New Income Tax Act 2025: Fewer Forms, Smarter TDS & Simpler Compliance (Part-3)

For most taxpayers, TDS & TCS are not just provisions — they are silent partners in every transaction. Whether you earn salary, receive interest, pay rent or buy property, tax quietly gets deducted or collected along the way. Under the new Income Tax Act, 2025, this silent partner has not changed its role — but it has definitely changed its style.

From Scattered Provisions to Structured System:

Under the Income-tax Act, 1961, TDS and TCS provisions were not just numerous (from Sections 193 to 196D, around 69 in numbers) — they were scattered, overlapping, with each having its own logic, concept and exceptions. There were separate sections for each nature of payments, different thresholds, rates, and conditions & frequent amendments over the years

Though the concept of TDS/TCS has remained the same in the New Act— its architecture has been changed in totality.  The new Act has not only simplified but has also consolidated them into just a few sections. TDS provisions are now structurally grouped into fewer umbrella sections – Section 392 (TDS on salary) and Section 393 (TDS on all other payments) while TCS provisions are consolidated into Section 394.

The New Act achieves simplification primarily through tabulation, replacing the self-contained sections of the Old Act with tables which aptly incorporate payment types, payer categories (e.g., ‘Specified Person’), rates, and thresholds. Let us have a short overview of some of the key changes in New Income Tax Act – 2025 & rules thereto vis a vis earlier law.

1.Ease in Payment of TDS on immoveable property transactions:

Under the earlier system, governed by Section 194-IA and compliance through Form 26QB, a simple property transaction could turn into a compliance nightmare. Imagine one buyer & four sellers in a property transaction. Even though the transaction was one, the compliance required – separate form for each seller. In short, four returns-cum-Challans forms were required to be filed. In many cases, taxpayers ended up spending more time filing forms than actually finalizing the property deal. Earlier, one transaction could generate multiple forms.
Now, the new Income-Tax Rules system addresses this issue directly. Instead of fragmented reporting, a consolidated reporting mechanism in Form No. 141 is introduced. One buyer can report multiple sellers within a single structure. This comes as a huge relief for buyers in property transactions involving multiple sellers. Now, one form tries to capture the entire transaction.
Apart from structural changes, several specific provisions have also been rationalized.

2.Uniform Threshold for Interest on Securities:
One of the notable changes is the introduction of a uniform threshold of ₹10,000 for TDS on interest on securities. Earlier, this threshold applied only in limited cases such as interest on debentures paid to individuals or HUFs. The new law extends this uniformly to all recipients, thereby eliminating selective applicability and bringing consistency.

3.Withdrawal of Exemption for Co-operative Banks:
Under the earlier law, interest payments on investment by co-operative banks enjoyed exemption from TDS. The 2025 law appears to restrict this exemption only to “banking companies”. As co-operative banks do not fall within this definition under the relevant section of the RBI Act, they are now brought within the TDS net. This change removes the preferential exemptions.

4.Rationaliztion of MACT Interest Provisions:
The earlier law created a distinction between credit and payment of interest on compensation awarded by the Motor Accidents Claims Tribunal (MACT). The 2025 law merges these provisions and introduces a single condition. No TDS if aggregate interest does not exceed ₹ 50,000 during the year. However, a practical issue remains. While TDS may be deducted on accrual, the income continues to be taxable on receipt basis. This creates a timing mismatch, requiring taxpayers to carry forward TDS credit.

 5.Hidden Reform: Disappearance of Multiple TDS Forms:

141. a) One of the most silent yet impactful changes in the Income-tax Act, 2025 is the disappearance of multiple TDS forms. Forms like 26QB (property transactions – Sec 194-IA), 26QC (rent by individual/HUF – Sec 194-IB), 26QD (payments to resident contractors/professionals – Sec 194M) are now replaced by a unified, transaction-based reporting system in one Form, Form No. 141.
142. b) Similarly, the declaration form for non deduction of tax at source Form 15G (Non-senior citizens) & Form 15H (Senior citizens) is gone with a single declaration format, Form No. 121, taking their place.Many taxpayers may not even realize this change immediately — but they will definitely feel it the next time they try to file a TDS form.
     For many taxpayers, the biggest relief may not be lower tax — but fewer forms to remember.

6.Expansion of Definition of Rent:
The definition of rent for deduction of tax at source has been now widened to include Factory buildings & Land appurtenant to buildings. This brings uniformity between different provisions and ensures that similar transactions are treated consistently for TDS purposes.

7.Change in Timing of Deduction – Compulsory Acquisition:
In case of compulsory acquisition of immovable property, TDS is now required at the earlier of (a) Credit of amount or (b) Payment. Earlier, deduction was linked only to payment. This change aligns the provision with general TDS principles.

8. Relief in Cash Withdrawal Provisions:
The earlier provisions imposed lower thresholds and higher TDS rates for non-filers. These have now been removed. The rationale is practical – difficulty in verifying return filing status & reduction in the compliance burden on banks. This change simplifies operations and reduces errors.

9. Lower Deduction Certificate – Wider Applicability:
Earlier, lower TDS certificates were available only for selected sections. Now, the facility is extended to all TDS provisions, ensuring uniform access and reducing hardship for taxpayers with lower tax liability.

10. TCS – Alignment and Timing Rationalization:
In TCS provisions, the timing has been standardized. Tax is now to be collected at the earliest of (a) Debit to buyer’s account, or (b) Receipt of consideration. It ensures early collection and aligns TCS with TDS principles.

Conclusion – A Structural Overhaul:

One of the most visible and practical changes in the New Income Tax Act, 2025 vis a vis 1961 Act is with regard to TDS and TCS provisions. The changes represent a structural overhaul of the withholding tax system. The focus is clearly on:

• Uniformity
• Simplicity
• Digital compatibility
• Reduction of ambiguity.

While certain interpretational issues may still arise, the overall direction is towards a more coherent, system-driven and taxpayer-friendly regime. The new law may not reduce your tax liability, but it will certainly reduce your paperwork. And in taxation, sometimes less paperwork is the biggest relief.  The system is becoming simpler to follow – but sharper in its design.

[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com.  Other articles & response to queries are available at www.theTAXtalk.com]