Big Relief! Govt Proposes New Electronic Option to Apply for Nil or Lower TDS Certificates; Effective April 2026

Section 395 of the Income Tax Act allows taxpayers to apply for certificates for deduction of tax at source (TDS) and tax collection at source (TCS) at nil or a lower rate.

How Does Provision Work?

A person can apply for issuance of a certificate for deduction of tax at source (TDS) at Nil or lower rates under sub-section (1) of the said act by following the steps:

• The payee is first required to fill in an application before the Assessing Officer (AO).
• Thereafter, the AO verifies the total income of the recipient and checks if the income satisfies the deduction of income tax at any lower rates or no deduction of income tax.
• If satisfied, the AO issues a certificate to the recipient allowing lower or nil deduction of tax (TDS).

Sometimes, this process is a little time-consuming, especially for small taxpayers. To make this process easier, the government has proposed a new electronic option, using which the payee (person receiving income) can apply online for a lower or nil TDS certificate. Now, the application will be able to be filed directly before the prescribed income-tax authority, instead of approaching the assessing officer physically.

If all the prescribed conditions are met, the authority issues the certificate electronically. However, in case conditions are not met, or the application filed is incomplete, it can also be rejected.

This change will benefit small taxpayers, individuals and businesses with low taxable income, and anyone facing excess tax deduction despite having a lower tax liability. This change is aimed at reducing the compliance burden on taxpayers, saving time, and making the process simpler, transparent, and taxpayer-friendly.

This change is scheduled to take effect from April 01, 2026.