Banking Industry Impact New Income tax Act
(TDS / TCS / PAN Compliance – FY 2026-27)
- REGULATORY FRAMEWORK OVERVIEW
| Particulars | Details |
| Governing Law | Income-tax Act, 2025 |
| Key Sections | Sec 392 (Salary), Sec 393 (Non-salary), Sec 394 (TCS), Sec 397 (PAN default) |
| Key Change | Consolidation of TDS/TCS into unified structure |
| Compliance Model | System-driven, automation-based |
- KEY BANKING AREAS – TDS APPLICABILITY
- Interest Payments (Core Banking Area)
| Particulars | Details |
| Section | 393 |
| Nature | Interest (FD, RD, Savings – where applicable) |
| TDS Rate | 10% |
| Threshold | ₹50,000 (General) / ₹1,00,000 (Senior Citizen) |
| Deduction Trigger | Earlier of Credit or Payment |
- MACT Interest (Motor Accident Claims Tribunal)
| Particulars | Details |
| Individuals | ❌ No TDS applicable |
| Non-Individuals | TDS only if > ₹50,000 |
| Nature | Court-directed compensation (social welfare) |
System Requirements
- Separate tagging of MACT accounts
- Disable TDS for individuals
- Apply threshold logic only for non-individuals
- Cash Withdrawal TDS
| Particulars | Details |
| Section | 393(3)(5) |
| Rate | 2% |
| Threshold | ₹1 Cr / ₹3 Cr (as applicable) |
| Basis | Aggregate withdrawals during FY |
System Requirements
- Account-wise yearly tracking
- Auto-trigger TDS on threshold breach
- Remove non-filer validation layer
- PAN COMPLIANCE (RULE 159)
- Key Changes
| Particulars | Details |
| Old Rule | Rule 114B |
| New Rule | Rule 159 |
| Declaration Form | Form 97 (replaces Form 60) |
| Compliance Model | Transaction + System-based |
- Banking-Specific Transactions
(i) Cash Deposits
| Particulars | Requirement |
| Threshold | ≥ ₹10,00,000 (aggregate in FY) |
| If PAN not available | Form 97 to be obtained |
(ii) Cash Withdrawals
| Particulars | Requirement |
| Threshold | ≥ ₹10,00,000 (aggregate in FY) |
| Requirement | Reporting under Rule 159 |
- SFT (STATEMENT OF FINANCIAL TRANSACTIONS)
| Particulars | Details |
| Applicability | Banks, NBFCs, Financial Institutions |
| Purpose | Reporting high-value transactions |
| Penalty | ₹200/day |
| Maximum Penalty | ₹1,00,000 |
System Requirements
- PAN-based tracking
- Centralized data extraction
- Timely filing controls
- TDS/TCS RETURN COMPLIANCE
| Particulars | Details |
| Correction Timeline | Reduced to 2 years |
| Earlier Timeline | 6 years |
| Critical Deadline | 31 March 2026 (for past corrections) |
Risks
- Permanent demand
- Loss of deductee credit
- Customer disputes
Immediate Actions
- PAN correction
- Challan reconciliation
- TCS PROVISIONS
| Particulars | Details |
| Section | 394 |
| Standard Rate | 2% (most cases) |
| Applicability in Banks | LRS, overseas remittances |
- Form 121 replacing Form 15G / 15H – Key Update
The new Income-tax Rules (2026) have replaced existing Forms 15G and 15H with a unified Form 121.