The Income Tax Department is framing rules to implement a Budget 2026-27 provision for electronic lower or nil TDS certificates, the government informed Parliament on Monday.
I-T Department prepares rules for online lower or nil TDS certificates
In a written reply to the Lok Sabha, Union MoS for Finance Pankaj Choudhary said Section 395(1) of the Income-tax Act, 2025 provides for issuance of certificates for deduction of tax at source at nil or lower rates.
The minister said the Finance Act, 2026 has enabled taxpayers to electronically file applications for issuance of such certificates, with the certificates to be issued or applications rejected subject to conditions that will be prescribed.
“…the enabling rule is currently under preparation and shall be notified in due course,” he said.
Who can benefit from a lower or nil TDS certificate?
A taxpayer generally seeks a lower or nil TDS certificate when the expected tax liability is lower than the amount that would otherwise be deducted at source.
The facility is aimed at preventing excess tax deductions and reducing the need for taxpayers to claim refunds later.
Under the proposed system, taxpayers will be able to apply electronically to the tax authority for a lower or nil TDS certificate.
Online TDS certificate process to use existing tax data
The application is expected to be processed using information already available with the Income Tax Department, including previously filed tax returns, Annual Information Statement (AIS), Taxpayer Information Summary (TIS) and Form 26AS.
The move is aimed at easing compliance for small taxpayers by reducing paperwork and eliminating the need for physical submission of documents and repeated visits to tax offices. It is also expected to make the process faster, paperless and more transparent.
Income Tax Department reports rise in appeal disposal
The minister also provided details on faceless assessments and appeals disposed of by the Income Tax Department. The IT department disposed of 2.24 lakh appeals during 2025-26, compared with 1.11 lakh in 2023-24, he said.
Meanwhile, 2.13 lakh faceless assessments were completed in 2025-26, against 2.73 lakh in 2023-24.
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