The Union Budget 2026-27 has proposed a few important amendments in the TDS and TCS provisions, aimed at easing compliance, reducing unnecessary tax burden, and simplifying procedural requirements. While the number of changes is limited, their impact is significant for deductors, collectors, and taxpayers alike.
Key Amendments in TDS Provisions
- Interest awarded by the Motor Accident Claim Tribunal (MACT) to a natural person is proposed to be fully exempt from Income Tax. Accordingly, no TDS shall be deducted on such interest.
- TDS on supply of manpower services shall be covered under Section 194C as “work”, and tax shall be deducted at the applicable contractor rates. Accordingly, TDS shall be deducted at 1% where payment is made to a resident individual or HUF, and at 2% where payment is made to any other resident person.
- For purchase of immovable property from a non-resident, TDS shall be deducted and deposited using the resident buyer’s PAN instead of requiring a TAN.
- Non-production of books of account and documents leading to TDS payment obligations has been proposed to be decriminalised.
Key Amendments in TCS Provisions
- TCS on sale of overseas tour program packages is proposed to be reduced to 2% without any threshold or amount-based conditions.
- TCS under the Liberalised Remittance Scheme (LRS) for education and medical purposes is proposed to be reduced from 5% to 2%.
Rationalization of TCS Rates
| Sl. No | Nature of receipt | Current Rate | Proposed Rate |
| 1. | Sale of alcoholic liquor for human consumption. | 1% | 2% |
| 2. | Sale of tendu leaves. | 5% | 2% |
| 3. | Sale of scrap. | 1% | 2% |
| 4. | Sale of minerals, being coal or lignite or iron ore. | 1% | 2% |
| 5. | LRS – Education & Medical purposes (Threshold Limit – 10 Lakh) | 5% | 2% |
| 6. | Overseas tour package program | (a) 5% of amount or aggregate of amounts up to ten lakh rupees; (b) 20% of amount or aggregate of amounts exceeding ten lakh rupees. | 2% |
Sir
It is mentioned above that interest awarded by the Motor Accident Claim Tribunal (MACT) to a natural person is proposed to be exempt from Income Tax, where the aggregate amount of such interest received during the financial year does not exceed ₹50,000. Accordingly, no TDS shall be deducted on such interest. However this is the existing provision.
The Budget 2026 proposes to remove the aforesaid monetary ceiling. Consequently, no tax shall be required to be deducted at source on the entire amount of interest awarded by the MACT to a natural person, even where such interest exceeds ₹50,000 during a financial year.
To give effect to this proposal, an amendment has been made to section 393(4), Table, Sl. No. 7, clause (C), sub-clause (c), item (iv), whereby the ceiling of ₹50,000 has been withdrawn.
Thank you for your valuable observation. You are absolutely right.
The earlier reference to the ₹50,000 threshold relates to the existing provision under Section 393(4). As correctly pointed out by you and clarified in the Budget 2026 FAQs, the Finance Bill, 2026 proposes to remove this monetary ceiling in the case of individuals, and accordingly, no TDS shall be required to be deducted on the entire amount of interest awarded by the MACT to a natural person, even if it exceeds ₹50,000 during a financial year.
The article has now been updated.