Q1 TDS Return July 2026: Section 393 New Payment Codes Guide

Your Q1 TDS return for April–June 2026, due 31 July 2026, is unlike any quarterly return your firm has filed before. The Income-tax Act, 2025 replaced the Income-tax Act, 1961 for all income earned from 1 April 2026 onwards, and that means the section numbers your practice has used for decades—194C, 194J, 194I, 194IB, 194A—no longer apply. File a Q1 return using old section logic and the TRACES system will reject it.

The 2025 Act consolidates all non-salary TDS provisions into a single Section 393, structured as a table of payment codes. This is not a cosmetic renumbering—the compliance workflow, form references, and in some cases the applicable rates have changed. This guide covers exactly what changed, which payment codes replace your old sections, and the specific actions every deductor must complete before 31 July 2026.

What Changed: From Standalone Sections to Section 393

Under the Income-tax Act, 1961, TDS was governed by a cluster of standalone sections—each dedicated to a specific payment type. Section 192 deducted tax on salaries, 194A on interest, 194C on contractor payments, 194J on professional fees, 194I on rent from businesses, and 194IB on rent paid by individuals and HUFs. Over decades, this proliferation reached over 30 separate TDS sections, each with its own threshold, rate, and compliance trap.

The Income-tax Act, 2025 collapses all non-salary TDS into Section 393, presented as a structured table. Each row in the table carries:

• A payment code (four-digit numeric, beginning from 1001)
• The nature of payment
• The applicable TDS rate
• The annual or per-payment threshold below which TDS does not apply

Salary TDS is handled under a separate provision of the 2025 Act and reported independently. Every other deduction previously attributed to sections 193 through 196D—and many in later sections—now flows through Section 393 with a payment code. The complete payment code table (codes 1001 through 1092) is published by the CBDT in the subordinate legislation implementing Section 393.

What This Means for Your Monthly Challan Deposits

When you deposit TDS each month via Form 281, the challan requires a section reference. From April 2026, that reference must be the Section 393 payment code, not the old section number. If your accounting software auto-populated "194J" on April or May 2026 challans, verify immediately whether the system applied the correct code mapping under the 2025 Act. A challan carrying an invalid section reference creates a mismatch when you file the Q1 return, and TRACES defaults will follow.

What This Means for Q1 Return Filing

The old Form 26Q used for non-salary TDS under the 1961 Act is not the correct return for Q1 FY 2026-27. Your software vendor should have released a 2025 Act-compatible update covering the new form structure and payment code fields. If no update has arrived, escalate before the 31 July deadline—the late-filing fee applies per day of delay and there is no grace period for "software not yet updated."

The Rate That Changed: Rent TDS Drops from 5% to 2%

One rate change in Section 393 has immediate cash-flow impact for individuals and HUFs who pay rent. TDS on rent paid by individuals and HUFs—previously 5% under Section 194IB of the 1961 Act—is now 2% under the equivalent entry in Section 393, effective 1 April 2026.

Before vs. After

Practical example: Your business partner pays ₹80,000 per month for office space on a personal lease. Under the 1961 Act, TDS was ₹4,000 per month—₹48,000 per year. Under the 2025 Act from April 2026, TDS is ₹1,600 per month—₹19,200 per year. The landlord's annual take-home improves by ₹28,800. The only change on your side: file Form 141 instead of Form 26QC.

If you or your client has been deducting at 5% after 31 March 2026, the excess must be refunded to the landlord through a correction return. The landlord's AIS will reflect a higher deduction than what the law now requires, which can trigger mismatch notices during their ITR processing.

July 2026 TDS Deadlines: The Exact Dates

Missing the 31 July return deadline triggers a per-day late filing fee under the 2025 Act (mirroring the structure of old Section 234E) plus interest on any unpaid TDS amount. Both run from the due date, not from when you eventually file.

Step-by-Step Action Checklist

Step 1 — Audit April–June 2026 challans for correct code references

Pull every TDS challan deposited for April, May, and June 2026. Check the section or code reference on each challan. If you see old 1961 Act references—194C, 194J, 194I, 194IB—contact your bank or raise a correction request through TRACES before filing the return. A code mismatch between challan and return is the most common first-quarter TRACES default under a new Act.

Step 2 — Map your payment categories to Section 393 codes

Build a reference table for every payment type your entity or your clients handle. For each category, identify the Section 393 payment code, TDS rate, and threshold from the CBDT notification implementing the 2025 Act. Cross-reference this mapping against what your TDS software now shows. Any discrepancy between your reference table and the software output needs vendor escalation before the return goes in.

Key categories to map (verify exact codes and rates from the official CBDT notification):

• Contractor and sub-contractor payments
• Professional and technical fees
• Interest paid by non-banking entities
• Rent paid by businesses
• Rent paid by individuals and HUFs (2% rate, Form 141)
• Payments to non-residents

Step 3 — Reconcile deductions versus deposits for each deductee

For each deductee, confirm:

• Total payment made April–June 2026
• TDS that should have been deducted at the 2025 Act rate
• TDS actually deducted and deposited (challan BSR code, date, amount)

Differences attract interest from the date of deduction, not the deposit date. Close all gaps before filing the return.

Step 4 — Verify your TDS software supports 2025 Act filing

Your software must support: Section 393 payment codes in the challan entry screen, Form 141 for individual or HUF rent TDS, the 2025 Act-compatible Q1 non-salary return form, and TRACES upload validation against the new format. If your vendor has not released a Q1 FY 2026-27 update, use the Income Tax Department's offline utility rather than miss the 31 July deadline.

Step 5 — File by 31 July and issue Q1 TDS certificates

Upload the validated return file to TRACES and retain the provisional receipt number as proof of timely filing. Issue TDS certificates to all deductees—Form 16A or the 2025 Act equivalent—by 15 August 2026. With systems adapting to the new Act, run the certificate generation process well before the 15 August cut-off, not the morning of.

Common Mistakes to Avoid

Using 1961 Act section numbers in the Q1 return. Filing Q1 FY 2026-27 with old section references (194C, 194J, etc.) is the highest-risk mistake this quarter. TRACES will reject or flag the return, and correction returns under the 2025 Act framework are unfamiliar territory for most CA firms in this first cycle.

Continuing to deduct rent TDS at 5%. If you or a client is an individual or HUF paying rent above ₹50,000 per month, the rate has been 2% since 1 April 2026. Over-deducting at 5% means the landlord is short on cash flow, the excess sits with the government, and a correction return is unavoidable. On a monthly rent of ₹60,000, the over-deduction alone is ₹1,800 per month—₹10,800 for the full quarter.

Filing Form 26QC for rent payments after March 2026. Form 141 is the correct form for individual or HUF rent TDS from 1 April 2026 onwards. A Form 26QC submission for Q1 FY 2026-27 will be rejected.

Assuming software handles the transition automatically. Software that was not updated before April 2026 may have been depositing challans under wrong section references for three months. Do not assume the transition is seamless—audit the full April–June challan trail before filing.

Running TRACES validation on the deadline day. TRACES experiences heavy load and periodic downtime on quarterly return due dates. Run your pre-validation at least three to four days before 31 July to leave room for error correction and re-upload if needed.

Key Takeaways

• The Income-tax Act, 2025 retired all familiar non-salary TDS sections (194C, 194J, 194I, 194IB, and others) and replaced them with Section 393—a table-format provision with payment codes beginning from 1001, effective 1 April 2026.
• The Q1 TDS return for April–June 2026 is due 31 July 2026 and is the first return filed entirely under the new Act. Returns using 1961 Act section references will be rejected by TRACES.
• TDS on rent paid by individuals and HUFs dropped from 5% to 2% on 1 April 2026. The reporting form changed from Form 26QC to Form 141.
• Audit April–June 2026 TDS challans now to confirm they carry Section 393 payment codes, not 1961 Act section numbers—a mismatch blocks clean Q1 return filing.
• A software vendor delay is not a defence against late-filing fees or TRACES defaults. Use the offline utility from the Income Tax Department portal if your vendor has not released a 2025 Act-compatible update.

How corpus Helps

corpus handles the Income-tax Act, 2025 transition inside your normal accounting workflow. When you record a payment to a contractor, professional, or landlord, corpus maps the transaction to the correct Section 393 payment code and applies the 2025 Act TDS rate automatically—including the 2% rate for individual and HUF rent payments under Form 141. Monthly TDS liability reports show challan amounts tagged to the correct payment codes, and at quarter-end, corpus generates the Q1 return file in TRACES-compatible format for the new Act. No manual code-mapping, no waiting on a vendor update for what should be handled at the accounting layer.

File your first Q1 TDS return under the Income-tax Act, 2025 without a TRACES rejection—try corpus free and see the Section 393 workflow in action.