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To get relief from TDS deduction, you need to submit an application to the Income Tax Department using a specific form, and then you can get a nil or lower TDS certificate for a particular period of time. For instance, if you are planning to sell your property and expect it to be sold between April and October, you can apply for a lower or nil TDS certificate covering that period.
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The form used to apply for lower or nil TDS certificate has been renamed under the Income Tax Act, 2025. Earlier, taxpayers used Form 13 (under the 1961 law) to request the department to allow lower or nil TDS. However, with the new 2025 Act, the form number and section have changed and so now you’ll need to apply using Form 128.
What is changed with new Form 128 for nil/lower TDS deduction?
Chartered Accountant Gopal Bohra, partner- direct tax, N. A. Shah Associates LLP, says that the content and purpose of Form 128 of 2025 Act and Form 13 of 1961 Act are largely similar. However, a comparison between Form 128 with Form 13 throw up some changes.
Bohra explains that under Form 13, the applicant needed to upload copies of the income tax returns (ITRs) filed for the preceding four previous years.
Bohra says: “In contrast, Form 128, requires the applicant to furnish only the relevant particulars of the returns filed for the preceding four previous years, such as the acknowledgement number, date of filing, taxable income and tax liability.”
According to Bohra, under Form 13, the payee could furnish the TAN, PAN or Aadhaar number of the payer. “However, under Form 128 only the TAN or PAN of the payer is required to be provided.”
Impact of Budget 2026: Nil TDS announcement on Form 128?
According to Bohra, the draft rule 213 and Form 128 do not contain any specific provision for a separate application process for small taxpayers or for automated processing of lower or NIL TDS certificates.
However, Part-B, item 2 of the form 128 classifies application for issuance of certificate into four categories, namely
- registered NPO,
- specified entity,
- person carrying on business / profession or
- person other than (i) to (iii).
Bohra says: “It is possible that applicants falling under the residual category may be considered as small taxpayers for the purpose of automated processing of lower or nil TDS certificates. Alternatively, the CBDT may notify a separate form or distinct mechanism for small taxpayer, as indicated in the Budget speech.”
Chartered Accountant Abhishek Soni, co-founder, Tax2Win says: “Form 128 is the new version of Form 13 under the Income-tax Act, 2025. The purpose remains largely the same, you apply to request deduction of tax at a lower rate.”
Budget 2026 had proposed a nil TDS certificate scheme where an automated rule based process will enable taxpayers to get either lower or nil TDS certificate.
When asked if the new Form 128 is the new form or process which the Budget proposed, Soni said that Form 128 is the legal application form. But Budget 2026 promised a system where certificates can be issued automatically for small taxpayers based on preset rules and data already available with the Income-tax Department.
Soni says: “This means many people may not need manual approval from an officer.”
What is the current process for applying for a nil or lower TDS certificate?
Soni says that right now, the process is not automatic.
Here’s how it works:
- The taxpayer files an application online via the e-filing ITR portal (currently Form 13, later Form 128).
- The Assessing Officer checks income details and past records.
- If satisfied, the officer issues a certificate mentioning the rate of TDS.
- The taxpayer gives this certificate to the payer.
- The payer deducts tax at that approved lower or nil rate.
How can property sellers obtain a Nil TDS certificate under old Act?
Property sellers have to electronically apply for a lower or nil deduction certificate under Section 197, read together with Rule 28 of the Income-tax Rules, 1962, by filing Form 13 on the income-tax e-filing portal.
The application requires detailed information such as the computation of capital gains, cost of acquisition, indexation details, proposed sale consideration, and details of applicable exemptions (for example, under Sections 54 or 54F, if eligible).
Upon examination, the Assessing Officer may issue a certificate specifying the applicable lower or nil rate of tax to be deducted, which the buyer can rely upon while making the payment.
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