Income Tax Department is preparing rules to allow taxpayers to apply electronically for lower or nil TDS certificates, making the process faster and reducing compliance requirements.
Key Highlights:
- New rules are being prepared for online lower or nil TDS applications.
- Taxpayers will be able to apply electronically through the income-tax system.
- Applications will use information available in AIS, TIS and Form 26AS.
- The move aims to reduce paperwork and physical visits to tax offices.
- Certificates will be issued electronically if prescribed conditions are met.
- Applications with discrepancies may be rejected.
- The Income Tax Department disposed of 2.24 lakh appeals in FY26.
New Delhi, August 10: The Income Tax Department is preparing rules to implement a provision in the 2026-27 Budget that will allow taxpayers to electronically apply for lower or nil Tax Deducted at Source (TDS) certificates.
Minister of State for Finance Pankaj Chaudhary informed Parliament that Section 395(1) of the Income-tax Act, 2025 provides for the issuance of certificates allowing tax to be deducted at nil or lower rates.
Under the Finance Act, 2026, taxpayers have been given the option to submit applications for lower or nil TDS deduction electronically. The certificate may be issued or rejected depending on whether the applicant meets the conditions prescribed under the rules.
“The enabling rule is currently under preparation and shall be notified in due course,” Chaudhary said in a written reply in the Lok Sabha.
A lower or nil TDS certificate is generally useful when a taxpayer expects their actual tax liability to be lower than the amount that would otherwise be deducted. The facility can help taxpayers avoid excess tax deductions and the need to wait for a refund later.
Under the proposed system, taxpayers will be able to apply electronically before the tax authority. The application will be assessed using information already available on the income-tax portal, including previously filed income-tax returns, the Annual Information Statement (AIS), Taxpayer Information Summary (TIS) and Form 26AS.
If the applicant fulfils the prescribed conditions, the lower or nil TDS certificate will be issued electronically. Applications containing discrepancies or failing to meet the required conditions may be rejected.
The proposed online mechanism is expected to reduce physical documentation and the need for repeated visits to income-tax offices. It is also aimed at making the process faster, paperless and more transparent for taxpayers.
Chaudhary also informed Parliament about the department’s performance in handling tax-related proceedings. The Income Tax Department disposed of 2.24 lakh appeals during the 2025-26 financial year, compared with 1.11 lakh appeals in 2023-24.
During FY26, the department also completed 2.13 lakh faceless assessments, compared with 2.73 lakh in FY24. The minister provided the figures in response to a question regarding faceless assessments and appeals disposed of by the department during the last three years.
