Budget 2026: TDS/TCS Guidelines to Become Mandatory Under Income Tax Law

During the budget 2026, Finance Minister Nirmala Sitharaman proposed guidelines to be binding on income-tax authorities and persons liable to deduct or collect income tax.

Section 400(2) of the Act allows the Board, with the approval of the Central Government, to issue guidelines if there are any problems in applying the TDS/TCS provisions. These guidelines must be presented before each House of Parliament.

In the Income-tax Act, 1961, these provisions clearly state that such guidelines are compulsory and must be followed by both tax authorities and the persons who deduct or collect tax. However, Section 400(2) of the present Act does not clearly say that these guidelines are binding on anyone.

To make this act consistent with the Income Tax Act, 1961, it is proposed that any guidelines issued to remove difficulties in giving effect to provisions of the TDS/TCS chapter will be binding on income tax authorities as well as on persons responsible for deducting or collecting tax. The government proposed to amend section 400(2) of the Act.

This amendment will come into force from April 1, 2026.