TDS, TCS new rules: Forms 138 and 140 replace old Forms 24Q and 26Q — here's all you need to know

From 1 April 2026, Indian taxpayers have been introduced to major changes in the tax compliance framework, as the government rolled out the Income-tax Act, 2025, along with the Income-tax Rules, 2026.

The changes aim to streamline tax filings, expand digital reporting, and make tax administration more transparent for businesses and individuals alike.

A major part of this transition is the overhaul of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) systems, aimed at saving time, reducing manual errors, avoiding mismatches, and ensuring faster processing, the Income Tax Department said in an X post on Friday.

As part of the new rules, the government has replaced the old Forms 24Q and 26Q with Forms 138 and 140. These forms continue to be used for quarterly reporting of tax deducted at source (TDS) statements.

New Forms ‘simple' and ’reliable'

According to the I-T Department, the new Forms 138 and 140 are “simple, tech-enabled and reliable,” helping taxpayers file their TDS returns easily and on time.

The new Forms also offer advanced features such as auto-prefill of details, real-time validations, drop-down menus, date-pickers, and checkbox verification, which guide users and reduce mistakes while filing, the tax department said.

Who must file Form 138 and what is it used for?

Form 138 is specifically used by employers to report the TDS deducted from salaries paid to employees under section 392. It is also used by specified banks to report TDS on income paid to specified senior citizens.

It's important to note that two kinds of entities are required to file Form No. 138. These are:

• Any employer, whether a company, firm, government body, or individual, that deducts tax from employees’ salaries
• Any specified bank that deducts tax on pension and interest income paid to a specified senior citizen.

What is the purpose of Form 140?

Form 140 is a quarterly statement filed by deductors who are responsible for the deduction of tax at source on non-salary payments such as commission, brokerage, professional fees, or rent, made to residents.

The following entities must file Form 140 if they meet the specified criteria:

• Every entity — whether a company, firm, partnership, government, or individual — responsible for making non-salary payments to a resident on which tax is deductible.

Changes in TCS rules

On the tax collected at source (TCS) front, the government has reduced rates in a bid to ease upfront tax burden on people.

• Foreign travel packages: Such deals will now be taxed at a flat 2% rate, replacing the earlier applicable rate of 5% (up to ₹10 lakh) and 20% for amounts above the ₹10 lakh threshold.
• Education and medical remittances abroad: TCS has been reduced from 5% to 2% on applicable amounts.

These changes are expected to provide massive relief to travellers and households with international financial commitments while maintaining reporting visibility for tax authorities.