The Income‑tax Department has rolled out a key procedural change with the introduction of Form No. 128, replacing the earlier Form 13 under the new Income‑tax Act, 2025. The update is designed to make it easier for taxpayers to avoid excess tax deductions or collections during the financial year. Instead of waiting for refunds later, eligible individuals and businesses can now apply in advance for a lower or nil TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) rate. The process is fully online, more structured, and aims to reduce unnecessary cash‑flow pressure for taxpayers.
What is Form No. 128 and who should use it?
Form No. 128 is an application to obtain a certificate from the tax department that permits tax to be deducted or collected at a reduced rate or even zero, under Sections 395(1) for TDS and 395(3) for TCS of the Income‑tax Act, 2025. It is especially useful for those whose actual tax liability is expected to be lower than the standard TDS/TCS rates—for example, retirees receiving interest or rent, freelancers, or non‑residents with limited taxable income in India.
Both resident and non‑resident taxpayers can apply, and use of the form is optional. It is only needed if the taxpayer wants to avoid an excess deduction on a specific payment. The timing of the application is critical: it must be filed before the income is credited or paid to the recipient. Once the tax has already been deducted or collected, the request for a lower or nil rate will not be considered. Filing early is strongly advised to avoid processing delays.
How to apply for Form No. 128
The application is entirely digital and must be filed through the TRACES portal:
- Log in to the TRACES portal as a taxpayer.
- Go to the “e‑File & View” section, select “File Forms”, and choose Form No. 128 (for lower/nil TDS and TCS certificates).
- Fill in estimated income and tax‑liability details, upload supporting documents such as projected income‑tax computations, prior‑year income details (if returns are not yet filed), and information on exempt income, and complete e‑verification.
A valid PAN is mandatory, and the form cannot be filed offline—only electronic submissions are allowed. Applicants must provide clear estimates of their annual income, tax calculations, and reasons why the standard TDS/TCS rate is expected to be higher than their actual tax liability.
What happens after submission?
Once Form No. 128 is submitted, the system generates an Acknowledgement Receipt Number that can be used to track the status of the request. The application is then forwarded to the relevant Assessing Officer, who reviews the details and, if satisfied, issues a certificate for reduced or nil TDS/TCS. The approved certificate can be downloaded from the portal and shared with the payer or collector, who is legally bound to apply the lower or zero rate instead of the normal TDS/TCS rate.
Taxpayers who deal with more than 100 payers can use Annexure‑II of Form No. 128 to generate multiple “child” certificates tailored to different deductors or collectors. The form or its annexures can also be revised or withdrawn before they are processed, if the taxpayer’s circumstances change.
By replacing Form 13 with Form No. 128, the Income‑tax Department has streamlined the mechanism for lower‑ or nil‑rate TDS/TCS, making it easier for eligible taxpayers to manage cash flow and avoid unnecessary tax‑withholding on their income.
