Are you a taxpayer expecting your final tax liability to be lower than the Tax Deducted at Source (TDS)? Then you may soon have an easier way to seek relief. The Income Tax Department is drafting new rules to allow applications for nil or lower TDS certificates to be filed electronically.
Minister of State for Finance Pankaj Chaudhary, in a written reply in the Lok Sabha on 10 August, said the move is aimed at easing compliance, bringing transparency, and will be particularly beneficial for small taxpayers.
Chaudhary wrote: “Section 395(1) of the Income-Tax Act, 2025 provides for issuance of certificate for deduction of tax at source at Nil or lower rates. Vide Finance Act, 2026, to ease the compliance burden of small taxpayers, an option has been enabled for the payee, to file the application for issuance of certificate for lower or nil deduction of income-tax electronically and the certificate may be issued or rejected electronically subject to fulfilment of conditions as may be prescribed. In this regard, the enabling rule is currently under preparation and shall be notified in due course.”
Who can seek a lower or nil TDS certificate?
This is available when the taxpayer’s estimated taxation liability justifies no TDS or deduction at a lower rate. It can assist taxpayers in avoiding excessive deductions and waiting extended periods for a refund.
The Income Tax Department said: "An assessee can apply to the Assessing Officer to issue a nil or lower TDS certificate. Such certificate is issued if the estimated tax liability of the assessee justifies no deduction of tax or deduction of tax at a lower rate."
Residents and non-residents, firms and companies, among others, can request a certificate.
Which incomes are covered?
The provision can apply to several different income streams, including salary, interest, dividends, contractor payments, insurance commission, brokerage, rent and fees for professional or technical services. Certain payments made to non-residents can also qualify.
What will change?
In the newly proposed online system, applications will be analyzed and assessed utilizing information already available to the Income Tax Department, including previously filed returns, the Annual Information Statement (AIS), Taxpayer Information Summary (TIS) and Form 26AS.
The detailed rules are still awaited, and clarity will emerge only after they are issued. Once notified, the digital route can make lower- or nil-TDS applications simpler, faster and less paperwork-intensive for eligible taxpayers.
The complete reply of the Minister of Finance to the unstarred question can be accessed at: https://sansad.in/ls/questions/questions-and-answers
