How do I apply for a lower TDS certificate?

Log in to TRACES as a taxpayer with your PAN and file Form 128 online, with your estimated income and tax for the year, details of the payers and their TANs, the amounts you expect to receive, and supporting documents such as past returns and financial statements. E-verify, note the acknowledgement number, and download the certificate from TRACES once it is issued.

How long does it take to get a lower TDS certificate?

The Income-tax Rules, 2026 do not set a fixed time limit for the officer to decide. Practitioners commonly report two to eight weeks, depending on the case and the information on record — that is an estimate, not an official timeline. Apply at the start of the tax year, well before the first payment, because the certificate does not undo tax already deducted.

How long is a lower TDS certificate valid?

Only for the period of the tax year stated on it, and only for the payer and the amount it names, unless the Assessing Officer cancels it earlier. Once the payer has paid you the certified amount, or the period ends, the normal rate applies again. You need a fresh application every tax year.

Is Form 13 still valid in 2026?

Form 13 was the application under section 197 of the 1961 Act. For tax year 2026-27 onwards the application is Form 128 under section 395(1). Certificates already issued under section 197 for receipts of tax year 2026-27 continue to be honoured, according to practitioner guidance, but new applications must use Form 128 on TRACES.

Can I use Form 121 instead of a lower TDS certificate?

Only if your estimated tax for the year is nil and the income is one of the types listed in section 393(6) — interest, dividends, insurance commission, rent from a business tenant, life-insurance payouts and a few others. People under 60 also need that income to be within the basic exemption limit. For commission, contract work, professional fees or e-commerce sales, or where your tax is low but not nil, a Form 128 certificate is the route.

Income tax & TDS

Lower TDS Certificate in 2026: How to Get Lower or Nil TDS with Form 128

Lower TDS certificate in 2026: apply in Form 128 (old Form 13) on TRACES under section 395 (old 197), what the officer checks, validity, timelines and ₹ examples.

Edited by Sumeet YadavFounder & editor, MSMETOOLS · fact-checked against official sources

Updated October 2026 Verified against official sources 12 October 2026 16 min read

Lower TDS certificate — Form 128 on TRACES — MSMETOOLS guide cover

Contents (10)

1. When a lower TDS certificate makes sense
2. The law: section 395 and rule 213
3. Applying in Form 128 on TRACES
4. Timelines and validity
5. Worked examples in ₹
6. Form 121 or Form 128: which route?
7. What payers must do with a certificate
8. Why applications get rejected, and how to fix them
9. The electronic route announced in 2026
10. What to do next

TDS is meant to collect tax in advance, not to overtax. But a fixed rate cannot see your expenses, losses or deductions, and for many MSMEs, contractors, consultants and landlords the tax withheld each year is far more than the tax they finally owe. The money comes back only as a refund after the return is processed — months of working capital locked up. A lower TDS certificate fixes that at the source: the Assessing Officer tells your payer to deduct at a lower rate, or not at all. This guide explains how it works under the Income-tax Act, 2025, how to apply in Form 128 (which replaced Form 13) on TRACES, what the officer looks at, how long certificates last, what payers must do with them, and the cheaper alternative of a Form 121 declaration — with worked examples in rupees.

Quick answer

A lower TDS certificate is issued by the Assessing Officer under section 395(1) of the Income-tax Act, 2025 (old section 197) when your total income justifies deduction at a lower rate or no deduction. You apply online in Form 128 (old Form 13) on TRACES under rule 213 of the Income-tax Rules, 2026. The certificate names the payer, the rate, the amount and the period; the payer must deduct at that rate until the amount is used up or the period ends.

Law: s.395(1) for TDS, s.395(3) for TCS — in force from 1 April 2026
Form: 128 on TRACES, e-verified; no offline filing; a valid PAN is mandatory
Officer looks at this year's estimated tax, the last four years' tax, outstanding demands and credits already available
Valid only for the payer, amount and period stated; a fresh application each tax year
No fixed processing time — apply before the first payment of the year

When a lower TDS certificate makes sense

TDS rates are flat percentages of gross receipts. Your tax is a percentage of profit after expenses, losses, depreciation and deductions, at slab or company rates. The gap between the two is what a certificate closes. It is worth applying when that gap is large enough to tie up meaningful money for a year.

Typical cases are a civil contractor whose margins are thin, so 2% of receipts is far more than its tax; a consultant with heavy staff and travel costs who suffers 10% on gross fees; a company with brought-forward business losses or unabsorbed depreciation that wipe out this year's profit; a start-up or MSME in its first loss-making years receiving professional or contract payments; a landlord whose rental income is mostly offset by interest on a housing loan; an agent earning commission with high expenses; a charitable trust or other registered non-profit whose income is exempt; and an individual whose total income falls below the rebate threshold but who receives payments that Form 121 cannot cover.

It is usually not worth applying when the TDS is small compared with your tax — for example the 0.1% e-commerce TDS for a profitable online seller — or when you would end up owing tax anyway.

Lower TDS certificate at a glance (2026-27)

Form 128

Application

replaced Form 13 from 1 April 2026

s.395(1)

Section

old section 197

4 years

Tax history checked

rule 213(3)

Tax year

Maximum validity

or the period stated

The law: section 395 and rule 213

Section 395(1) says that where tax must be deducted on any income or sum under the TDS chapter, the payee may apply to the Assessing Officer for deduction at a lower rate or no deduction. If the officer is satisfied that the payee's total income justifies it, the officer issues a certificate, and the person paying must deduct at the rate in the certificate — or not deduct — while it is valid. Section 395(3) is the mirror rule for tax collected at source: buyers, licensees and lessees can apply for collection at a lower rate. Section 395(5) lets the officer cancel either kind of certificate after giving the applicant a reasonable opportunity to be heard.

Rule 213 of the Income-tax Rules, 2026 fills in the detail. It replaced six separate rules of the 1962 Rules (28, 28AA, 28AB, 29, 37G and 37H), which had dealt with the old Form 13 and related certificates. The key points are these.

Form. The application for both lower TDS and lower TCS is made in Form 128.

What the officer considers. Under rule 213(3) the officer may issue the certificate after taking into account the tax payable on your estimated income for the tax year; the tax paid or payable on returned, assessed or estimated income for the last four tax years; your existing liabilities under the new Act and the 1961 Act; and the advance tax, TDS and TCS already credited to you for the year as on the date of the application.

Non-profits. For registered non-profit organisations and other specified entities, the officer must also confirm that the exemption approval is valid on the date of application and of the certificate, and that returns for the last four tax years have been filed.

Validity and scope. Under rule 213(7) a certificate is valid for the period of the tax year it specifies, unless cancelled earlier. Under rule 213(8) it is issued in the name of the person who deducts or collects the tax, and covers only a specified payment from that deductor, up to the amount specified.

Many payers. Where you expect more than 100 deductors and do not have their details when you apply — a common situation for interest on widely held deposits or for a business with many small customers — rule 213(9) allows the certificate to be issued in your name, authorising you to generate certificates for individual payers from the Department's portal.

Section 397(2)(f)(ii) adds one hard condition: no certificate can be granted on an application that does not carry a valid PAN.

Aayakar Bhavan, the Income Tax Department office building in Kolkata — Applications are filed online, but the decision still rests with your jurisdictional Assessing Officer, who weighs this year's estimate against your last four years.· Image: sushanta mohanta (Panoramio) (CC BY 3.0)

Applying in Form 128 on TRACES

Form 128 is filed only online, on TRACES (the TDS Reconciliation Analysis and Correction Enabling System), not on the e-filing portal. You need to be registered on TRACES as a taxpayer using your PAN. The form has annexures for different situations: one for TDS where you know the payers, one for TDS where payers are likely to exceed 100 and their details are not available, and one for TCS.

Gather the numbers before you start. You will need an estimate of your income and tax for the tax year, with a computation; the payers' names, TANs and the amount you expect from each; your returns, financial statements and audit reports for recent years; and details of advance tax paid and TDS or TCS already credited for the year. Explain anything unusual — a brought-forward loss, an exemption you claim, a one-off contract — in the form or a note, because the officer will compare your estimate with your filing history.

Filing Form 128 for a lower or nil TDS certificate

1
Register or log in on TRACES as a taxpayer
Use your PAN. Check that your PAN is valid and operative — without it no certificate can be granted.
Open TRACES
2
Open Form 128
Go to the dashboard, then the e-file section, and choose Form No. 128. Pick the annexure: known payers (TDS), many unknown payers (TDS) or TCS.
3
Enter your estimate and payer details
Estimated income and tax for the year, payers' TANs and expected amounts, the nature of each payment and the rate you are asking for.
4
Upload supporting documents
Income computation, recent returns, financial statements, audit reports, and notes on losses or exemptions.
5
E-verify and submit
Verify with a digital signature or an electronic verification code. Note the acknowledgement number.
6
Track and download
Follow up with your jurisdictional officer if asked. Download the certificate from TRACES and send it to each payer named.
Tip: Send the certificate before the payer's next credit or payment — it cannot reverse TDS already deducted.

Timelines and validity

The Income-tax Rules, 2026 do not set a fixed number of days for the officer to decide a Form 128 application. Practitioner guidance commonly puts the time at roughly two to eight weeks, depending on how clean your filing history is and whether the officer asks for more information. Treat that as an estimate based on practice, not an official timeline.

The calendar matters because a certificate works only from the date it is issued and only for payments made afterwards. Tax already deducted is not reversed; you get it back only as a refund after filing your return. The practical rule is to apply in April, or as soon as you sign a large contract, so the certificate is in place before the first credit.

A certificate is valid only for the period of the tax year stated in it — never beyond 31 March — and only for the payer and the amount it names. Once the certified amount has been paid, the payer must go back to the normal rate even if the period has not ended, so estimate receipts realistically. Each tax year needs a fresh application.

For the move to the new Act, practitioner guidance indicates that a certificate issued under section 197 of the 1961 Act for projected receipts of tax year 2026-27 does not become invalid just because the new Act took effect on 1 April 2026. Applications made now must use Form 128.

A sensible lower-TDS calendar

February–March

Estimate next year's income, receipts by payer and tax; collect payers' TANs

Early April

File Form 128 on TRACES for the new tax year

April–May

Respond to any queries from the Assessing Officer; download certificate and send to payers

Every quarter

Check that payers applied the certified rate in your AIS; track how much of the certified amount is used

When a big new contract arrives

Apply again for that payer if it was not covered

Worked examples in ₹

1. Consultant with high costs. A management consultant (an individual) expects ₹40 lakh of fees in 2026-27 from one company client, which will deduct 10% — ₹4,00,000. After staff, rent and travel, the consultant expects taxable income of ₹16 lakh. Under the new regime the tax is nil on the first ₹4 lakh, 5% on the next ₹4 lakh (₹20,000), 10% on the next ₹4 lakh (₹40,000) and 15% on the last ₹4 lakh (₹60,000) — ₹1,20,000 — plus 4% cess, ₹1,24,800. Spread over ₹40 lakh of fees, that is about 3.1%. The consultant can apply for a certificate at around 3%; if granted for the full ₹40 lakh, TDS falls from ₹4,00,000 to about ₹1,20,000, freeing roughly ₹2.8 lakh of cash during the year.

2. Contractor with brought-forward losses. A limited liability partnership expects ₹3 crore of receipts from two government-sector customers, who will deduct 2% — ₹6,00,000. It has ₹50 lakh of business losses carried forward and expects ₹45 lakh of profit this year, so its tax for the year should be nil after set-off. With clean filings for the last four years and no outstanding demand, it can ask for a nil certificate covering both customers.

3. The certificate runs out. In example 1, suppose the certificate covers ₹30 lakh at 3%, but the client ends up paying ₹40 lakh. The client deducts 3% on the first ₹30 lakh (₹90,000) and 10% on the remaining ₹10 lakh (₹1,00,000). The consultant can apply again for the extra amount.

4. Landlord with a home loan. A landlord receives ₹1,20,000 a month in rent from a company tenant, which deducts 10% — ₹1,44,000 a year. Interest on the loan for the let-out property and the standard deduction for house property leave little taxable rental income, and the landlord has no other significant income. A nil or low-rate certificate in Form 128 stops most of that deduction. If the landlord is a resident individual whose tax is nil, Form 121 may be simpler — see below.

Try it — what normal TDS would take from your fees

Payment AmountNature of Payment (Section)

Payee PAN

Payment Amount₹40,00,000.00

Section194J

TDS Rate10%

TDS to Deduct₹4,00,000.00

Net Payable to Payee₹36,00,000.00

Open the full TDS Calculator (PDF, save, compare)

Form 121 or Form 128: which route?

Not everyone needs an officer's certificate. Section 393(6) lets a resident individual, and other persons that are not companies or firms, give the payer a self-declaration — Form 121, which replaced Forms 15G and 15H — that the tax on their estimated total income for the year will be nil. No application, no approval: the payer simply stops deducting.

The catch is scope. Form 121 works only for the incomes listed in section 393(6): interest (on securities and otherwise), dividends, income from mutual fund units, insurance commission, rent paid by a business tenant, life-insurance payouts and certain provident fund withdrawals. And for anyone under 60, it cannot be used if the total of that kind of income is likely to exceed the basic exemption limit — ₹4 lakh under the new regime. It is never available to companies or firms, and it is useless where your tax is low but not nil.

Point	Form 121 declaration (s.393(6))	Form 128 certificate (s.395(1))
Who decides	You, by self-declaration	The Assessing Officer
Who can use it	Resident individuals; other non-company, non-firm persons	Any payee, including companies and firms
Incomes covered	Interest, dividends, MF units, insurance commission, rent from business tenants, LIC payouts, some PF withdrawals	Any TDS payment (and TCS under s.395(3))
Tax test	Estimated tax must be nil	Lower rate or nil, as justified
Under-60 ceiling	Covered income within ₹4 lakh	None
Where filed	With each payer	TRACES
Timing	Instant	Weeks — apply early

Our TDS on interest guide explains Form 121 in detail for depositors.

What payers must do with a certificate

If a payee gives you a certificate, you are bound by it: section 395(1)(c) says you deduct at the rate it specifies, or not at all, until it expires. Check that it is issued in your name and TAN, that the payment is of the kind it covers, that the date of credit or payment is within its period, and that the cumulative amount you have paid under it has not passed the certified limit. Once the limit is reached, revert to the normal rate.

Report each payment covered by a certificate in your quarterly statement — Form 140 for most non-salary payments — with the certificate number and the reason for lower or no deduction. A mismatch between the certificate and the statement shows up as a short-deduction default when the statement is processed, and you will be asked to pay the difference with interest at 1% a month or part of a month a month. If a certificate is cancelled under section 395(5), the normal rate applies to payments after the cancellation.

A calculator, pen and notepad in an open organiser case — Payers should track how much of the certified amount has been used — once it is exhausted, the normal TDS rate applies again.· Image: Horia Varlan (CC BY 2.0)

Why applications get rejected, and how to fix them

Outstanding tax demands. Rule 213 lets the officer consider existing liabilities under both Acts. Clear or get a stay on old demands first, or explain them, before you apply.

Unfiled or late returns. An estimate that cannot be compared with filed returns is hard to accept, and for non-profits four years of returns are a condition. File pending returns before applying.

Estimate out of line with history. If your estimated profit margin is far below what you have reported in the last four years, attach the reason — a new contract at thin margins, losses carried forward, a large capital expenditure. Unexplained drops invite rejection or a higher rate than you asked for.

Missing payer details. Certificates are issued payer by payer. Without TANs and expected amounts the officer cannot issue a usable certificate, unless your case qualifies for the many-payers route.

PAN problems. An invalid or inoperative PAN blocks the certificate completely. Fix PAN–Aadhaar linking before filing.

Applying too late. If most of the year's payments are already made, there is little left for a certificate to cover. Apply early, and reapply when your estimates change.

The electronic route announced in 2026

The Finance Act 2026 amended section 395 to give payees an option to apply electronically to a prescribed income-tax authority, which can issue the certificate automatically if prescribed conditions are met, or reject the application if they are not or if it is incomplete. The change took effect from 1 April 2026 and is aimed at small taxpayers, using information the Department already holds.

The conditions have to be set out in the rules, and as of the government's written reply in the Lok Sabha on 10 August 2026, the enabling rule was still being prepared. Until it is notified, the officer-based Form 128 process on TRACES described above is the way to apply. We will update this page when the rule is notified.

Official links

What to do next

Work out this year's expected receipts by payer, the TDS they will deduct, and your realistic tax — our free TDS calculator handles the first two. If the difference is large, prepare your computation and file Form 128 on TRACES before the first payment. If your tax is nil and the income is interest, dividends or rent from a business tenant, Form 121 may do the job without an application. For the rates you are trying to reduce, see our guides to TDS on professional fees, TDS on contractor payments, TDS on rent and TDS on commission.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

It is a certificate from the Assessing Officer telling a named payer to deduct tax at a lower rate, or not at all, on payments to you, because your actual tax for the year justifies it. Under the Income-tax Act, 2025 it is issued under section 395(1), which replaced section 197 of the 1961 Act from 1 April 2026. The application is Form 128, which replaced Form 13.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 12 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1.The Income-tax Act, 2025 (Act No. 30 of 2025), Gazette of India Extraordinary, 21 August 2025 — Ministry of Law and Justice (Legislative Department) · accessed 12 October 2026
2.Memorandum explaining the provisions in the Finance Bill, 2026 — Ministry of Finance (Union Budget 2026-27) · accessed 12 October 2026
3.TDS Compliance — e-Filing help — Income Tax Department (e-Filing portal) · accessed 12 October 2026
4.Rule 213, Income-tax Rules 2026 — text — TaxHeal (reproducing the Income-tax Rules, 2026) · accessed 12 October 2026
5.I-T Dept framing rules for electronic lower, nil TDS certificate: Govt (10 August 2026) — IANS · accessed 12 October 2026
6.Income Tax Form 128: Application for Lower or Nil TDS/TCS Certificate — TaxGuru · accessed 12 October 2026
7.Form 128 income tax — ClearTax · accessed 12 October 2026
8.Form 13 is now Form 128: lower or nil TDS certificate guide — Busy Infotech · accessed 12 October 2026

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