Tax compliance upgrade: TDS rules to change from FY 2026. What salaried employees & SMEs must know
Currently, the TDS framework is riddled with challenges — wrong deductions, frequent mismatches, and endless reconciliation during tax filing. These errors often result in frustration for both employees and employers.
- Sep 28, 2025,
- Updated Sep 28, 2025 2:08 PM IST
Filing taxes and declaring the correct income is not just a compliance formality — it is the cornerstone of financial transparency and smooth personal as well as business financial management. With every Budget and policy tweak, the government aims to make this process cleaner, more digital-friendly, and less prone to disputes. Now, starting April 1, 2026, India will witness one of the biggest overhauls of its Tax Deducted at Source (TDS) system.
In a post on X (formerly Twitter), CA Nitin Kaushik explained, “India’s TDS Overhaul Is Coming (April 2026). If you’re salaried, a business owner, or run an SME — this will change how your income tax works.”
Currently, the TDS framework is riddled with challenges — wrong deductions, frequent mismatches, and endless reconciliation during tax filing. These errors often result in frustration for both employees and employers. The upcoming reform aims to end this cycle with a more transparent, digital-first system.
Key features of the new TDS Form
- Extra disclosures for clarity to minimise ambiguity
- Direct linkage with AIS & Form 26AS for seamless data flow
- Simplified, easy-to-read structure
- Digital-friendly filing aligned with modern compliance needs
- Clear instructions for both employers and employees
For salaried employees: A relief
- Salary slips will carry a clearer tax breakdown
- Fewer mismatches while filing returns
- A consolidated financial view for better planning
- Lower risk of IT notices, reducing anxiety during filing season
For businesses & SMEs: Time to prepare
- Mandatory upgrades to payroll and accounting software
- Training for compliance and HR teams
- Accurate, timely filing will be critical
While large companies may adapt swiftly, Kaushik stressed that SMEs must begin preparations early to avoid penalties or confusion.
Long-term impact
Kaushik highlighted that though the changes may initially feel like added work, they will reduce compliance costs, minimize disputes during assessments, and streamline audits in the long run.
Other Updates Expected in FY 2025-26
- Tweaks in exemptions
- Clearer rules on digital assets
- Adjustments to advance tax requirements
How to prepare
- Keep income and investment records clean
- Track deductions throughout the year
- Stay updated with official CBDT circulars
- Businesses: upgrade systems and train staff well in advance
Concluding his post, Kaushik noted: “The new TDS form (from April 2026) is the biggest upgrade in years. Those who prepare early will avoid confusion, penalties, and stress. Tax isn’t just about paying — it’s about staying ahead.”
Filing taxes and declaring the correct income is not just a compliance formality — it is the cornerstone of financial transparency and smooth personal as well as business financial management. With every Budget and policy tweak, the government aims to make this process cleaner, more digital-friendly, and less prone to disputes. Now, starting April 1, 2026, India will witness one of the biggest overhauls of its Tax Deducted at Source (TDS) system.
In a post on X (formerly Twitter), CA Nitin Kaushik explained, “India’s TDS Overhaul Is Coming (April 2026). If you’re salaried, a business owner, or run an SME — this will change how your income tax works.”
Currently, the TDS framework is riddled with challenges — wrong deductions, frequent mismatches, and endless reconciliation during tax filing. These errors often result in frustration for both employees and employers. The upcoming reform aims to end this cycle with a more transparent, digital-first system.
Key features of the new TDS Form
- Extra disclosures for clarity to minimise ambiguity
- Direct linkage with AIS & Form 26AS for seamless data flow
- Simplified, easy-to-read structure
- Digital-friendly filing aligned with modern compliance needs
- Clear instructions for both employers and employees
For salaried employees: A relief
- Salary slips will carry a clearer tax breakdown
- Fewer mismatches while filing returns
- A consolidated financial view for better planning
- Lower risk of IT notices, reducing anxiety during filing season
For businesses & SMEs: Time to prepare
- Mandatory upgrades to payroll and accounting software
- Training for compliance and HR teams
- Accurate, timely filing will be critical
While large companies may adapt swiftly, Kaushik stressed that SMEs must begin preparations early to avoid penalties or confusion.
Long-term impact
Kaushik highlighted that though the changes may initially feel like added work, they will reduce compliance costs, minimize disputes during assessments, and streamline audits in the long run.
Other Updates Expected in FY 2025-26
- Tweaks in exemptions
- Clearer rules on digital assets
- Adjustments to advance tax requirements
How to prepare
- Keep income and investment records clean
- Track deductions throughout the year
- Stay updated with official CBDT circulars
- Businesses: upgrade systems and train staff well in advance
Concluding his post, Kaushik noted: “The new TDS form (from April 2026) is the biggest upgrade in years. Those who prepare early will avoid confusion, penalties, and stress. Tax isn’t just about paying — it’s about staying ahead.”