Taxpayers Get Relief: Government Prepares Rules to Enable Online Application for Low or Nil TDS Certificate
The Finance Ministry is actively working on enabling rules that will allow taxpayers to apply for a lower or nil Tax Deducted at Source (TDS) certificate electronically. This move is designed to significantly ease compliance burdens, particularly for small and individual taxpayers.Currently, the option for electronic application for these certificates remains unavailable to taxpayers. The Finance Ministry informed the Lok Sabha on August 10 that these enabling rules are under preparation and will be notified in due course.
Introducing Digital Compliance for Low or Nil TDS Certificates
Section 395(1) of the Income-tax Act, 2025, mandates the issuance of a certificate regarding deduction of tax at source (TDS) at nil or lower rates. The government confirmed that this facility has been incorporated vide Finance Act, 2026.The ministry stated that an option has now been enabled for payees to file applications for a certificate of low or nil deduction of income-tax electronically. Such certificates can be issued or rejected digitally, provided all prescribed conditions are met.
Targeting Small Businesses and Individual Taxpayers
Tax Deducted at Source is typically deducted at standard rates across various categories. Examples include 10 percent on professional fees, 1–2 percent on contractor payments, or 20 percent on specific payments made to non-residents.However, the tax law provides avenues for lower or nil TDS in certain circumstances. If an individual or a small business's total estimated taxable income for the year is less than the basic tax-free exemption limit, or if they fall into a very low tax bracket, then a flat 10 or 20 percent TDS is not applicable.
Tax Law Revisions and Compliance Streamlining
The Income-tax Act, 2025, which replaces the previous act from 1961, came into force on April 1, 2026. This transition aims to make compliance less complex for taxpayers.To streamline processes, the number of rules under the new Act has been reduced from 511 to 333. Furthermore, the forms have been brought down from 399 to 190, reflecting a concentrated effort to ease taxpayer burdens.
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