India's TDS process changed

India just changed a routine tax step that most companies used to treat like data entry. From April 1, 2026, a tax deducted at source payment on India’s e-filing portal has to be built as a fresh challan with a unique Challan Reference Number before money is paid. (incometax.gov.in) The new portal flow is stricter than the old one. The Income Tax Department says users making payments for Tax Year 2026–27 or later must use the new challans under the Income Tax Act, 2025, while payments for earlier periods stay under the Income Tax Act, 1961. (incometax.gov.in) That split sounds simple until payroll dates land on both sides of April 1. India’s official tax guidance says tax deducted at source follows the earlier of payment or book entry, so a fee credited in March 2026 but paid in April 2026 still stays under the 1961 law. (incometax.gov.in) The same rule works in reverse for advance payments. If money was paid in March 2026 and booked in April 2026, the March payment date controls, and the old law still applies. (incometax.gov.in) That is why this is not just a new screen on a website. A company can run April 2026 payroll with some deductions tied to events before April 1 and other deductions tied to events after April 1, which means one payroll cycle can carry two legal regimes. (incometax.gov.in) The portal is also checking the law section more aggressively. The department says deductors and collectors entering transactions on or after April 1, 2026 must quote the new section table items under section 393 or section 394, and using old section numbers like 194C, 194J, or 194H can trigger system validation errors. (incometax.gov.in) That matters because section codes are the labels that tell the tax system what kind of payment is being taxed. If a software system still sends an old code after April 1, the payment can fail before it even reaches the bank step. (incometax.gov.in) India’s tax portal has already flagged the legal switch in plain language. Its homepage says the Income Tax Act, 1961 stands repealed effective April 1, 2026 under section 536 of the Income Tax Act, 2025, and that new challan forms are live for Tax Year 2026–27. (incometax.gov.in) The transition is messy because the government is not erasing old obligations. The official compliance note says liabilities that arose before April 1, 2026 remain governed by the 1961 law even though the new law has started. (incometax.gov.in) For finance teams, the practical checklist is narrow but unforgiving: pick the right tax year, pick the right new-law section, and match the deduction to the actual trigger date of payment or credit. If any one of those three fields is wrong, the challan can be mapped to the wrong law or rejected by the portal. (incometax.gov.in)