---
title: "Form 13 Is Now Form 128: Lower or Nil TDS Guide"
description: "Form 13 is now Form 128. Learn who can apply for a lower or nil TDS certificate, how to apply, key 2026 rules, and what deductors should check."
canonical: "https://busy.in/tds/form-13-is-now-form-128-lower-or-nil-tds-certificate-guide/"
author: "Jagdish Prasad"
published: "2026-08-12T07:30:00.000Z"
category: "TDS"
---

-   From 1 April 2026, Form 128 is used to apply for a lower or nil TDS certificate under Section 395(1) of the Income-tax Act, 2025.
-   The earlier application was Form 13 under Section 197 of the Income-tax Act, 1961.
-   A lower or nil TDS certificate changes how much tax is deducted from covered payments. It does not change the applicant's final tax liability.
-   The Assessing Officer reviews the applicant's estimated income, tax history and existing liabilities before deciding the rate.
-   Certain Section 197 certificates issued for projected receivables of Tax Year 2026-27, from 1 April 2026 to 31 March 2027, remain valid after 1 April 2026.

# Form 13 Is Now Form 128: Lower or Nil TDS Certificate Guide

Tax deducted at source, or TDS, is collected when certain payments are made or credited. In some cases, normal TDS can be higher than the recipient's expected tax liability for the year. A lower or nil deduction certificate can help avoid this excess withholding where the conditions are met.

This guide is for businesses, professionals, individuals, non-residents and other taxpayers who expect the TDS on their income to be higher than the tax justified by their estimated total income.

## **What Is a Lower or Nil TDS Certificate?**

A lower or nil TDS certificate allows the deductor, the person responsible for deducting TDS, to deduct tax at a rate lower than the [**normally applicable rate**](https://busy.in/tds/section-wise-tds-rate-table-for-fy-2025-26/) or at a nil rate if approved by the Assessing Officer.

For example, suppose a ₹10 lakh payment would normally have TDS deducted at 10%. This would mean ₹1 lakh is withheld. If a valid certificate approves a 2% rate for that payment, ₹20,000 would be withheld instead.

A lower deduction therefore helps reduce excess withholding during the year. It does not reduce the applicant's final tax liability or make the underlying income tax-free.

**Note:** The example is only illustrative, as the actual TDS rate depends on the type of payment and the applicable tax provisions.

Form 128 can also be used to apply for lower collection of tax at source (TCS) under Section 395(3). This guide mainly focuses on lower or nil TDS under Section 395(1).

## **Form 128: What Changed in 2026?**

The Income-tax Act, 2025 came into force on **1 April 2026**. Under the new framework, the application earlier made in [**Form 13**](https://www.incometaxindia.gov.in/w/certificate-of-lower/no-deduction-of-tax-at-source) is now made in [**Form 128**](https://www.incometaxindia.gov.in/documents/d/guest/fn-128). The Income-tax Rules, 2026 were notified through **Notification No. 22/2026, G.S.R. 198(E), dated 20 March 2026**. The main changes are:

| Earlier Framework | From 1 April 2026 |
| --- | --- |
| Form 13 | Form 128 |
| Section 197 for lower or nil TDS | Section 395(1) |
| Rules 28, 28AA, 28AB and 29 | Rule 213 |

There is also a transition rule for existing certificates. A certificate issued under old Section 197 remains valid for payments or credits made on or after 1 April 2026 if it was issued for lower or nil deduction on projected receivables for Tax Year 2026-27. Such a certificate does not become invalid merely because the new Act has taken effect.

## **Who Can Apply for Form 128?**

An applicant can use Form 128 when TDS would normally apply, but their estimated total income supports a deduction at a lower rate or no deduction. [**Section 395(1)**](https://www.incometaxindia.gov.in/w/section-395-5) continues the lower or nil deduction mechanism that earlier existed under Section 197.

Depending on the facts, Form 128 may be relevant to businesses, professionals, individuals, non-residents, registered non-profit organizations and other eligible applicants. Form 128 groups applicants into four categories:

| Applicant Category | Relevant Form Requirement |
| --- | --- |
| Registered non-profit organisation | Select this category in Part B and complete the declaration in Part D |
| Specified Entity referred to in Section 263(9)(c) | Select this category in Part B and complete the declaration in Part D |
| Person carrying on business or profession | Select this category in Part B and complete the declaration in Part E |
| Persons other than the above | Select this category in Part B and complete the declaration in Part E |

Parts A, B, C and F contain the general applicant, request, tax and verification details. Part D applies to registered non-profit organisations and specified entities, while Part E applies to the other applicant categories.

The relevant annexure depends on whether the application relates to TDS or TCS and whether deductor details are available.

Typical situations may include a business operating on [**low taxable margins**](https://busy.in/tds/importance-of-tds-in-cash-flow-management-for-businesses/) , an applicant with eligible brought-forward losses, a professional whose expected tax liability is lower than the TDS on receipts, or a non-resident whose expected Indian tax liability is lower than the withholding that would otherwise apply.

Eligibility depends on the applicant's income, tax position and the nature of the payment. A lower or nil certificate is not granted simply because normal TDS affects cash flow.

## **How Does the Assessing Officer Decide the Rate?**

Rule 213 sets out the factors the Assessing Officer may consider before issuing a lower or nil deduction certificate. The rule forms part of the Income-tax Rules, 2026 notified through Notification No. 22/2026.

| Factor | What It Means |
| --- | --- |
| Estimated income | Expected income and tax liability for the relevant tax year |
| Earlier tax position | Tax paid or payable on returned, assessed or estimated income for the previous four tax years |
| Existing tax liabilities | Outstanding liabilities under the current Act or the earlier Income-tax Act, 1961 |
| Taxes already paid or credited | Advance tax and [**TDS or TCS already paid**](https://busy.in/business-updates/gst-compliance-calendar-march-2026/), deducted or collected for the current tax year |

Registered non-profit organisations and certain specified entities may also have to meet additional conditions relating to their approval status and earlier income-tax return filing.

The AO uses these factors to decide whether the applicant's estimated tax position supports the lower or nil rate requested.

### **When Might the Requested Rate Not Be Approved?**

Filing Form 128 does not guarantee that the rate requested by the applicant will be approved. The AO must first determine whether the applicant's estimated income and tax position justify a lower or nil rate.

The requested rate may not be accepted if the income and tax estimate does not support it, existing tax liabilities affect the calculation, or conditions applicable to the applicant's category are not met.

For registered non-profit organisations and certain specified entities, approval status and earlier return-filing conditions can also affect eligibility.

Applicants should therefore make sure that the figures in Form 128 are supported by their [**tax records, financial information**](https://busy.in/accounting/tax-accounting/) and other relevant documents

## **How to Apply for Form 128**

CBDT's Form 128 guidance currently provides for electronic filing through the TRACES portal.

### **Application Steps**

The process generally involves:

1.  Open Form 128 for the relevant tax year.
2.  Enter the applicant's PAN, contact and other required details.
3.  Provide details of the income or payments for which [**lower or nil TDS is requested**](https://busy.in/tds/tds-on-exempt-income-or-lower-tax-liability/) .
4.  Add deductor details where required.
5.  Enter the estimated income and tax details requested in the form.
6.  Complete the applicable annexures and attach supporting information.
7.  Verify and submit the application electronically.
8.  Track the application and respond to any clarification sought by the tax authority.

If the application is accepted, the Assessing Officer issues a certificate specifying the approved rate and its period and scope of validity.

**Processing time:** There is no fixed statutory processing period for Form 128. Practitioner guidance commonly indicates that processing may take roughly 2 to 8 weeks, depending on the jurisdiction, case complexity, supporting documents and any queries raised during review.

Note that this is only an indicative range and not a guaranteed Income Tax Department timeline.

### **Information and Records to Keep Ready**

The supporting records will depend on the applicant and the type of income involved. Commonly relevant information may include:

| Information | Examples |
| --- | --- |
| Identity details | PAN and taxpayer information |
| Payment details | Nature and expected value of the receipts covered by the application |
| Deductor details | Name, [**Tax Deduction and Collection Account Number**](https://busy.in/tds/tan-registration-how-to-obtain-and-register-tan-online/) (TAN) and payment details, where applicable |
| Income workings | Current-year income estimate and tax computation |
| Financial records | Financial statements, books or other records supporting the estimate |
| Tax records | Earlier returns, tax payments and available [**TDS or TCS details**](https://busy.in/tds/section-206c-of-income-tax/), where required |
| Other supporting records | Contracts, agreements or documents relevant to the income covered by the application |

Not every document will be required in every case. The supporting information should match the applicant's category and the facts stated in Form 128.

### **If There Are More Than 100 Deductors**

Rule 213 provides a separate mechanism where the number of [**persons likely to deduct tax**](https://busy.in/tds/who-must-pay-tds-in-india-deductors-individuals-businesses-government/) exceeds 100 and their details are not available when the application is filed.

In that situation, a certificate may be issued in the applicant's name. The applicant can then generate the appropriate certificate through the Income Tax Department's portal and provide it to the relevant deductor.

## **How Does the Certificate Work After Approval?**

A lower deduction certificate should not be treated as permission to apply one reduced TDS rate to every transaction. Rule 213 limits the certificate by its stated scope.

| Check | Why It Matters |
| --- | --- |
| Rate | The deductor should use the [**rate stated in the certificate**](https://busy.in/tds/how-tds-rates-are-decided-income-tax-act-finance-act-dtaa/) |
| Validity Period | The certificate applies only for the period specified |
| Payment | It applies only to the specified payment from the specified deductor |
| Amount | It remains applicable only up to the amount specified in the certificate |

If expected receipts are likely to exceed the amount covered by the certificate, the applicant should review the position before the approved amount is exhausted. Payments beyond the amount covered by the existing certificate are not eligible for its lower rate unless they are covered by another valid certificate.

## **What Should the Deductor Check?**

The deductor should verify that the current payment falls within the scope of the valid certificate before using the reduced rate.

The certificate details must also be reported correctly in the applicable TDS statement. Under the Income-tax Rules, 2026, Form 140 replaces Form 26Q for quarterly non-salary TDS statements, while Form 144 replaces Form 27Q for quarterly statements covering non-salary payments to non-residents.

Businesses dealing with different TDS rates across vendors need to keep lower-rate cases separate from normal TDS transactions. [**BUSY accounting software**](https://busy.in/accounting-software/) allows businesses to create a custom TDS category with a lower rate and review party-wise TDS deduction details, helping teams keep these transactions organised.

## **Form 128 vs. Form 121 vs. Form 129**

Form 128 is sometimes confused with other forms dealing with [**non-deduction or non-resident payments**](https://busy.in/tds/section-195-of-income-tax/) . They serve different purposes.

| Form | Main Purpose | Who Uses It |
| --- | --- | --- |
| Form 128 | Application for lower or nil TDS under Section 395(1), or lower TCS under Section 395(3) | Person seeking the lower deduction or collection certificate |
| Form 121 | Declaration for receipt of specified income without TDS under Section 393(6), subject to eligibility | Eligible resident taxpayers |
| Form 129 | Application to determine the taxable proportion of certain non-salary payments to a non-resident | Payer making the relevant payment |

Form 121 replaces the earlier [**Forms 15G and 15H**](https://busy.in/tds/save-tds-on-interest-form-15g-15h/) , while Form 129 replaces Form 15E. The correct route depends on the type of payment, the person making the application and the recipient's tax status.

## **Form 128 for NRIs Selling Property in India**

The TDS process is different when the [**property seller is a non-resident**](https://busy.in/tds/tds-on-property-transactions-stepwise-guide-with-form-26qb-16b/) . The PAN-based property TDS process currently available to resident sellers should not be used by non-resident sellers.

| Property Holding Period | Gain Type | TDS Rate for NRI Individual Before Surcharge and Cess |
| --- | --- | --- |
| Less than 24 months | Short-term capital gain | 30% |
| 24 months or more | Long-term capital gain | 12.5% |

**Note:** Applicable surcharge and 4% health and education cess may increase the effective rate. A lower rate may apply where a valid lower deduction certificate is issued.

As of August 2026, the Income Tax Department states that Form 141 applies only where the deductee is resident. For non-salary payments to a non-resident, Form 144 is the applicable quarterly TDS statement, and the current filing process requires the deductor to have a valid Tax Deduction and Collection Account Number (TAN).

This requirement is scheduled to change from 1 October 2026. Under the 2026 amendment, a resident individual or Hindu Undivided Family (HUF) buying immovable property from a non-resident will no longer be required to obtain TAN for this transaction.

An NRI seller may consider applying for a lower deduction certificate where the TDS that would otherwise apply is higher than the tax justified by the seller's actual tax position.

The final tax depends on factors such as the cost and date of acquisition, whether the gain is short-term or long-term, [**available capital gains exemptions**](https://busy.in/glossary/capital-gains-tax-and-real-estate-taxation/) and the seller's overall tax position. The applicable TDS should therefore be determined based on the facts of the transaction rather than using the resident-seller property TDS rate.

## **Conclusion**

Form 128 can help prevent excess TDS where the applicant's estimated total income supports a lower or nil rate.

If you expect a payment for which lower deduction is required, apply well before the payment or credit and keep the required income and tax records ready. Once the relevant TDS or TCS transaction is completed, the application cannot be processed for that transaction.

## About the author

**Jagdish Prasad**

Jagdish Prasad is a Chartered Accountant with over 5 years of experience. He helps people and businesses with GST, income tax, and HSN codes. Jagdish makes sure his clients follow all tax rules and save money the right way. He also enjoys writing simple articles to help others understand taxes and stay updated with the latest rules.

## Frequently asked questions

### Do existing PAN and TAN numbers change under the Income-tax Act, 2025?

No. Existing [**PAN and TAN numbers**](https://busy.in/tds/section-206aa-surcharge-cess-pan-requirements/) continue to remain valid under the new Act. The change in form numbers does not require taxpayers or deductors to obtain new PAN or TAN numbers.

### Does a lower or nil TDS certificate remove the need to file an income-tax return?

No. The certificate only changes the amount of tax deducted from the payments it covers. It does not remove any income-tax return filing requirement that otherwise applies to the taxpayer.

### Is a Chartered Accountant's certificate a substitute for Form 128?

No. A Chartered Accountant's certificate used for certain [**payments to non-residents**](https://busy.in/tds/section-195-of-income-tax/) serves a different purpose. Form 128 is an application to the income-tax authority for lower or nil deduction of tax.

### Which law applies to AY 2026-27 and Tax Year 2026-27?

They relate to different periods during the transition. Assessment Year 2026-27 relates to income earned before the [**Income-tax Act, 2025**](https://busy.in/business-updates/union-budget-2026-key-highlights/) came into force and continues under the Income-tax Act, 1961. The new framework applies from Tax Year 2026-27 beginning on 1 April 2026.

### Is there a fixed annual deadline for filing Form 128?

Rule 213 does not prescribe one common annual due date for all Form 128 applications. In practice, the application should be made early enough for the certificate to be issued before the payments on which the lower rate is intended to apply.

### What happens if TDS has already been deducted before the certificate is issued?

A later lower or nil deduction certificate does not normally change tax that has already been deducted on an earlier payment. The taxpayer can [**claim credit for the TDS**](https://busy.in/tds/form-26as/) and, where eligible, claim any excess through the income-tax return.

### What should a taxpayer do if actual income becomes higher than the estimate used in Form 128?

The taxpayer should review the [**expected tax liability and tax payments**](https://busy.in/tds/step-by-step-tds-calculation-with-payment-type-rates/) for the year. A lower deduction certificate does not reduce the final income-tax liability, so any additional tax arising from higher income may still need to be paid under the normal provisions.

## Related articles

- [Impact of Non-Compliance on TDS Certificate Issuance: 2025 Update](https://busy.in/tds/impact-of-non-compliance-on-tds-certificate-issuance-2025-update/)
- [Section 194R: TDS on Business Perks, Freebies, and Benefits](https://busy.in/tds/section-194r-tds-on-business-perks-freebies-and-benefits/)
- [Section 194M: TDS Rules for High-Value Payments by Individuals & HUFs](https://busy.in/tds/section-194m-tds-rules-for-high-value-payments-by-individuals--hufs/)
- [Form 12BA: Complete Guide to Salary Perquisites, Applicability, and Tax Implications](https://busy.in/tds/form-12ba-complete-guide-to-salary-perquisites-applicability-and-tax-implications/)
- [Section 194K: TDS on Mutual Fund Dividend and IDCW Income](https://busy.in/tds/section-194k-tds-on-mutual-fund-distributions-demystified/)
- [Income Tax Notice: Key Triggers in TDS Assessments and How Businesses Can Prepare](https://busy.in/tds/income-tax-notice-key-triggers-in-tds-assessments-and-how-businesses-can-prepare/)
- [Importance of TDS in Cash Flow Management for Businesses](https://busy.in/tds/importance-of-tds-in-cash-flow-management-for-businesses/)
- [Section 194DA: Complete Guide to TDS on Insurance Policy Maturity Payouts](https://busy.in/tds/section-194da-complete-guide-to-tds-on-insurance-policy-maturity-payouts/)
- [TDS on Software Purchase in India: A Complete Guide for Businesses](https://busy.in/tds/tds-on-software-purchase-in-india-a-complete-guide-for-businesses/)
- [Understanding Tax Deduction at Source (TDS) Under the Income Tax Bill, 2025](https://busy.in/tds/understanding-tax-deduction-at-source-tds-under-the-income-tax-bill-2025/)