India moves towards fully digital process for lower and nil TDS certificates

The Indian Income Tax Department is finalising rules to enable online application for lower or nil tax deducted at source certificates, aiming to simplify compliance for small taxpayers and bolster its digital tax administration.

India’s Income Tax Department is drafting the rules needed to bring into force a Budget measure that will let taxpayers apply online for lower or nil tax deducted at source certificates, Parliament was told on Monday. Minister of State for Finance Pankaj Chaudhary said the enabling rule is still being prepared and will be notified in due course.

The change is intended to reduce the compliance burden on smaller taxpayers who often seek such certificates when they expect their final tax liability to be below the amount otherwise deducted. Instead of submitting paper applications and making repeated visits to tax offices, eligible applicants will be able to file electronically, with the system drawing on information already on the income-tax portal, including past returns, the Annual Information Statement, the Taxpayer Information Summary and Form 26AS.

Under the new framework, the tax authority will examine the application against the data already available online. If the prescribed conditions are met, the certificate will be issued electronically; if discrepancies are found, the request may be rejected. The department’s own guidance says the revised process under the Income-tax Act, 2025 is designed to make lower or nil deduction certificates easier to obtain and to replace the older manual route.

Chaudhary also told the Lok Sabha that the department disposed of 224,000 appeals in 2025-26, up from 111,000 in 2023-24. Faceless assessments totalled 213,000 in FY26, compared with 273,000 in FY24, in another sign of the tax administration’s continuing shift towards digital processing.