TDS for Small Businesses in Tax Year 2026-27: Section 393 Rates, Thresholds, Due Dates and Forms

For tax year 2026-27, TDS is deducted under the Income-tax Act 2025: salary under section 392 and other payments to residents under the table in section 393(1). The thresholds and rates a small business meets are the same as last year — for example 1% or 2% on contractor bills above ₹30,000 (₹1 lakh a year), 10% on professional fees above ₹50,000 and 2% or 10% on rent above ₹50,000 a month. Tax deducted in a month is deposited by the 7th of the next month, and the quarterly statements are now Form No. 140 (other payments) and Form No. 138 (salary).

Sources checked: 20 October 2026

Facts checked on 20 October 2026 against the Income-tax Act 2025 (sections 393, 397, 398, 402, 427 and 461 on incometaxindia.gov.in) and the e-filing portal's Form No. 138 and 140 user manuals.

This guide is for payments made from 1 April 2026. For payments up to 31 March 2026 (and the January–March 2026 statement in Form 26Q) the older rules apply: see TDS for FY 2025-26 under the 1961 Act.

Key facts

Item	Tax year 2026-27
Law	Income-tax Act 2025 (in force from 1 April 2026)
Salary TDS	Section 392
Other payments to residents	Section 393(1) Table
Payments to non-residents	Section 393(2) Table
Deposit	By the 7th of the next month; March deductions by 30 April (Rule 218 of the Income-tax Rules 2026)
Quarterly statements	Form No. 140 (residents, non-salary), Form No. 138 (salary), Form No. 144 (non-residents)
Statement due dates	31 July, 31 October, 31 January, 31 May
TDS certificates	Form No. 130 (salary), Form No. 131 (other payments)
TAN application	Form No. 135
No PAN from the payee	20% (5% on purchase of goods), or the normal rate if higher

Who has to deduct TDS in tax year 2026-27?

Every company, firm, LLP, trust or co-operative society deducts TDS on the payments in the table below; an individual or HUF deducts on most of them only if its business turnover exceeded ₹1 crore, or professional receipts exceeded ₹50 lakh, in the previous tax year. The Act calls such a payer a "specified person" (section 402(37)); for contractor payments the matching term is "designated person" (section 402(11)).

A proprietor or HUF below those limits still deducts in three cases, and needs no TAN for any of them (section 397(1)(c)):

• Rent above ₹50,000 a month paid for business or personal use: 2%, deducted once, from the rent for the last month of the tax year or of the tenancy (Table serial 2(i), formerly section 194-IB).
• Contract work, professional fees or commission above ₹50 lakh in the year: 2% (serial 6(ii), formerly 194M).
• Buying immovable property (other than agricultural land) where the price or stamp duty value is ₹50 lakh or more: 1% of the higher (serial 3(i), formerly 194-IA).

Everyone else needs a TAN before the first deduction; apply in Form No. 135.

What are the TDS rates and thresholds for 2026-27?

The rows a small business usually meets, from the section 393(1) table (payments to residents):

Payment	Formerly (1961 Act)	2025 Act Table serial	Threshold	Rate
Contractors and sub-contractors, including job work and, from 1 April 2026, supply of manpower	194C	6(i)	₹30,000 a bill or ₹1,00,000 in the year	1% to an individual/HUF; 2% to others
Professional fees	194J	6(iii)	₹50,000 in the year	10%
Technical fees (not professional), call-centre operators	194J	6(iii)	₹50,000 in the year	2%
Director's fees or commission (not salary)	194J	6(iii)	Nil	10%
Commission or brokerage (not insurance)	194H	1(ii)	₹20,000 in the year	2%
Rent of plant, machinery or equipment	194-I	2(ii)	₹50,000 for a month or part of a month	2%
Rent of land, building, furniture or fittings	194-I	2(ii)	₹50,000 for a month or part of a month	10%
Interest (not on securities) paid by a business	194A	5(iii)	₹10,000 in the year	Rates in force
Purchase of goods, where your turnover exceeded ₹10 crore last year	194Q	8(ii)	On the amount above ₹50 lakh per seller in the year	0.1%
Salary, remuneration, commission, bonus or interest to a partner (by a firm)	194T	Section 393(3), serial 7	₹20,000 in the year	10%

"Rates in force" means the rate set by the Finance Act for the year; check it before you deduct. Interest paid by a bank, co-operative bank or post office has a higher threshold (₹50,000, or ₹1,00,000 for a senior citizen).

Points that change the answer:

• Transporters: no deduction from a contractor who plies, hires or leases goods carriages, owns ten or fewer of them at any time in the year, and gives you a declaration with their PAN (section 393(4), Table serial 8).
• Job work with the customer's material: where the invoice shows the material separately, deduct only on the rest of the invoice (note to serial 6(i)).
• Personal payments: an individual's payments to a contractor or professional purely for personal purposes are outside serials 6(i) and 6(iii).
• Finance Act 2026 changes: "work" now includes supply of manpower that works under your supervision (section 402(47)(f)), and no TDS applies to interest paid to a co-operative bank (section 393(4), Table serial 7).

When do I deposit TDS and file the statements?

Deposit the tax deducted in a month by the 7th of the following month; tax deducted in March may be deposited by 30 April. Then file the quarterly statement for the payments:

Quarter of tax year 2026-27	Form No. 140 / 138 due
April – June 2026	31 July 2026
July – September 2026	31 October 2026
October – December 2026	31 January 2027
January – March 2027	31 May 2027

The statements are prepared in the return preparation utility and uploaded on the e-filing portal under "Forms as per Income-tax Act 2025", choosing the tax year and quarter. Issue the TDS certificate to each payee in Form No. 130 (salary) or Form No. 131 (other payments) within the time the Rules allow. The compliance calendar shows each month's dates.

What does a missed or late deduction cost?

Interest, a daily fee, a possible penalty and a disallowance of the expense:

• Interest (section 398(3)): 1% a month or part of a month from the date tax was deductible to the date it is deducted, and 1.5% a month from deduction to deposit. Pay it before filing the statement.
• Late fee (section 427): ₹200 for every day the statement is late, capped at the TDS amount, paid before the statement is filed.
• Penalty (section 461): ₹10,000 to ₹1,00,000 for not filing the statement on time or for incorrect information. No penalty for delay if the tax, fee and interest are paid and the statement is filed within one month of the due date.
• Disallowance (section 35): 30% of an expense on which tax was not deducted, or not deposited by the return due date, is added back to your income; it is allowed in the year you deduct and deposit.
• Payee without PAN: deduct at 20% (5% on purchase of goods) or the normal rate if higher (section 397(2)).

Practical controls for a small office

1. Tag every vendor with its Table serial number and threshold when you create the ledger; the old section numbers will still appear in some software until it is updated.
2. Deduct at the earlier of booking the expense or paying it: the Act triggers TDS on credit or payment, whichever comes first.
3. Collect the PAN before the first payment, and the no-deduction declaration from small transporters.
4. Reconcile Form No. 140 with your ledger before filing, and check your own tax credit statement on the e-filing portal each quarter to see that customers deposited what they deducted from you.

TDS is one of the compliances our income tax services handle each month. If a payment does not fit neatly into a Table serial, ask our expert team before you deduct or book a consultation.