Lower or nil TDS certificates to go fully online soon, rules being framed

Synopsis

New rules are being prepared for electronic applications for lower TDS certificates. Taxpayers can soon apply online for reduced or nil tax deductions. This initiative aims to ease compliance burdens for small taxpayers. The Income Tax department disposed of many appeals in the last fiscal year. Faceless assessments were also completed, though fewer than previously.

The Income Tax Department is preparing rules to allow taxpayers to electronically apply for lower or nil tax deducted at source (TDS) certificates, Parliament was informed on Monday.

Minister of State for Finance Pankaj Chaudhary said the provision was introduced to ease compliance for small taxpayers. Under the Income-tax Act, 2025, taxpayers can seek certificates allowing TDS to be deducted at a lower rate or not deducted at all.

“... the enabling rule is currently under preparation and shall be notified in due course,” Chaudhary said in a written reply in the Lok Sabha.

The change was introduced through the Finance Act, 2026. Once the rules are notified, taxpayers will be able to submit applications electronically instead of relying on physical documentation or visiting tax offices.

The application will be processed using information already available with the Income Tax Department, including previously filed tax returns, the Annual Information Statement (AIS), Taxpayer Information Summary (TIS) and Form 26AS.

If the prescribed conditions are met, the certificate will be issued electronically. Applications where the information does not match may be rejected.

A lower or nil TDS certificate is generally sought when a taxpayer expects their final tax liability to be lower than the TDS that would otherwise be deducted. This allows taxpayers to avoid excess deductions and the need to claim a refund later.

Chaudhary also said the Income Tax Department disposed of 2.24 lakh appeals in FY26, compared with 1.11 lakh in FY24.

The department completed 2.13 lakh faceless assessments in FY26, compared with 2.73 lakh in FY24.

The minister was responding to a Lok Sabha question on the number of faceless assessments completed and appeals disposed of by the Income Tax Department over the last three years.