Last updated: September 2026
If you walk into a TDS interview next week and say "we deduct 10% under Section 194J," you have just told the interviewer you have not worked on a challan since March.
Section 194J does not exist any more. Neither does 194C, 194I, 194H or 192. The Income-tax Act, 1961 was repealed on 1 April 2026 and replaced by the Income-tax Act, 2025. All TDS provisions were consolidated into three parent sections, and the income tax portal stopped accepting section numbers on challans months ago.
Almost every TDS interview guide you will find online was written before this. This one covers 35+ questions with model answers under the law in force today — plus the dual-Act problem that is currently the single most likely question in any tax interview.
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What changed on 1 April 2026
The 1961 Act was repealed
The Income-tax Act, 2025 came into force on 1 April 2026, replacing a statute that had governed Indian direct taxation for 65 years. Roughly 819 sections were consolidated into about 536, arranged across 23 chapters with sequential numbering and no alphabet suffixes.
Crucially: rates, slabs, thresholds and deduction limits did not change. This was a restructuring of language and numbering, not of tax burden. A candidate who thinks the new Act raised taxes has misunderstood it.
"Tax Year" replaced Previous Year and Assessment Year
The twin concepts of Previous Year and Assessment Year were collapsed into a single Tax Year — the twelve months from 1 April to 31 March in which income is earned. Tax Year 2026-27 means income earned between 1 April 2026 and 31 March 2027.
This terminology change alone catches out candidates who have memorised old definitions.
TDS was consolidated into three sections
The entire range from Section 192 to 194T was collapsed into:
Section 392 — TDS on salary
Section 393 — TDS on non-salary payments to residents
Section 394 — TCS
Individual payment types are now identified by entries in tables under those sections, and by numeric payment codes rather than section numbers. From 1 April 2026 the portal no longer displays 194C or 194J when depositing TDS.
Deductions moved to Schedule XV
Chapter VI-A was restructured. Section 80C deductions now sit under Section 123 read with Schedule XV, with the ₹1.5 lakh limit unchanged. The new tax regime, formerly Section 115BAC, is now Section 202.
Old matters stay under the old Act
Section 536 of the new Act saves everything already in motion — pending assessments, appeals, penalties and rectifications for earlier years continue under the 1961 Act, citing the old section numbers.
The dual-Act question every interviewer is asking
Which Act applies right now — 1961 or 2025?
Both, depending on the year.
Income earned in FY 2025-26 is computed, returned and assessed entirely under the 1961 Act — same sections, same forms. The 2025 Act applies from Tax Year 2026-27 onward, meaning income earned from 1 April 2026.
So in September 2026 an accounts executive is doing two things simultaneously: deducting and depositing current TDS under Section 393 payment codes, while finalising FY 2025-26 filings and assessments under Section 194C and its siblings.
What sets you apart: say the phrase "it depends on the tax year of the income, not the date of the transaction or the notice." That single sentence signals you have actually worked through the transition rather than read a summary of it.
What practical problems has the transition caused?
Software mapping. Every accounting and payroll system had to map legacy section codes to the new payment codes, and quoting a legacy code on a challan after 1 April 2026 causes the payment to fail or mismatch. Teams also had to move to the new return and certificate forms.
Basic TDS interview questions for freshers
What is TDS?
Tax Deducted at Source is a mechanism where the person making a specified payment deducts tax at a prescribed rate before paying, and deposits it with the government against the recipient's PAN. It collects tax at the point income arises rather than at year end, widens the tax base by creating a transaction trail, and gives the government steady revenue through the year. The deductee claims credit for it when filing their return.
What is the difference between TDS and TCS?
TDS is deducted by the payer from a payment being made. TCS is collected by the seller from the buyer, over and above the sale price, on specified goods and transactions. TDS is now governed by Sections 392 and 393; TCS sits under Section 394.
Who is a deductor and who is a deductee?
The deductor is the person responsible for making the payment and deducting tax. The deductee is the recipient whose income the tax is deducted from, and who claims credit for it.
What is TAN and why is it required?
Tax Deduction and Collection Account Number — a ten-character alphanumeric number that every deductor must obtain and quote on all TDS challans, returns and certificates. Failure to obtain or quote TAN attracts a penalty. TAN is distinct from PAN and cannot be substituted by it.
What happens if the deductee does not provide a PAN?
Tax is deducted at a higher rate under the applicable provision — generally the higher of the specified rate or 20%. The deductee also cannot see the credit in their Form 26AS or Annual Information Statement, so the deducted amount is effectively lost to them until corrected.
When is TDS deducted — at payment or at credit?
For most non-salary payments, at the time of credit to the payee's account or actual payment, whichever is earlier. This includes credit to a suspense account. Salary TDS is deducted at the time of actual payment.
What sets you apart: mention the suspense account point. It is a favourite follow-up because it catches people who assume deduction is triggered only by a bank transfer.
What is Form 26AS and how does it relate to TDS?
A consolidated annual tax statement showing tax deducted and collected against a taxpayer's PAN, advance tax and self-assessment tax paid, and specified financial transactions. It is populated from the TDS returns filed by deductors. If a deductor files late or quotes the wrong PAN, the credit does not appear and the deductee cannot claim it.
What is the Annual Information Statement?
A wider statement than 26AS covering interest, dividends, securities transactions, mutual fund activity and other reported financial information. Candidates should know that AIS supplements rather than replaces the TDS credit shown in 26AS.
Rates, thresholds and payment codes
Before you use this section: verify every rate, threshold and code against the Income Tax Department portal and current CBDT notifications. Secondary sources currently disagree on some payment code numbers. In an interview, quoting a code confidently and wrongly is worse than saying you would check it on the portal.
What are the main TDS payments an accounts executive handles?
Legacy sectionNature of paymentNew parent sectionIndicative rate192Salary392Slab rates192APremature PF withdrawal392(7)10%193Interest on securities393(1)10%194AInterest other than securities393(1)10%194CPayment to contractor (Individual/HUF)393(1)1%194CPayment to contractor (other)393(1)2%194HCommission or brokerage393(1)2%194-I(a)Rent — plant and machinery393(1)2%194-I(b)Rent — land and building393(1)10%194JTechnical services393(1)2%194JProfessional services393(1)10%194JDirector's remuneration (non-salary)393(1)10%
Each row also carries a four-digit payment code used on the challan. Confirm the exact code on the portal before quoting it.
Why is the distinction between 194C and 194J the most common interview trap?
Because the rates differ sharply — 1% or 2% for a work contract versus 10% for professional fees — and the classification is often genuinely ambiguous. A design agency, an IT vendor, a marketing consultant: whether the payment is a work contract or a professional service determines whether you deduct 2% or 10%. Under-deduction attracts interest and disallowance; over-deduction annoys the vendor and creates refund work.
What sets you apart: explain how you would resolve it — read the contract, look at whether the deliverable is a specified work product or the application of professional skill, and document the reasoning.
What is the difference between the two rates under 194J?
Technical services, royalty on cinematographic films and call centre payments attract the lower rate; professional fees to a chartered accountant, advocate, doctor, engineer or consultant attract the higher rate. Director's fees other than salary are deducted with no threshold.
What is the threshold limit, and how is it applied?
Each payment type has its own threshold, applied either per transaction or on aggregate payments during the tax year, depending on the provision. For contractor payments, both a single-contract threshold and an annual aggregate threshold apply — cross either and deduction is triggered.
What sets you apart: note that once the aggregate threshold is crossed, deduction applies to the whole amount paid during the year, not only the excess.
What is a lower or nil deduction certificate?
A deductee expecting a lower final liability can apply to the Assessing Officer for a certificate authorising deduction at a lower rate or nil. The deductor must verify the certificate is valid, applies to that payment type, and has not exhausted its ceiling, then quote it in the TDS return.
TDS returns, forms and compliance
What are the TDS return forms?
Quarterly statements, historically 24Q for salary, 26Q for other resident payments, 27Q for payments to non-residents and 27EQ for TCS. Under the new Act the forms have been renumbered — the new series includes Forms 130, 131, 138, 140 and 141. Confirm which form applies to your quarter before answering, since the changeover date matters.
What are the due dates for depositing TDS?
By the 7th of the following month for most deductions, with a special rule for tax deducted in March, which is payable by 30 April. Government deductors paying without a challan follow a same-day rule.
What are the consequences of late deduction and late payment?
Interest applies at 1% per month or part month for failure to deduct, from the date tax was deductible to the date it is deducted, and at 1.5% per month or part month for failure to deposit after deduction, from the date of deduction to the date of payment.
What sets you apart: explain why the second rate is higher — money already deducted and not deposited is the government's money being held. Interviewers like candidates who understand the logic rather than the number.
What is the late fee for delayed filing of a TDS return?
A fee of ₹200 per day of delay, capped at the amount of TDS in that statement. Separate penalties apply for failure to file or for filing incorrect information.
What is Form 16 and Form 16A?
Form 16 is the certificate issued to an employee for salary TDS, including a detailed annexure of income and deductions. Form 16A is the certificate for non-salary TDS. Both are generated from the TRACES portal, not prepared manually, and are issued after the relevant quarterly return is processed.
What is a TDS correction statement?
A revised return filed to fix errors in an original statement — a wrong PAN, an incorrect challan reference, a wrong amount or section code. Corrections are filed against the original token number, and until they are processed the deductee's credit remains wrong.
What happens if TDS is not deducted at all?
Beyond interest and penalty, a portion of the corresponding expenditure is disallowed when computing business income, which increases taxable profit. The deductor may also be treated as an assessee in default, though relief is available where the deductee has included the income in their return and paid tax on it, supported by an accountant's certificate.
Practical TDS interview questions
Expect these for accounts executive roles and above. They are the questions candidates fail.
A vendor invoice arrives on 28 March. You book it in March but pay in April. When is TDS deducted and deposited?
Deduction is triggered on credit or payment, whichever is earlier — so on booking in March. Because the deduction falls in March, the deposit due date is 30 April rather than 7 April. Reporting goes in the Q4 statement.
You deducted TDS under the wrong payment code. How do you fix it?
File a correction statement against the original return, changing the code. If the challan itself carries the wrong code, an online challan correction may be needed through the portal or the assessing officer, depending on the field and how much time has passed. Correct it before the deductee's credit is affected, and before the annual reconciliation.
A contractor gives you a nil deduction certificate mid-year. What do you do about deductions already made?
Deductions made before the certificate's validity period stand — the certificate is not retrospective unless it says so. From the effective date, deduct at the certificate rate, quote the certificate number in the return, and monitor the ceiling amount so you resume normal deduction once it is exhausted. Tax already deducted is claimed by the contractor as a refund in their return.
Your deductee says the TDS credit is not showing in their 26AS. Walk me through your check.
Confirm the deduction is recorded in your books, then confirm the challan was deposited and correctly referenced. Check the quarterly return was filed and processed, and check the PAN quoted in the return against the deductee's actual PAN — a single wrong character is the most common cause. If the PAN is wrong, file a correction statement. Give the deductee the challan and token details so they can track it.
You realise in September that TDS was short-deducted on a payment made in June. What now?
Deduct and deposit the shortfall immediately with interest for the intervening period, then file a correction statement for the relevant quarter so the deductee's credit reflects the corrected amount. Document the cause. Voluntary correction before departmental detection is treated far more leniently than a shortfall found in a survey.
How do you handle TDS on a payment to a non-resident?
The rate depends on the nature of income and the applicable Double Taxation Avoidance Agreement, which requires a Tax Residency Certificate and Form 10F from the payee. A certificate in Form 15CB from a chartered accountant and a declaration in Form 15CA are generally required before remittance. This is where a candidate should say clearly that they would involve the tax team rather than decide alone.
TDS interview questions for experienced candidates
What is TDS on purchase of goods, and how does it interact with TCS on sale of goods?
Both regimes can apply to the same transaction, and the rule is that the buyer's deduction obligation takes precedence — where the buyer is required to deduct, the seller is relieved of the collection obligation. Turnover thresholds determine which party is covered. Check the current provision numbers under the 2025 Act before citing them.
How is TDS applied to a payment made partly in kind?
Where a benefit or perquisite arising from business or profession is provided in kind, the deductor must ensure tax has been paid on the value before releasing it, since there is no cash payment from which to deduct. In practice this means collecting the tax from the recipient or grossing up.
What is grossing up, and when is it required?
Where the payer bears the tax on behalf of the payee, the payment is grossed up so that the net amount received by the payee is the agreed sum and the tax is computed on the grossed-up figure. It commonly arises in non-resident payments where the contract is expressed net of Indian taxes.
How do you build a TDS control process for a company?
Vendor master with PAN validation at onboarding, a mapped payment code against every expense ledger, a monthly reconciliation between the TDS ledger and the challans deposited, a quarterly reconciliation between the return filed and the books, and a calendar for deposit and filing dates. The single highest-value control is PAN validation at onboarding, because a wrong PAN is cheap to fix before a return is filed and expensive afterwards.
What did the move to Sections 392, 393 and 394 change in day-to-day work?
The rate you deduct and the threshold you apply are largely unchanged. What changed is what you quote — the challan, the quarterly statement and the certificate now carry payment codes rather than section numbers, and ERP and payroll systems needed remapping. The most common error in the first quarter after changeover was submitting a legacy section code and having the payment mismatch.
How to prepare for a TDS interview
Know which Act governs which year. This is the question of 2026. If you can explain the split cleanly — current deductions under the new Act, FY 2025-26 filings and old assessments under the 1961 Act — you are ahead of most candidates.
Learn the rates by payment type, not by section number. Section numbers changed; the underlying logic did not. Someone who knows "contractor is 1% or 2% depending on whether the payee is an individual" adapts. Someone who memorised "194C" does not.
Be honest about codes you are unsure of. Saying "the rate is 10%, and I would confirm the payment code on the portal before depositing" is a strong answer. Guessing a four-digit code is not.
Prepare one real reconciliation story. A 26AS mismatch you traced, a correction statement you filed, a short deduction you caught. Practical TDS roles are filled on evidence of practical TDS work.
Practise out loud. Knowing TDS and explaining TDS to an interviewer are different skills.
Practise with a role-specific AI mock interview on BeSkill and get instant feedback — browse the Taxation interview library to find the role you are applying for, or see the finance and accounting interviews if you are targeting a broader accounts role.
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