The good news: your tax liability has not changed. The bad news: almost everything else has.
From 1 April 2026, the Income Tax Act, 1961 stands repealed. Every salary credited from April 2026 onwards is now governed by the Income Tax Act, 2025. For employers, this means new section numbers, new form numbers, new payment codes, and new declarations — effective immediately.
What Changed and What Did Not
Tax rates, slabs, and thresholds are unchanged. If an employee's tax liability was zero under the New Regime last month, it remains zero this month. What has changed is everything around the calculation — how TDS is reported, which forms are filed, and which sections are cited.
This distinction matters. Payroll software that still references Section 192, Form 24Q, or Form 16 is now filing under a repealed law for new transactions. Mismatched references will create Annual Information Statement errors and correction work at year-end.
The New Section Structure
Section 192 — the provision that governed salary TDS for over six decades — is replaced by Section 392(1) of the Income Tax Act, 2025. The entire 194-series (194C, 194J, 194H, and all others) is simultaneously abolished and consolidated into three sections:
Section 392 covers TDS on salary and all payments to residents. Section 393 covers nil-TDS declarations and lower deduction certificates. Section 394 covers residual and special category deductions.
Payments are no longer identified by individual section numbers. A new numeric payment code system (codes 1001–1067) replaces section references across challans, e-payments, and return filings.
New Forms — Effective Immediately
Every TDS and TCS form has been renumbered. For Tax Year 2026-27:
Salary TDS Return: Form 138 (was Form 24Q). Salary TDS Certificate: Form 130 (was Form 16). Non-Salary TDS Return: Form 140 (was Form 26Q). Non-Salary TDS Certificate: Form 131 (was Form 16A). Non-Resident TDS Return: Form 144 (was Form 27Q). TCS Return: Form 143 (was Form 27EQ). Nil-TDS Declaration: Form 121 (replaces both Form 15G and 15H). Lower/Nil TDS Certificate Application: Form 128 (was Form 13).
One important exception: corrections and revised returns for FY 2025-26 (AY 2026-27) and earlier periods must still use the old forms — Form 24Q, Form 16, Form 26Q. The old forms only apply to old periods.
New Regime Is Still the Default
Nothing has changed here. If an employee does not explicitly declare their regime choice to the employer, TDS is deducted under the New Tax Regime. Employees who want the Old Regime must communicate this in writing at the beginning of Tax Year 2026-27.
One thing that has changed: investment declarations can no longer reference old section numbers. Deductions previously cited under Section 80C are now referenced as Schedule XV read with Section 123 of the Income Tax Act, 2025. Employers using standard declaration forms must update their templates accordingly.
15G and 15H Are Gone — Use Form 121
The long-standing age-based distinction for nil-TDS declarations is abolished. Senior citizens used Form 15H. Everyone else used Form 15G. From April 2026, both are replaced by a single unified Form 121 under Section 393(6). It is age-agnostic, digitally processed, and requires a 26-character Unique Identification Number (UIN) to be allotted by the payer for tracking.
If your organisation is still collecting Forms 15G or 15H for Tax Year 2026-27, stop. Those forms are no longer valid for the current year.
Tax Year Replaces Assessment Year — What It Means for Form 130
The confusing Assessment Year and Previous Year framework is gone. Tax Year 2026-27 covers 1 April 2026 to 31 March 2027 — income earned and filed in the same period.
Practically, Form 130 (the new Form 16) will show Tax Year 2026-27 on its face — not Assessment Year 2027-28. Employees who receive their TDS certificate in mid-2027 and see an unfamiliar format should know that Form 130 is the legal successor to Form 16.
CBDT Circulars Are Now Binding
Under Section 400(2) of the Income Tax Act, 2025, CBDT guidelines and circulars on TDS are now legally binding on both tax authorities and deductors. The earlier position — that CBDT circulars carry only advisory weight — no longer holds. Any circular on perquisites, allowances, virtual digital assets, or regime declarations now carries the force of law.
Employer Checklist — Tax Year 2026-27
- Collect regime declarations from all employees. Silence means New Regime.
- Update payroll software: new payment codes (1001–1067), new form numbers.
- Replace Forms 15G/15H with Form 121 for nil-TDS declarations.
- File Q1 TDS return using Form 138 — not Form 24Q.
- Issue Form 130 as TDS certificate — not Form 16.
- Update investment declaration templates to reference new section numbers.
- For FY 2025-26 corrections, continue using old forms.
The Bottom Line
The tax you pay has not changed. The paperwork you file has changed entirely. Employers who delay updating their systems risk AIS mismatches, correction notices, and disallowance of salary expenses under the new Act's compliance provisions. The transition window is narrow — the first quarterly return under the new Act falls due in July 2026.
Reference: Income Tax Act, 2025 — Sections 392, 393, 394, 400(2) | Income Tax Rules, 2026 | CBDT TDS Compliance FAQ (incometax.gov.in) | Salary paid from April 2026 onwards: Section 392(1), ITA 2025.
This update is for informational purposes. For case-specific advice, consult a qualified tax professional.