Income tax regulations for online lower, zero TDS certificates to be announced soon
Income Tax department is now drafting regulations to put into effect the 2026–2027 Budget provision that permits taxpayers to electronically apply for lower or zero TDS certificates, Parliament was informed on Monday.
Minister of State for Finance Pankaj Chaudhary stated Section 395(1) of the Income-tax Act, 2025 permits the issuance of certificates for tax deduction at source at nil or lower rates.
According to the Finance Act of 2026, small taxpayers now have an option to electronically apply for the issuance of certificates for a lower or zero income tax deduction. The certificate may be granted or denied based on fulfilling any requirements that may be specified.”
he enabling rule is currently under preparation and shall be notified in due course,” Chaudhary said in a written reply in the Lok Sabha.
When a taxpayer predicts that their actual tax burden will be less than the amount of TDS that would otherwise be deducted, they usually apply for a lower or nil TDS certificate in order to avoid excess tax deductions and the requirement to later claim a refund.
The FY27 Budget amendment would allow taxpayers to online apply to the tax office for a lower TDS certificate. The application will be processed using data that is already accessible on the income-tax system, such as Form 26AS, the Annual Information Statement (AIS), the Taxpayer Information Summary (TIS), and previously filed returns.
The certificate will be issued electronically if the requirements are fulfilled. Discrepancies in an application may result in its rejection.
The new clause would make the procedure quicker, paperless, and more transparent while doing away with the need for physical documentation and frequent visits to tax offices.
Chaudhary added that the income tax department handled 224,000 appeals in the 2025–2026 fiscal year, compared to 111,000 in 2023–2024. Additionally, compared to 273,000 in FY24, only 213,000 faceless assessments were finished in FY26.
