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TDS rates, thresholds, payment codes and form names change with every Finance Act, and buyers rarely ask how a vendor absorbs those changes.
Ask eight questions on ownership, speed, visibility, approval, effective dates, rollback, history and testing, and request evidence of a past change handled end to end.
A question table with good answer, weak answer and evidence to request, filed with the vendor's responses.
A contract-ready view of how each vendor will handle the next TDS change and who is accountable.
TDS rules move with every Finance Act, and sometimes in between. The April 2026 move to Income-tax Act, 2025 payment codes under Section 393 showed how much can change at once. Before you sign, ask who updates rate tables, codes and forms, how quickly, and whether your team can see and approve each change before it affects a reconciliation run.
How to reconcile across a change is covered in TDS rate by date and cross-era TDS reconciliation. This page is about the vendor.
What did a TDS tool have to absorb recently?
A short list, from changes the site’s own guides track:
- Rate change: Section 194H commission fell from 5 percent to 2 percent from 1 October 2024.
- Rate change: Section 194O e-commerce TDS fell to 0.1 percent from 1 October 2024.
- Threshold change: Section 194-I rent moved to ₹50,000 per month or part of a month from 1 April 2025.
- Provision removed: Section 206AB (higher rate for non-filers) was omitted from 1 April 2025.
- New classification: from 1 April 2026, payment codes 1001 to 1092 replace 194-series section labels, for example code 1006 for commission and code 1027 for professional fees.
- New forms: Form 168 replaces Form 26AS for tax year 2026-27 onward, and Form 131 replaces Form 16A.
A tool that needed a custom project for any of these will need one for the next change too.
Is a change a setting or a release?
This is the central question. There are two models:
- Dated setting. The vendor supplies the new rate, code or form mapping as a dated entry. Your finance team sees it, approves it and it applies from the effective date.
- Release. The change ships inside a software update. You see the result, but not always the rule.
The first model gives you control and an audit trail. The second can work if the vendor publishes a change log naming each TDS rule touched and its effective date.
What eight questions should you ask?
| Question | Good answer | Weak answer | Evidence to request |
|---|---|---|---|
| 1 Who updates rate tables, codes and forms? | Vendor supplies, customer approves | ”Your team edits it” or “we do it, no notice” | Named owner in the contract |
| 2 How fast after notification? | A stated target, with history | ”As soon as possible” | Dates for the 1 April 2026 change |
| 3 Can we see the change before it applies? | Yes, as a pending dated entry | Only after the run | Screen of a pending change |
| 4 Who approves? | Named role at your company, logged | Nobody | Approval log extract |
| 5 How are effective dates applied? | By transaction date | By run date | Test with invoices either side of a change |
| 6 How is a wrong setting rolled back? | Reversal logged, affected runs flagged, re-run kept separately | Overwritten | Rollback walk-through |
| 7 Is the history kept? | Every version of every rule, with dates | Only current rule | Rule history for one section |
| 8 How is a change tested? | On a sample before release, with notes | Not tested | Release notes for a past TDS change |
What does a mid-year change look like in practice?
Illustrative case: commission is paid to an agent of ₹1,00,000 on 25 September 2024 and another ₹1,00,000 on 5 October 2024.
- The first payment carries TDS at 5 percent: ₹5,000.
- The second carries TDS at 2 percent: ₹2,000.
A tool that applies rates by run date would check both at 2 percent and wrongly flag ₹3,000 on the first payment as excess deduction. A tool with dated rules checks each against the rate in force on its transaction date, and the audit trail shows who approved the 2 percent rule and when. Run this kind of pair through the tool in the demo; the cross-era test script has six more cases.
How do you test a vendor’s answers in the demo?
Answers to the eight questions are claims until you see them work. Three short tests turn them into evidence:
- Effective-date test. Give the vendor the two commission payments above, one either side of 1 October 2024, and check that each is judged at its own rate.
- Pending-change test. Ask the vendor to load a hypothetical rate change dated in the future, for example a professional-fees rate moving from 10 percent to a new rate next quarter, and show it sitting as pending until your approver accepts it. Delete it afterwards.
- Rollback test. Ask the vendor to approve a wrong rate on a test period, run it, then roll it back. The log should show the original run, the reversal and the corrected run as three separate records.
If the vendor cannot run these on a test copy during evaluation, ask how your team would run them after go-live. A tool that cannot show a rule’s history today will not be able to show it to your auditor next year.
What should go into the contract?
Write down who owns TDS rule updates, the notice you will get, the approval step and the rollback process. Avoid promises you cannot check; ask for the change log instead. The payment code reference is a useful list to test the vendor’s current mapping against.
How Terra Insight fits
TransactIG’s TDS reconciliation reconciles Form 26AS, Form 168 and AIS against your TDS receivable ledger, with configurable rules, an exception queue and audit-ready exports. Ask us these eight questions in discovery; pricing is discussed there too.