Challans: Ensuring Accurate GST Payment Processing

The implementation of GST Registration and issuance of a Tax Invoice are crucial for businesses, but recent changes under the New Income Tax Act 2025, effective from 1 April 2026, have introduced significant modifications to the TDS provisions, impacting the way tax deductions are made and reported. The new system for generating and paying TDS challans under the New Income Tax Act 2025 has been designed to streamline the process, but it requires a thorough understanding of the applicable sections and the correct procedure for creating a TDS challan.

Key Facts

• The New Income Tax Act 2025 is effective from 1 April 2026, replacing the old Income Tax Act of 1961.
• A new system for generating and paying TDS challans has been introduced under the New Income Tax Act 2025.
• The TDS payment for March 2026 or earlier must be made under the old Income Tax Act 1961, while TDS for April 2026 or later must be made under the new Income Tax Act 2025.
• The new portal covers TDS under sections 392, 393(1), 393(2), 393(3), and 394(1) of the New Income Tax Act 2025.
• Interest is calculated under Section 398 for delayed TDS payments, and a late fee is charged under Section 427 at Rs. 200 per day for late TDS returns.

Statutory Context & Tax Analysis

The New Income Tax Act 2025 has introduced significant changes to the TDS provisions, aiming to simplify the process and reduce compliance burdens. The Act has replaced the old Income Tax Act of 1961, and as such, all TDS deductions and payments made on or after 1 April 2026 must be made under the new Act. The TDS provisions under the new Act are governed by various sections, including sections 392, 393(1), 393(2), 393(3), and 394(1), which cover different types of income and deductions. For instance, Section 393(1) deals with TDS on rent payments, while Section 394(1) deals with TDS on salaries. Understanding the applicable sections and the correct procedure for creating a TDS challan is crucial to avoid errors and penalties. The new portal for generating and paying TDS challans has been designed to facilitate this process, but taxpayers must ensure that they select the correct act, tax year, and TDS section to avoid any discrepancies.

Client Impact & Compliance Procedure

The changes to the TDS provisions under the New Income Tax Act 2025 will impact the tax liability of businesses and individuals, and it is essential to understand the compliance procedure to avoid any penalties or interest. To create a TDS challan under the new Act, taxpayers must first log in to the portal using their TAN and navigate to the e-File → e-pay Tax option. They must then select the correct act, either the Income Tax Act 2025 or the Income Tax Act 1961, depending on the date of the TDS payment. For TDS payments made on or after 1 April 2026, the correct act is the Income Tax Act 2025. Taxpayers must then select the correct tax year, TDS section, and deductee status, and enter the amount of TDS deducted. They must also calculate and pay interest under Section 398 and late fees under Section 427, if applicable. The challan will be generated successfully once the payment is completed. To ensure compliance, taxpayers must maintain accurate records of TDS deductions and payments, and file the correct returns and forms, such as Form 26Q, within the prescribed deadlines. They must also ensure that they have the necessary documentation, such as the TDS certificate, to support their claims. By following the correct procedure and maintaining accurate records, taxpayers can avoid penalties and interest, and ensure compliance with the TDS provisions under the New Income Tax Act 2025.

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