Everything deductors need to know before the 31st July 2026 Q1 TDS return deadline
If you’ve been filing TDS returns for years on autopilot — same forms, same section codes, same process — this quarter is different. The Q1 return for FY 2026-27 (covering April–June 2026 deductions) is due on 31st July 2026, and it lands right in the middle of the biggest structural overhaul TDS compliance has seen in decades: the transition from the Income Tax Act, 1961 to the Income Tax Act, 2025.
Here’s what every deductor — businesses, employers, and individuals with TAN — needs to know before that date.
The Big Picture: Two Acts, One Transition Quarter
The Income Tax Act, 2025 governs any sum paid or credited on or after 1st April 2026. Anything paid or credited on or before 31st March 2026 continues to be governed by the old 1961 Act — even if the actual tax deposit happens later. This means Q1 FY 2026-27 is genuinely a transition quarter: a company might still need to file arrear corrections for Q4 FY 2025-26 under the old forms and section numbers, while simultaneously filing its fresh Q1 FY 2026-27 return under entirely new form numbers and citations. Mixing the two up is turning out to be the single most common filing error this season.
1. The Forms Have Been Renamed and Renumbered
The familiar form names are being phased out for periods starting April 2026:
- Form 138 replaces Form 24Q (TDS on salary)
- Form 140 replaces Form 26Q (TDS on domestic non-salary payments)
- Form 141 replaces Form 26QB, 26QC, 26QD and 26QE (challan-cum-statement for property/asset transactions)
- Form 143 replaces Form 27EQ (TCS returns)
- Form 144 covers other TCS-related filings alongside the return calendar
2. Section Codes Are Changing Too
For any transaction dated on or after 1st April 2026, deductors must quote the corresponding table item under Section 393 (TDS) or Section 394 (TCS) of the Income Tax Act, 2025 — not the old familiar codes like 194C, 194J, or 194H. Quoting old section numbers for post-April 2026 transactions will trigger system-level validation errors on TRACES, forcing a correction statement even though the late-fee clock keeps running in the meantime.
Practical example: if a company pays a contractor on 5th April 2026, the Q1 return must cite Section 393(1) of the new Act, not the old 194C.
3. The TCS Return Deadline Has Moved — and Now Matches TDS
This is a change that’s catching quite a few TCS collectors off guard. Under the old regime, Form 27EQ (the TCS return) was due on the 15th of the month following quarter-end. Under the new Form 143, the TCS return now follows the same quarterly schedule as TDS returns — meaning Q1 TCS is also due 31st July 2026, not 15th July. Anyone still working off the old 15th-of-the-month reminder is looking at an unplanned non-compliance window.
Note: Form 27EQ still applies for any TCS collections relating to periods up to 31st March 2026, including correction statements for those older periods.
4. Correction Window for TDS/TCS Returns Now Capped at 2 Years
The CBDT has tightened the correction rules. From 1st April 2026, any correction to a TDS/TCS return — wrong PAN, mismatched amounts, incorrect challan details, etc. — must be filed within two years from the end of the relevant Tax Year. After that, TRACES will simply reject the correction request. There was a one-time relaxation allowing corrections for older years (from FY 2018-19 Q4 through FY 2023-24 Q1–Q3) up to 31st March 2026, but that window has now closed. Going forward, timely reconciliation against Form 26AS is essential — you won’t get indefinite chances to fix errors.
5. Form 16 Is Also Being Replaced
For salary income relating to FY 2026-27, employers must issue Form 130 to employees — not the familiar Form 16. Form 130 can only be downloaded from TRACES once Form 138 (the new salary TDS return) has been filed. Income earned up to 31st March 2026 still uses the old Form 16/16A; anything from 1st April 2026 onward moves to the Form 130/131 series.
6. “Assessment Year” Is Gone — It’s “Tax Year” Now
One conceptual shift worth internalizing: the Income Tax Act, 2025 does away with the “Assessment Year” terminology altogether for periods it governs, replacing it with a single “Tax Year.” So for challans, returns, and correspondence relating to April 2026 onward, you should be selecting “Tax Year 2026-27” — not “AY 2026-27.” Selecting the assessment year label on a post-April 2026 challan risks misallocating the payment to the wrong year’s records. The e-filing portal is expected to support both labels during the transition, but the onus is on the deductor to pick correctly.
The Deadline Snapshot for Q1 FY 2026-27
| Compliance item | Due date |
| TDS/TCS deposit for June 2026 deductions | 7th July 2026 |
| Form 138 (Salary TDS return, Q1) | 31st July 2026 |
| Form 140 (Non-salary TDS return, Q1) | 31st July 2026 |
| Form 143 (TCS return, Q1) | 31st July 2026 |
| Any pending Q4 FY 2025-26 corrections (old Act forms) | Ongoing, separately |
What Happens If You Miss It
The penalty structure itself hasn’t changed:
- Late filing fee (Section 427, formerly 234E): ₹200 per day of delay, capped at the total TDS/TCS amount for that statement — and it’s mandatory, with no discretion to waive it.
- Penalty under Section 271H-equivalent provisions: an additional ₹10,000 to ₹1,00,000 for late or incorrect filing, at the discretion of the assessing authority.
- Interest for late deposit: 1.5% per month (or part-month) from the date of deduction to the date of actual deposit.
- Interest for failure to deduct: 1% per month from the date tax was deductible to the date it was actually deducted.
- Disallowance risk: failure to deduct or deposit TDS can disallow 30% of the underlying business expense from taxable income — a direct hit to your P&L, not just a compliance penalty.
- In cases of willful default in depositing deducted tax, prosecution can follow, with imprisonment ranging from three months to seven years.
A Practical Checklist Before 31st July
- Update your software — payroll, accounting, or TDS-filing utility — to recognize Forms 138, 140, 141, 143, and 144.
- Segregate your data: keep April–June 2026 transactions clearly tagged under the new Act’s section codes, separate from any lingering FY 2025-26 corrections under the old codes.
- Re-check deduction rates for commission/brokerage and individual/HUF rent payments against the reduced 2% rate.
- Reconcile challans: confirm every April 2026 onward challan is tagged “Tax Year 2026-27,” not “AY 2026-27.”
- File early — given the transition, expect more validation queries from TRACES than usual, and build in buffer time before 31st July.
The Bottom Line
FY 2026-27 Q1 isn’t just another routine quarterly filing. It’s the first real-world test of India’s new Income-tax Act framework, and the Income Tax Department has signaled it won’t be lenient on returns that still carry old section codes or old form names. Treat 31st July 2026 not just as a due date, but as the point by which your systems, your team, and your data all need to be running on the new rules.
This article is for general informational purposes and reflects the compliance framework as understood in early July 2026. Given that this is a transition year, it’s worth cross-checking specific dates and form requirements against the TRACES portal or a tax professional before filing.
BLOG BY: Mittal & Co.