In a significant procedural change under the new Income Tax framework, taxpayers and deductors can now deposit Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) liabilities pertaining to multiple sections and codes through a single challan, with section-wise bifurcation reflected separately in the payment details.
The development is being viewed as a major compliance simplification measure for businesses, professionals, and tax deductors who were previously required to manage separate challans for different TDS/TCS sections in several cases. The updated payment format under the New Income Tax Act, 2025, allows consolidated payment while maintaining granular section-level reporting.
The newly surfaced challan format demonstrates that a single challan can accommodate multiple TDS deduction categories under distinct section codes. The challan separately reflects the nature of payment, relevant section, code, tax amount, surcharge, cess, and aggregate liability for each entry. This ensures that while the payment is consolidated operationally, the reporting continues to preserve section-wise compliance tracking.
The payment details displayed in the format include separate reporting for deductions relating to purchase transactions, payments to partners, and contractor payments under different TDS provisions. Each entry is tagged with its corresponding section code, thereby reducing ambiguity in reconciliation and departmental processing.
Tax professionals believe the move could substantially ease treasury and compliance operations for companies handling large volumes of vendor payments and multiple deduction categories. The ability to deposit liabilities through a unified challan may reduce repetitive banking procedures, challan generation issues, and reconciliation mismatches.
The change also assumes significance ahead of the Tax Year 2026–27 return filing cycle, where stakeholders are expecting TDS utilities, return preparation software, and TRACES-related systems to align with the revised payment mechanism. Industry participants have highlighted that software ecosystem readiness will be crucial to ensure seamless adoption of the consolidated challan facility.
The updated system may particularly benefit medium and large deductors dealing with numerous monthly TDS deductions across salary payments, contractual payments, professional fees, purchase transactions, commissions, and other withholding categories. Consolidated payment functionality could also help reduce operational errors caused by incorrect challan mapping or fragmented deposits.
However, professionals are also cautioning that backend reporting systems, TDS return utilities, OLTAS reconciliation architecture, and departmental validation mechanisms will need synchronized upgrades to avoid short-credit disputes or unmatched challan issues during processing of TDS statements.
The procedural relaxation appears aligned with the broader objective of simplifying tax administration under the new Income Tax regime through digitisation, centralised compliance architecture, and reduction of repetitive procedural burdens on taxpayers.
The development is expected to be closely monitored by chartered accountants, deductors, payroll processors, and compliance software providers as implementation under the new law progresses toward the upcoming filing season.
