Complete Step-by-Step Guide for Businesses, Accountants & Tax Professionals

 

TDS/TCS Challan Payment Process for Tax Year 2026-27 Under Income Tax Act 2025

Complete Step-by-Step Guide for Businesses, Accountants & Tax Professionals

Introduction

The Government has officially implemented the new Income Tax Act 2025 from 1 April 2026. With this major change, the terminology and online tax payment process for TDS and TCS have also been updated.

Earlier, taxpayers used terms like:

• Financial Year (FY)

• Assessment Year (AY)

But now, under the new system, only the term:

“Tax Year”

will be used.

So, the period from 1 April 2026 to 31 March 2027 will now be called:

Tax Year 2026-27

If you deduct TDS or collect TCS after 1 April 2026, then the challan payment must be made under the new Income Tax Act 2025.

In this detailed guide, you will learn:

• How to pay TDS/TCS challan online

• New portal changes under Income Tax Act 2025

• Step-by-step e-Pay Tax process

• How to select correct section codes

• Major Head and Minor Head explanation

• How to avoid common challan filing mistakes

This article is written in simple English so that business owners, accountants, tax consultants, students, and beginners can easily understand the complete process.

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What Is Income Tax Act 2025?

The Government introduced the new Income Tax Act 2025 to simplify taxation procedures and modernize the tax system.

The new Act became effective from:

1 April 2026

Key changes include:

• Replacement of FY and AY with “Tax Year”

• Updated TDS/TCS challan payment interface

• New section code structure

• Improved e-Pay Tax system

• Simplified online compliance process

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What Is Tax Year 2026-27?

Under the new tax system:

• 1 April 2026 to 31 March 2027
  is called:

Tax Year 2026-27

Any TDS deducted or TCS collected during this period must be deposited under Income Tax Act 2025.

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Two Ways to Pay TDS/TCS Challan

Taxpayers can pay TDS/TCS challan through the Income Tax portal in two ways.

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1. Login-Based Payment Method

In this method:

• You log into the Income Tax portal

• Use the e-Pay Tax option

• Generate and pay the challan

This method is preferred for:

• Chartered Accountants

• Tax consultants

• Businesses

• Regular deductors

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2. Payment Without Login

The portal also allows challan payment without login.

To use this option:

• Open the Income Tax portal

• Scroll to “Quick Links”

• Click on:

e-Pay Tax

The remaining process is mostly the same.

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Step-by-Step TDS Challan Payment Process

Now let us understand the complete procedure in detail.

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Step 1: Login to Income Tax Portal

Visit the official Income Tax portal and log in using:

• User ID

• Password

• OTP verification

After successful login, proceed to the next step.

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Step 2: Open e-Pay Tax Option

After login:

Go to:

e-File → e-Pay Tax

This section is used for all online tax payments including:

• TDS

• TCS

• Advance Tax

• Self-Assessment Tax

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Step 3: Select Applicable Income Tax Act

You will now see two options:

• Income Tax Act 1961

• Income Tax Act 2025

Which One Should You Choose?

Select Income Tax Act 1961 if:

The TDS was deducted before 31 March 2026.

Select Income Tax Act 2025 if:

The TDS was deducted on or after 1 April 2026.

For Tax Year 2026-27, always select:

Income Tax Act 2025

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Step 4: Click on “New Payment”

Now click:

New Payment

to create a fresh TDS/TCS challan.

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Step 5: Select Tax Year

Choose:

Tax Year 2026-27

This applies to payments related to:

• 1 April 2026
  to

• 31 March 2027

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Step 6: Select TDS/TCS Tab

You will now see multiple tax payment categories.

Select:

TDS/TCS

Then click:

Proceed

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Step 7: Select Minor Head

Now choose:

Minor Head 200

This is generally used for regular TDS/TCS payments.

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Step 8: Select Major Head

You will now see two Major Head options.

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Company Deductees

Choose this if the deductee is a company.

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Other Than Company Deductees

Choose this if the deductee is:

• Individual

• HUF

• Partnership Firm

• Trust

• LLP

Selecting the correct Major Head is extremely important.

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Step 9: Select Residential Status

Now choose the deductee’s residential status.

Options include:

• Resident

• Non-Resident

If the deductee is an Indian resident, select:

Resident Deductee

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Step 10: Select Correct TDS Section Code

This is one of the most important steps.

The portal now requires you to choose the:

• Nature of Payment

• Section Code

from the Description Box.

You must select the correct code carefully.

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Important TDS Section Codes

Commission or Brokerage

• Section Code: 106

---

Machinery Rent

• Section Code: 108

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Land or Building Rent

• Section Code: 109

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Interest Payment

For interest payments by non-bank entities:

• Section Code: 102

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Contractor Payments

Individual/HUF Contractor

• Section Code: 1023

Other Contractors

• Section Code: 1024

---

Technical Services / Royalty

• Section Code: 1026

---

Professional Fees

Applicable for payments to:

• CA

• Doctor

• Lawyer

• Engineer

• Consultant

Section Code:

• 1027

---

Director Remuneration / Sitting Fees

• Section Code: 1028

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Step 11: Enter TDS Amount

Now enter the amount of TDS deducted.

Examples:

• ₹5,000

• ₹10,000

• ₹50,000

etc.

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Step 12: Click on Add Button

After entering details, click:

Add

This will add the entry to your challan.

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Can Multiple Sections Be Added in One Challan?

Yes.

Under the new system, you can add multiple section codes in a single challan.

For example:

• Commission payment

• Interest payment

• Professional fees

can all be included together.

This feature saves time and simplifies compliance.

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Step 13: Enter Interest, Late Fee or Penalty (If Applicable)

If applicable, enter:

• Interest amount

• Late filing fee

• Penalty amount

Otherwise, leave those fields blank.

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Step 14: Select Payment Mode

Choose your preferred payment method:

• Net Banking

• Debit Card

• RTGS/NEFT

Most taxpayers prefer Net Banking.

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Step 15: Select Bank and Continue

Now select your bank and click:

Continue

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Step 16: Verify Challan Details

Before making payment, carefully check:

• Tax Year

• Section Code

• Amount

• Major Head

• Minor Head

• Residential Status

If everything is correct, proceed further.

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Step 17: Click “Pay Now”

Now click:

Pay Now

Accept the Terms & Conditions and click:

Submit to Bank

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Step 18: Complete Payment Through Net Banking

You will now be redirected to your bank’s payment gateway.

Complete:

• Login

• OTP verification

• Payment authorization

Once payment is successful, the portal will redirect you back to the Income Tax website.

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How to Download TDS Challan Receipt?

After successful payment:

• Challan counterfoil will be generated

• CIN number will be available

• BSR code will appear

Download and save the challan PDF for future use.

This document is important while filing:

• TDS Return

• Tax Audit

• Compliance reports

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Common Mistakes to Avoid

Selecting Wrong Section Code

Always verify the correct section before payment.

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Choosing Incorrect Tax Year

For payments after 1 April 2026, select:

Tax Year 2026-27

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Incorrect Major Head

Company and non-company deductees have different heads.

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Forgetting to Download Challan

Always save the challan receipt immediately.

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Final Words

The implementation of Income Tax Act 2025 has changed the TDS/TCS challan payment system significantly. However, once you understand the step-by-step process, online payment becomes simple and convenient.

The most important things are:

• Selecting the correct Tax Year

• Choosing the proper Section Code

• Verifying challan details carefully

• Saving payment receipts

Whether you are a business owner, accountant, tax consultant, or finance student, understanding the new TDS/TCS payment system is essential for smooth tax compliance in Tax Year 2026-27.