Guides / Tax Year 2026-27

Salary TDS in Tax Year 2026-27: What Changed

The 1 April 2026 transition changed the legal framework and section references used for salary TDS.

From 1 April 2026, salary TDS uses the new Act

The Income Tax Department says salary paid from April 2026 onwards for Tax Year 2026-27 is governed by section 392(1) of the Income Tax Act, 2025. Salary for FY 2025-26 paid up to March 2026 remains under the old Act.

Reset the payroll computation

Employers should reset salary-TDS calculations from 1 April 2026, taking projected income, eligible deductions and the employee's tax-regime choice into account for Tax Year 2026-27.

Do not mix AY 2026-27 with Tax Year 2026-27

Income earned during FY 2025-26 is still an AY 2026-27 obligation under the Income-tax Act, 1961. Income earned from 1 April 2026 is Tax Year 2026-27 under the new Act. The two can coexist in portal workflows during the transition.

What changed in section references?

The new Act consolidates salary TDS under section 392 and other TDS under section 393. For transactions after 1 April 2026, using old section numbers such as 194C or 194J where the new framework applies can cause validation issues.

Primary sources: Income Tax Department TDS Compliance FAQs and Income Tax Department New Act FAQs.

Related: Tax Regime Calculator.