New income tax rules: How to apply for lower or nil TDS/TCS via Form 128

The Income-tax Department has introduced Form No. 128, replacing the earlier Form 13, as part of the transition to the Income-tax Act, 2025. The form enables taxpayers to seek relief from standard tax deduction or collection rates by applying for a lower or nil rate certificate.

Here’s how the process works and what has changed.

What is Form No. 128 and why it matters

Form No. 128 is used by taxpayers to request a certificate that allows tax to be deducted (TDS) or collected (TCS) at a lower rate—or not at all—under Sections 395(1) and 395(3) of the new law. This is particularly relevant for individuals or entities whose actual tax liability is expected to be lower than the default deduction rates.

Who can apply

Any taxpayer—resident or non-resident—can file this form if they want to avoid excess tax deduction or collection. The form is optional and only needs to be filed if such relief is required.

When to file the application

Timing is critical. The application must be submitted before the transaction or income payment takes place. Once tax has already been deducted or collected, the request cannot be processed. Authorities advise filing well in advance to avoid delays.

How to apply

The process is fully digital and must be completed through the TRACES portal. Broadly, it involves:

• Logging into the TRACES platform
• Navigating to the Form No. 128 section
• Filling in details of estimated income and tax liability
• Uploading supporting documents
• E-verifying and submitting the application
• Offline filing is not permitted.

Documents requiredApplicants need to provide:

• Estimated income computation for the relevant tax year
• Estimated tax liability
• Income details for prior years if returns were not filed
• Notes on exempt income, if applicable

A valid PAN is mandatory to submit the form.

Flexibility in filing

There is no restriction on how many times Form No. 128 can be filed in a year. Taxpayers can submit multiple applications if their income projections change.

What happens after submission

Once submitted, the application generates an Acknowledgment Receipt Number (ARN), which can be used to track the request. If approved, the certificate can be downloaded from the TRACES portal.

Special cases: Multiple payers

If a taxpayer expects to deal with a large number of payers (over 100) and does not have their details at the time of application, they can use Annexure-II. In such cases:

• A main certificate is issued in the taxpayer’s name
• The taxpayer can later generate “child certificates” for individual payers
• These child certificates guide each payer on the applicable tax deduction rate

Can the application be withdrawn?

Yes, the application can be withdrawn at any stage before it is processed.

The broader context

The shift from Form 13 to Form 128 reflects structural changes under the new Income-tax Act, 2025, including updated section references and rules. While the objective remains the same—preventing excess tax deduction—the process is now more standardised and digital-first.