/ News · Income-tax Act 2025 · Updated 2026-10-27

Income-tax Act 2025: Section 195 Is Now Section 393(2). What Changed for NRIs and Foreign Payments, new law, same obligations.

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026. For anyone paying non-residents, the familiar Section 195 is now Section 393(2) for payments made or credited on or after 1 April 2026. The obligation to deduct tax, treaty relief and the need for a CA certificate on foreign remittances continue; the section numbers, some forms and the terminology are new.

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Written by CA Durgesh Chavda

Chartered Accountant (ICAI) · Founder, Bharat Quantum Prospera · NRI taxation, US incorporation, transaction due diligence, forensic audit, AEO, cross-border tax · LinkedIn

/ The changes that matter most

For NRIs, foreign companies and Indian payers.

Topic	Income-tax Act, 1961	Income-tax Act, 2025
TDS on payments to non-residents	Section 195	Section 393(2)
TDS on salary	Section 192	Section 392
Other TDS provisions	Sections 193-194T	Consolidated in Section 393
TCS, including on LRS remittances	Section 206C (206C(1G) for LRS)	Section 394
Penalty waiver applications	—	Section 440(2), Form 161 (Notification 134/2026)

/ Which law applies to what

The transition rule.

Payments made or credited up to 31 March 2026 stay under the 1961 Act and Section 195.
Payments made or credited from 1 April 2026 fall under the 2025 Act and Section 393(2).
Returns for FY 2025-26 (assessment year 2026-27), due this year, are still filed under the 1961 Act, which is why CBDT's 2026 due-date circulars still cite Section 139.

/ What to update now

Practical checklist.

Contracts, invoices and board resolutions that quote Section 195 for payments after 1 April 2026.
Payroll and accounting software TDS codes, which now map to Section 393 entries.
Treaty documentation: a Tax Residency Certificate and Form 10F are still needed to apply treaty rates.
Remittance paperwork with your bank, which uses the new form references for CA certificates.
Buyers of NRI property: see the separate change allowing PAN-based TDS from 1 October 2026.

Sources: ClearTax; EXIMPE.

Last updated: 27 October 2026. Form numbers under the new rules vary between sources; check the portal for the current form. Confirm against the official notification on incometax.gov.in before acting.

/ Ready when you are

Paying non-residents from India?

Make sure your TDS and remittance paperwork reflects the 2025 Act. Email durgesh@bharatquantumprospera.com or WhatsApp +91 78018 87130. Fixed-scope quote within 48 hours; work delivered remotely.

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FAQ

Common questions, answered.

What replaced Section 195?

Section 393(2) of the Income-tax Act, 2025, for payments to non-residents made or credited on or after 1 April 2026. Earlier payments stay under Section 195 of the 1961 Act.

When did the Income-tax Act, 2025 come into force?

On 1 April 2026, replacing the Income-tax Act, 1961.

Are FY 2025-26 returns filed under the new Act?

No. Returns for FY 2025-26 (assessment year 2026-27) are filed under the 1961 Act; the new Act governs income from 1 April 2026.

Do treaty benefits still apply?

Yes. Payments to treaty residents can use the lower treaty rate with a Tax Residency Certificate and Form 10F.

Can BQP update our compliance for the new Act?

Yes: contract language, TDS mapping, remittance certificates and treaty documentation for Indian entities paying foreign parties and for NRIs. Email durgesh@bharatquantumprospera.com or WhatsApp +91 78018 87130. Fixed-scope quote within 48 hours; work delivered remotely.