be filed within six years from the end of the financial year in which the TDS statement is required to be furnished, applicable from 1 April 2025.

Once this period is over, the return usually cannot be changed further. Because of this, it is wise to reconcile TDS records, challan details, and deductee information regularly during the year instead of waiting until the last quarter.

Conclusion

Form 140 offers a simple and clear filing format while retaining the reporting functionality of Form 26Q. The change should be easy for deductors that update their systems, check PAN and challan details in advance of deadlines, and adhere to the well-known quarterly due dates.

However, careful and prompt submission is still crucial due to the more stringent validation and short rectification window. It is better to approach Form 140 compliance as a continuous process rather than a year-end duty because late filing or unresolved errors can continue to result in interest, penalties, and other financial consequences.

Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute tax, legal, financial, investment, accounting, or other professional advice. Laws, regulations, tax provisions, and financial information are subject to change and may vary based on individual circumstances. While every effort has been made to provide accurate and up-to-date information, readers should verify the applicable provisions and consult a qualified professional before making any decision or taking any action based on this content. TaxAcumen is not responsible for any loss or consequence arising from reliance on the information provided.

Over the past few months, payroll systems in India have been adjusted to a new quarterly TDS statement by employers. Form 138 under the Income Tax Act, 2025 has taken the place of Form 24Q, the return used for years to report tax deducted from employee pay, as of April 1st, 2026. The form’s number, underlying section, and a few procedural specifics have changed, but its intent has remained the same. What payroll teams and employers should know about this change is as follows.

What Form 138 Is Used For

Form 138 is a quarterly statement filed by any employer, whether a company, firm, government body, or individual, who deducts tax from employees’ salaries under Section 392 of the Income Tax Act, 2025. It also covers specified banks that deduct tax on pension and interest income paid to specified senior citizens. This second use is new territory that Form 24Q didn’t formally carry, since senior citizen pension and interest reporting now sit within the same form.

Form 138 is filed electronically through the Income Tax e-Filing portal using the prescribed TDS return preparation and validation utilities. After successful validation, the accepted statement is transmitted to TRACES for further processing. Not every annexure is required every time. Annexure I goes with all four quarterly filings, while Annexure II and Annexure III, which cover the detailed annual salary or pension summary, get submitted only with the fourth quarter statement. This annual data eventually feeds into Form 130, the certificate that has replaced Form 16 for employees.

How the Due Dates and Filing Process Work

The quarterly due dates for Form 138 follow the same familiar pattern that Form 24Q used:

• Q1 (April to June): 31st July of the tax year
• Q2 (July to September): 31st October of the tax year
• Q3 (October to December): 31st January of the tax year
• Q4 (January to March): 31st May of the year following the tax year

Once submitted, Form 138 can’t be edited directly. If an error needs fixing, whether a wrong PAN, an incorrect amount, or any other detail, the employer must file a correction statement after the original return has been processed by CPC-TDS. This correction window runs for two years from the end of the tax year in which the statement was due. After successful filing, the portal issues an Acknowledgement Receipt Number as proof of submission.

Key Differences from Form 24Q

While the core reporting stays the same, a few things set Form 138 apart from its predecessor:

• The governing section has moved from Section 192 of the old Act to Section 392 of the Income Tax Act, 2025
• Terminology has shifted from “Assessment Year” and “Financial Year” to “Tax Year” throughout the form
• Specified senior citizen pension and interest reporting is now built into the same form, rather than handled separately
• Currency references now use the rupee symbol instead of “Rs.” across the document
• Late filing and non-compliance attract penalties under Sections 427, 461, and 465(2)(g) of the new Act, replacing the older penalty provisions

Timely and accurate filing remains just as important as before. It ensures employees receive proper TDS credit reflected in their records, and it protects employers from the legal exposure that comes with late or inaccurate returns.

Conclusion

Form 138 carries forward everything. Form 24Q was meant to do, reporting salary TDS accurately and on time, while adding a cleaner structure, updated terminology, and expanded coverage for senior citizen income. Employers who update their payroll processes now, align with the new section references, and keep the annexure requirements straight will find the quarterly filing routine just as manageable as it always was.

Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute tax, legal, financial, investment, accounting, or other professional advice. Laws, regulations, tax provisions, and financial information are subject to change and may vary based on individual circumstances. While every effort has been made to provide accurate and up-to-date information, readers should verify the applicable provisions and consult a qualified professional before making any decision or taking any action based on this content. TaxAcumen is not responsible for any loss or consequence arising from reliance on the information provided.

According to Indian law, a Hindu Undivided Family (HUF) is a distinct group made up of people who share a common ancestor, as well as their spouses and unmarried daughters. The Income Tax Act of 2025 treats it as a distinct taxable unit. An HUF is a helpful tool for tax planning and collective asset management since it can combine family assets and possess ancestral property.

Determining the Residential Status of HUF

The tax liability of an HUF depends on its residential status in a financial year. An HUF may be:

• Resident in India
• Non-resident in India

A resident HUF is further classified as the following:

• Resident and Ordinarily Resident (ROR)
• Resident but Not Ordinarily Resident (RNOR)

The HUF is ordinarily resident if the Karta (head of family) satisfies the residency criteria under Section 6 of the Act: having been a resident in India for at least two of the ten preceding years and staying in India for at least 730 days during the previous seven years. If either condition is unmet, the HUF is RNOR. A resident HUF is taxed on its global income; a non-resident HUF is taxed only on income that accrues, arises, or is received in India.

Calculation of Income

An HUF’s income is computed under four primary heads

1. Income from House Property
2. Profits and Gains from Business or Profession
3. Capital Gains
4. Income from Other Sources

The total income of the HUF is aggregated across these heads. Clubbing provisions under Section 151 (formerly 64) apply if a member transfers assets to the HUF without adequate consideration; such income may be taxed in the hands of the transferor rather than the HUF. Losses can be set off intra-head and inter-head as permitted, and unabsorbed losses may be carried forward.

Deductions and Regimes

After computing Gross Total Income (GTI), the HUF may claim allowable deductions (such as those under Section 123, formerly 80C) to arrive at total income, provided the HUF opts for the old tax regime. If the HUF remains in the default new tax regime under Section 202, most of these deductions are not available

Tax Rates Applicable to HUF (Tax Year 2025)

Old Tax Regime

Total Income (₹)	Tax Rate
Up to 2,50,000	Nil
2,50,001 – 5,00,000	5%
5,00,001 – 10,00,000	20%
Above 10,00,000	30%

New Tax Regime (Section 202 – Default)

Total Income (₹)	Tax Rate
Up to 4,00,000	Nil
4,00,001 – 8,00,000	5%
8,00,001 – 12,00,000	10%
12,00,001 – 16,00,000	15%
16,00,001 – 20,00,000	20%
20,00,001 – 24,00,000	25%
Above 24,00,000	30%

Important Note on Rebates:

Unlike individuals, an HUF is not eligible for the tax rebate under Section 87A. Even if the HUF income is below ₹12 lakh under the new regime, tax will be payable as per the slabs.

Surcharge, Cess, and AMT

If income surpasses ₹50 lakh, a surcharge is applied; under the current regime, the rate is limited at 25%. The overall tax plus surcharge is subject to a 4% health and education cess. An HUF is subject to the Alternative Minimum Tax under Section 206 if it claims certain investment-linked deductions and its regular tax is less than 18.5% of its adjusted total income.

Conclusion

For families, HUF taxes still provide a special “extra slab” benefit. Now that the Income Tax Act, 2025, is in effect, the family’s investment profile will determine whether they choose the deduction-based old regime or the default Section 202 regime. Maintaining high legal compliance and maximising the tax outflow need careful preparation regarding the Karta’s residence and the type of asset transfers.

Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute tax, legal, financial, investment, accounting, or other professional advice. Laws, regulations, tax provisions, and financial information are subject to change and may vary based on individual circumstances. While every effort has been made to provide accurate and up-to-date information, readers should verify the applicable provisions and consult a qualified professional before making any decision or taking any action based on this content. TaxAcumen is not responsible for any loss or consequence arising from reliance on the information provided.

Every salaried employee looked forward to Form 16 at the beginning of the financial year for more than 60 years. It served as the foundation for each ITR file and verified the amount of tax that the employer had deducted and deposited. Form 130 will take its place under the Income Tax Act, 2025. Millions of salaried employees are affected by this change, so knowing when it applies and what it looks like may help avoid confusion when it does.

When Form 130 Is Really Important

It’s worth being precise here, since there’s often confusion about timing. Form 16 continues to apply for FY 2025-26, and employers must issue it by 15th June 2026, exactly as before. Form 130 comes into effect from Tax Year 2026-27, which runs from April 2026 to March 2027. The first Form 130 that employees receive will be issued by 15th June 2027, once this tax year closes. So salaried employees filing returns right now still work with Form 16, but TDS deducted from April 2026 onward is already being recorded under the new system that Form 130 will eventually reflect.

What Form 130 Looks Like

Form 130 is issued under Section 395(4)(b) of the Income Tax Act, 2025, and it serves the same core purpose as Form 16, certifying tax deducted from salary and deposited with the government. It also extends to pensioners and specified senior citizens who have authorised a bank to deduct tax on their interest income, a group Form 16 never fully covered.

Structurally, Form 130 has three parts instead of two:

• Part A carries employer and employee details, along with the employment period, a field that wasn’t explicitly required before.
• Part B summarises the income paid and TDS deducted, reconciled against the employer’s quarterly filings.
• Part C contains detailed annexures, covering salary computation, or pension and interest income for senior citizens

Like its predecessor, Form 130 can only be generated through the TRACES portal, and only after the employer has filed the corresponding quarterly TDS return, now called Form 138, which replaces the earlier Form 24Q. Any version issued outside TRACES isn’t considered valid.

What Employees Should Watch For

Even though Form 130 won’t arrive until mid-2027, a few practical points are worth keeping in mind as this transition unfolds:

• Confirm your employer is filing Form 138 correctly each quarter, since Form 130 depends entirely on this filing being accurate
• Watch for the new employment period field in Part A, especially if you changed jobs during the year
• Once issued, cross-check the TDS figures in Form 130 against Form 168, the new version of Form 26AS, sometimes called the Tax Passbook
• Any mismatch between the two documents should be resolved with the employer before filing the ITR, not after

Since the certificate is generated only after quarterly filings are processed, delays on the employer’s side can push back when you actually receive it, so it helps to raise queries early if your payroll team seems behind schedule.

Conclusion

Salaried employees still have one more filing season with the well-known Form 16 before the move fully takes effect, and Form 130 isn’t arriving overnight. The fundamental change, quarterly filings under Form 138, a wider reach that includes pensioners, and a more complex three-part structure that will influence how income and deductions are reported after Form 130 finally arrives in mid-2027 have already begun.

For the first half of 2026, Indian accountants had to get used to a new method of reporting TDS. The 1961 Act was repealed by the Income Tax Act, 2025 on April 1st, 2026, and a set of numerical payment codes replaced the well-known Section 194 series. For a post-April transaction, a challan or quarterly report that still displays an outdated section number is deemed faulty. Completing TDS files correctly now requires understanding how the old system relates to the new one.

Why the System Changed

TDS provisions were distributed throughout sections 192 to 194T of the previous Act. This is reduced to three parent parts in the 2025 Act. TDS on salaries is covered under Section 392, which supersedes Section 192. Almost all non-salary payments are covered by Section 393, which replaces sections 194A, 194C, 194H, 194I, 194J, and several others. Section 206C has been replaced by Section 394, which addresses tax collection at the source.

The new system gives a payment a four-digit code within a specified range rather than calling it by section. Resident TDS, non-resident TDS, and TCS categories include the total of 92 codes.

How the Codes Map to Old Sections

Some of the most common payment types and their new codes include:

• Salary payments, earlier under Section 192, are now code 1001 under Section 392.
• Contractor payments to individuals or HUFs, earlier Section 194C at 1%, now code 1005
• Contractor payments to companies or firms, earlier Section 194C at 2%, now code 1006
• Interest paid by banks, earlier Section 194A, now code 1008
• Rent on land or buildings, earlier Section 194I, now code 1017
• Commission or brokerage, earlier Section 194H, now code 1014
• Technical services and royalty, earlier Section 194J at 2%, now code 1026
• Professional fees and director remuneration, earlier Section 194J at 10%, now codes 1027 and 1028

A handful of codes, including 1007, 1010, 1025, and 1036, appeared in draft forms but weren’t individually notified as of this writing. It’s best to hold off on using these until confirmed, or check with a tax consultant.

The Transition Rule and Form Changes

The rule that decides which act applies isn’t about when you deposit the tax. It depends on whichever comes earlier, the date you credit the payee in your books or the date you actually pay them. If that earlier event falls on or before 31st March 2026, the old Act and its section numbers still apply, even if the deposit happens later. If the earlier event falls on or after 1st April 2026, the new Act and its numeric codes take over.

For instance, crediting a contractor in your books on 28th March 2026 but paying on 5th April 2026 still counts as an old-Act transaction, since the credit date comes first. If both the credit and payment for another vendor happen after 1st April, the new code applies instead.

Alongside the codes, the return forms have changed names too. Form 24Q is now Form 138, Form 26Q is now Form 140, Form 27Q is now Form 144, and Form 27EQ is now Form 143. Payee certificates have changed as well, replacing the older Form 16 and Form 16A formats.

Avoiding Common Filing Errors

This quarter, a few errors are occurring often. On a post-April transaction, using an outdated section number makes the return inaccurate and may prevent the payee’s credit from accurately reflecting. Create distinct challans for each period because combining transactions from before and after April on one challan also results in validation failures. Another common error that causes processing delays is filing on the incorrect form, such as utilising the outdated Form 26Q for transactions that should be on Form 140.

Conclusion

The Income Tax Act of 2025’s change to numeric TDS codes affects every challan, return, and certificate a business files, making it more than just a name change. Businesses can avoid faulty returns and notices by being familiar with the new code ranges, using the appropriate transition rule, and updating accounting software on time. For the rest of the year, filings will go more smoothly if old sections are mapped to their new codes.

Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute tax, legal, financial, investment, accounting, or other professional advice. Laws, regulations, tax provisions, and financial information are subject to change and may vary based on individual circumstances. While every effort has been made to provide accurate and up-to-date information, readers should verify the applicable provisions and consult a qualified professional before making any decision or taking any action based on this content. TaxAcumen is not responsible for any loss or consequence arising from reliance on the information provided.

Quarterly TDS returns have carried the familiar names for years: Form 24Q, 26Q, 27Q, and 27EQ. That changed from 1st April 2026, when the Income Tax Act, 2025, came into force and renumbered every one of these forms. Those still using the old names in payroll templates or filing checklists need to update them, since returns submitted under old numbers for this period get rejected on validation.

What the New Forms Cover

Each old form now has a direct replacement, and the underlying purpose hasn’t changed:

• Form 24Q is now Form 138, used for TDS on salary payments.
• Form 26Q is now Form 140, used for TDS on non-salary payments to residents.
• Form 27Q is now Form 144, used for TDS on payments to non-residents.
• Form 27EQ is now Form 143, used for Tax Collected at Source.

For Q1 of FY 2026-27, covering April to June, all four returns share the same due date, 31st July 2026. This is a genuine change for TCS filers, who used to submit Form 27EQ two weeks earlier than the TDS returns. Under Form 143, that gap has closed, and TCS collectors now follow the same schedule as everyone else.

Filing the Return Correctly

Before you build the return, reconcile every TDS deposit made during the quarter against your bank challans, and confirm each one was tagged under Tax Year 2026-27 rather than the older Assessment Year format. A mismatch here can misallocate a payment to the wrong year’s records and create reconciliation trouble later.

It helps to work through the filing in order:

1. Confirm the correct form for each deduction category, Form 138 for salary, Form 140 for resident non-salary, Form 144 for non-resident payments, and Form 143 for TCS.
2. Verify the updated section code for every payment type against the current CBDT mapping, rather than relying on last year’s codes from memory.
3. Match deductee PAN details carefully, since PAN errors are a common reason for correction filings later on.
4. Generate the return file using an RPU or FVU utility version that supports the new form numbers.
5. Submit the return on the portal and save the acknowledgement once accepted.
6. Issue TDS certificates to deductees soon after filing. The salary certificate, earlier called Form 16, now goes by the name Form 130, though its content and purpose haven’t changed.

Penalties and a More Stringent Correction Window

Missing the due date still carries the same consequences as before. A late fee of Rs 200 per day applies under Section 234E, capped at the total TDS or TCS amount for that quarter, with no discretion to waive it once a return is filed late. Persistent or inaccurate filing can also draw a penalty ranging from Rs 10,000 to Rs 100,000 under Section 271H.

One more change worth noting, corrections to a filed statement, such as fixing a wrong PAN or an incorrect section code, must generally be made within two years from the end of the relevant financial year. Older statements with uncorrected errors may fall outside this window soon, so it’s worth clearing them up alongside your current filing.

Conclusion

Filing Q1 FY 2026-27 correctly is less about learning something new and more about updating labels, codes, and templates that stayed unchanged for years. Confirm the right form for each payment category, verify section codes against the current mapping, and reconcile your challans before the 31st July deadline. Getting this first quarter right makes every filing after it considerably smoother.

India’s Goods and Services Tax (GST) system, which went into effect on July 1, 2017, simplifies compliance and enforcement by combining several indirect taxes under one framework. Sections 129 and 130 of the Central Goods and Services Tax (CGST) Act, 2017, which deal with detention, seizure, and confiscation during the transfer of goods, are among its essential provisions. These two provisions have different objectives, even though they deal with violations of goods transportation. Commencing on January 1, 2022, and strengthened by changes in 2024 and 2025, these sections work independently to ensure compliance and penalise noncompliance.

Understanding Section 129: Detention, Seizure, and Release of Goods in Transit

Goods carried or held in violation of GST regulations, such as when an accurate e-invoice or e-way bill is missing, are governed by Section 129. Until the fine is paid, it permits officials to temporarily hold or seize the goods and the vehicle.

The current system of penalties is:

• 200% of the tax due on taxable goods if the owner comes forward.
• In the event that the owner remains silent: 200% of the tax due or 50% of the good’s value (less any taxes paid).
• For exempt goods: 2% of the value or ₹25,000, whichever is lower, if the owner shows up; 5% of the value or ₹25,000, whichever is lower, if the owner does not.

A detention notice (FORM GST MOV-06) and a show cause notice (MOV-07) for the penalty must be issued by the appropriate official within seven days. The officer has an additional seven days to issue an order (MOV-09) after granting representation. After the order, payment must be made within 15 days. These fines are documented in the Unified AIS (Form 168) under the Income Tax Act of 2025 and are not deductible from business expenses. By paying a maximum penalty of ₹100,000 or the good’s penalty, whichever is smaller, a carrier can obtain the vehicle’s release.

Understanding Section 130: Confiscation of Goods and Conveyance

Cases involving intentional tax evasion are covered by Section 130. This includes providing goods without registering, intentionally utilising a vehicle to transport goods in contravention of the law with the intention of evading taxes, and intentional tax noncompliance. The goods and carriage are subject to confiscation in certain situations. Instead of confiscating something, the officer may issue a fine. This fine must be at least equivalent to the penalty specified in Section 129 and cannot be greater than the market value of the items (after deducting tax). Furthermore, a Section 122 penalty is frequently imposed. To ensure procedural justice prior to the commodities becoming government property, confiscation necessitates a separate show cause notice (MOV-10) and a chance to be heard.

Key Differences Between Sections 129 and 130

Aspect	Section 129 (Detention & Seizure)	Section 130 (Confiscation)
Nature	Procedural: Ensures compliance during transit	Penal: Punishes intentional tax evasion
Causes	Document violations like missing E-Way Bill	Clear intent or motive to evade tax
Objective	Detain goods until the penalty is paid	Confiscate goods as they are “tainted”
Outcome	Release after penalty or security	Transfer of ownership to the Government
Appeal Deposit	25% of the penalty amount	Generally 10% of the disputed tax
IT Act 2025	Non-deductible penalty in Form 168	Non-deductible fine in Form 168

Conclusion

The CGST Act’s Sections 129 and 130 deal with multiple levels of GST violations. Section 129 addresses document-related concerns during transportation and is focused on procedural compliance. Section 130 permits the complete confiscation of goods in order to deal with outright tax evasion. These provisions have been further divided under the current 2025–2026 tax framework so that failure to pay a Section 129 penalty does not immediately result in Section 130 confiscation. The only approach for businesses to avoid the significant financial impact of these provisions is to maintain a clean digital record in the Invoice Management System (IMS).

Taxpayers are mostly responsible for calculating, paying, and reporting their own taxes under India’s GST system. Although this self-assessment approach is intended to make things easier and faster, there must be security measures in place for everything to function properly. GST audits serve as that protection. The government uses them to ensure that companies maintain integrity and compliance.

Turnover-Based (Annual Reconciliation)

In the current 2025-26 framework, businesses with sales above ₹2 crore must file an annual return in GSTR-9. If your business crosses the ₹5 crore turnover mark, you must also file a reconciliation statement in GSTR-9C.

The process has become more integrated with the Invoice Management System (IMS). This system tracks which invoices you accepted throughout the year to ensure your Input Tax Credit (ITC) matches your supplier’s records. While self-certification is common, businesses crossing high thresholds often now seek professional certification to align with the new Form No. 26 requirements under the Income Tax Act 2025.

Key Points:

• Applies to businesses with turnover above ₹2 crore for GSTR-9.
• GSTR-9C is mandatory for turnover above ₹5 crore.
• Uses IMS data to auto-populate and verify ITC claims.
• Focuses on matching GST returns with the audited financial books.

Departmental Audit (Section 65)

This audit is conducted by tax officers, usually at the direction of the GST Commissioner. The business gets at least 15 working days’ written notice before the audit begins through Form GST ADT-01.

The audit can happen at your office or at the GST department. Usually, it is over within three months, but in complex cases, the Commissioner may extend it by an additional six months. After the process, the findings are sent to you in Form GST ADT-04. This report highlights any mistakes, missing tax payments, or wrongly claimed credits.

Why It Matters:

• Ensures taxes and ITC claims match actual business activity.
• Flags bad bookkeeping or attempts to dodge taxes.
• Allows officers to initiate recovery under Section 73, 74, or the newer Section 74A.

Special Audit (Section 66)

This audit is only ordered when there is a strong reason to suspect the value of tax has not been correctly declared or the credit availed is out of normal limits. The GST Commissioner will order the audit, and a CA or CMA chosen by the authorities carries it out.

The nominated auditor reports back within 90 days, though this can be extended to 180 days. You will have a chance to respond to any irregularities before any penalties begin. If the audit proves there is fraud or hidden sales, the department can begin steps to recover lost revenue or even prosecute.

Why This Audit Happens:

• Used for serious cases like suspected tax fraud or highly complex transactions.
• An independent expert reviews the situation for the tax department.
• The cost of this audit is paid for by the government, not the taxpayer.

Audit Type	Conducted By	When	Duration	Main Focus
Annual Reconciliation	Taxpayer / Professional	Sales > ₹2cr (GSTR-9) / ₹5cr (GSTR-9C)	Annual	Books vs. Returns
Departmental Audit	GST Department	Selected based on risk	3-9 Months	General Compliance
Special Audit	Govt. Appointed CA/CMA	Suspicious or complex cases	90-180 Days	Fraud Investigation

Conclusion

GST audits are important for maintaining the fairness of India’s tax system. The approach saves time for honest taxpayers by emphasising self-assessment and IMS-based data for the majority of enterprises. However, department-led and special audits continue to be efficient methods for identifying significant errors. In the present digital era of the 2025–2026 tax regime, being aware of these audits allows you to operate your business clearly and gain the assurance of tax authorities.

Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute tax, legal, financial, investment, accounting, or other professional advice. Laws, regulations, tax provisions, and financial information are subject to change and may vary based on individual circumstances. While every effort has been made to provide accurate and up-to-date information, readers should verify the applicable provisions and consult a qualified professional before making any decision or taking any action based on this content. TaxAcumen is not responsible for any loss or consequence arising from reliance on the information provided.

Every company that employs a director, a lawyer, an IT consultant, or a chartered accountant eventually has to pay professional or technical fees. The law mandates that a small sum be deducted and paid with the government prior to the payment reaching the person receiving it. This deduction, known as tax deducted at source, or TDS, is now covered by Section 393 of the Income Tax Act, 2025 for professional and technical fees.

This provision was governed by Section 194J of the previous Income Tax Act, 1961, until March 31, 2026. Along with a number of other TDS provisions, it was combined into Section 393 of the new Act on April 1st, 2026. The rates and thresholds haven’t changed, but the section number, payment codes, and a few forms have. It’s important to get the categorisation and rate correct because a mistake here could result in unwanted notices and disallowed expenses.

Who Is Required to Deduct TDS?

Not everyone making a payment for professional or technical services has to deduct TDS. The obligation applies to:

• Companies, partnership firms, and LLPs
• Co-operative societies and local authorities
• Government departments and bodies set up under law
• Trusts, universities, and educational institutions
• Individuals or HUFs whose turnover crossed Rs 1 crore (business) or Rs 50 lakh (profession) in the previous financial year

If your turnover crossed these limits in FY 2025-26, you must deduct TDS on professional and technical payments through FY 2026-27. Individuals paying for purely personal services, like a doctor’s visit for a family member, don’t need to deduct TDS even if their income is high.

Rates and the Threshold Limit

Section 393 applies different rates depending on the nature of the payment. Professional fees, paid to a chartered accountant, lawyer, doctor, architect, or engineer, attract TDS at 10%. Technical fees, covering managerial, technical, or consultancy services that aren’t tied to a recognised profession, attract a lower rate of 2%. Royalty payments and non-compete fees are taxed at 10% as well.

The threshold for deduction is Rs 50,000 per payee, per financial year. This limit is calculated separately for each category, professional fees, technical fees, and royalty aren’t added together. So if you pay someone Rs 40,000 as technical fees and Rs 45,000 as professional fees in the same year, no TDS applies to either, since each stays under its own limit. Once a category crosses Rs 50,000, TDS applies to every payment in that category from that point on, not just the amount above the threshold.

Director remuneration works differently. Sitting fees, commission, or any non-salary payment to a director attracts TDS at 10% right from the first rupee, with no threshold at all. If a payee hasn’t shared their PAN, the rate jumps to 20% regardless of the payment type.

Software and Filing Compliance

Payments made for the right to use computer software, such as annual licence fees for accounting or ERP tools, are treated as royalty and taxed at 10% once they cross the Rs 50,000 mark. Custom software development, where a developer is paid to write code, usually falls under technical or professional fees instead, depending on how the service is classified.

On the compliance side, TDS must be deposited by the 7th of the month following deduction, except for March, where the deadline extends to April 30th. Deductors also need to file quarterly returns and issue TDS certificates to payees within the prescribed time. Missing a deduction isn’t just a compliance gap, it can lead to 30% of the payment being disallowed as a business expense, along with monthly interest and a penalty equal to the TDS amount.

Conclusion

The essential compliance work has not significantly changed because Section 393 maintains the same rates and thresholds that companies were used to under the previous Section 194J. The forms associated with certificates, the payment codes used in refunds, and the section reference have all changed. Businesses should avoid the fines related to misclassification or missed deductions and ensure a seamless transition by updating their systems and maintaining a clear, category-wise record of payments.