Businesses and tax deductors must file their Q1 TDS and TCS returns by July 31, 2026 for Tax Year 2026-27. According to reports from Mint, the filing comes with significant procedural changes as the Income Tax Department has enabled new quarterly forms on the e-filing portal, marking the transition from the Income-tax Act, 1961 to the new legislation that came into force on April 1, 2026. The department has clarified that TDS obligations are determined by the date of payment or credit, with transactions on or after April 1, 2026 governed by the Income-tax Act, 2025, while earlier transactions continue under the Income-tax Act, 1961. With the first quarterly filing under the new Income-tax Act now underway, businesses that prepare early and update their systems are likely to find the transition smoother.
The biggest change involves the replacement of existing quarterly return forms under the new framework. As reported by Mint, Form 138 replaces Form 24Q for TDS deducted from salary, Form 140 replaces Form 26Q for TDS on non-salary payments, and Form 143 replaces Form 27EQ for Tax Collected at Source (TCS). The due date for filing these Q1 statements remains July 31, 2026 for the April-June quarter, with the department cautioning that using old section numbers may lead to system validation errors. Tax professionals emphasize that deductors should familiarize themselves well before the July 31, 2026 due date to avoid filing errors and last-minute compliance issues.
Deductors must report transactions using the revised section codes prescribed under the new law, with key changes including salary transactions moving from section 192 to 1602, commission or brokerage from section 194H to 1606, contractor payments from section 194C to 1623, and rent payments from section 194I(a) to 1609 for land/building rent. According to Mint, the Income Tax Department has cautioned that using old section numbers may result in system validation errors during quarterly statement filing. For example, the earlier Section 192 governing TDS on salary payments is now reported under Section 1602, while TDS provisions relating to commission, rent, contractor payments, professional fees, purchase of goods and partnership remuneration have all been assigned new section numbers under the Income-tax Act, 2025. TCS provisions have also been renumbered, with TCS on sale of scrap now covered under Section 1073 instead of Section 206C(1).
Before filing Q1 returns, businesses should ensure their payroll software, accounting systems and TDS utilities have been updated to reflect the new form numbers and section codes, as reported by Mint. Deductors must also reconcile tax deducted or collected with challan payments and appropriately allocate amounts to relevant return forms to avoid mismatches during processing. According to Chartered Accountant Harshil Sheth, if tax has been deposited for multiple section codes using a single challan, additional reconciliation may be required before filing the returns. The challan amount must be correctly allocated among Form 138, Form 140 and Form 143, as the return filing utility needs to identify which portion of the tax payment relates to each return. Tax professionals recommend completing reconciliations in advance and ensuring correct use of revised forms and section codes to avoid unnecessary compliance issues.
According to tax experts, ITR filings are expected to increase by 8-10 percent in AY 2026-27, extending the steady growth seen in recent years as greater taxpayer awareness, wider reporting through the Annual Information Statement (AIS), Tax Deducted at Source (TDS) disclosures and continued formalisation of income bring more individuals into the tax net. ITR filings have shown consistent growth, increasing from 5.83 crore in AY 2022-23 to 6.77 crore in AY 2023-24, 7.29 crore in AY 2024-25, and over 7.3 crore returns filed by September 15, 2025 for AY 2025-26. Experts attribute this growth to enhanced tax relief under the new tax regime, simplified return filing, faster processing of returns and quicker refunds, all of which have encouraged greater voluntary compliance. The trend continues with around 8.80 crore ITRs filed for AY 2025-26 till February 4, 2026, with experts expecting total filings to move closer to 9.5 crore to 10 crore in AY 2026-27, provided filing momentum continues.
