Six big TDS & TCS changes for Tax Year 2026-27: From TDS on NRI property to TCS on overseas remittance for education, know all that has changed

The Finance Bill, 2026 that was approved by Parliament a few weeks ago introduced several changes relating to Tax Collected at Source (TCS) and Tax Deducted at Source (TDS) provisions. These TDS and TCS changes will take effect from Tax Year 2026-27 starting from April 1, 2026. However, do note that tax year as a concept is different from assessment year (AY).

For AY 2026-27, students, pensioners, salaried and others who are not required to do a tax audit will need to submit their income tax return (ITR) on or before July 31, 2026. Meanwhile, for Tax Year 2026-27, students, pensioners, salaried and non-tax audit individuals will have to file their ITR on or before July 31, 2027.

Six key changes relating to TCS and TDS for Tax Year 2026-27

Taxmann research says that the Finance Bill, 2026 has introduced several changes related to TDS and TCS provisions. Here is a brief overview of the key modifications:

1. Motor Vehicles Act: Interest awarded on compensation under the Motor Vehicles Act, 1988 will be fully exempt from tax. Accordingly, no TDS will apply on such interest.
2. Nil or lower TDS certificate: Small taxpayers can opt for an electronic process to obtain lower or nil TDS certificates instead of manual AO verification.
3. NRI property: From October 1, 2026, resident individuals and HUFs buying immovable property from a non-resident (NRI) will not be required to obtain a TAN for TDS compliance. TDS can be deducted simply by using PAN.
4. No TDS deduction declaration: Investors earning dividend or interest can file a single declaration for non-deduction of TDS with the depository instead of submitting separate forms to each payer.
5. "Supply of manpower" is specifically included in the definition of "work" to remove TDS ambiguity. Accordingly, payments for manpower supply will attract TDS for payment to contractors.
6. Interest (other than interest on securities) paid or credited to co-operative societies engaged in banking, including co-operative land mortgage banks, will not attract TDS.

TCS rates are proposed to be rationalised by introducing a uniform rate of 2% across most transactions as follows:

Nature of Receipt	Existing Rate	Proposed Rate
Sale of alcoholic liquor for human consumption	1%	2%
Sale of tendu leaves	5%	2%
Sale of scrap	1%	2%
Sale of minerals (coal, lignite or iron ore)	1%	2%
Remittance under LRS for education or medical treatment exceeding Rs 10 lakh	5%	2%
Sale of overseas tour programme package	5% up to Rs 10 lakh/20% above Rs 10 lakh	2% (no threshold)

Source: Taxmann research

Moreover, the tax law says that the Central Board of Direct Taxes (CBDT) guidelines issued under Section 400(2) for TDS/TCS matters will be expressly made binding on both income-tax authorities and deductors/collectors.