How do I get a lower TDS certificate in Form 128?

What does a lower TDS certificate do?

A lower TDS certificate under section 395(1) of the Income-tax Act, 2025 directs the payer to deduct at a reduced or nil rate for a stated period, instead of the rate the nature of the payment would otherwise carry. Deduction rates are set by the type of payment, not by the payee's actual tax position, so a payee whose expected liability is well below the deducted amount would otherwise finance the government all year and claim a refund later.

The certificate closes that gap. The payee applies to the Assessing Officer, and the officer, on being satisfied that the total income justifies a lower rate, issues a certificate stating the rate and the period it covers. The official forms FAQ says the substantive provisions remain the same under the new Act.

Who should apply for Form 128?

A payee should apply in Form 128 where the tax deducted for the year will clearly exceed the year's liability, which is usually a loss-making entity, a payee with largely exempt income, a non-resident property seller, or a thin-margin contractor. The recurring cases look like this.

• A loss-making or early-stage entity with substantial receipts that attract deduction at the full rate.
• A payee whose income is largely exempt or sheltered, so the deduction has no liability to settle against.
• A non-resident seller of property, where 1 per cent on the buyer side is not the applicable machinery and the deducted sum can be far larger than the gain.
• A contractor or professional whose margin is thin, so a rate set on gross receipts overshoots tax on net income.

Where the payee simply has no taxable income at all, the self-declaration route may fit better than a certificate. That is the Form 15G and 15H path, now Form 121, and it is a declaration by the payee rather than an order by an officer.

Can a Form 128 certificate authorise a nil rate?

Yes. Section 395(1) allows the Assessing Officer to certify a nil rate where the payee's total income justifies no deduction at all, not only a reduced one. A nil certificate leaves the payer's reporting obligation intact, so the deductee row and the certificate number still appear on the statement.

Does section 395(1) replace section 197?

Yes. The official Income Tax forms FAQ maps the old section 197 mechanism directly onto section 395(1) of the Income-tax Act, 2025, and the application form changes from Form 13 to Form 128 under the Income-tax Rules, 2026.

Existing certificates do not fall away at the cutover. The FAQ states that a certificate issued under section 197 remains valid for payments or credits on or after 1 April 2026 where it was issued for projected receivables of tax year 2026-27. Read the validity window written on the certificate rather than assuming either outcome.

How does a payer apply the certificate?

A payer applies the certified rate from the date the certificate covers and records the certificate number against that deductee on the statement, so the certificate is a field on the return rather than a side letter kept in a drawer. The official Form 141 page shows this plainly: the deductee panel asks whether section 395(1) applies, and if yes, requires the certificate number issued by the Assessing Officer before the rate can be entered.

1. Collect the certificate before the first deduction it is meant to cover. It does not apply retrospectively to a payment already deducted at the full rate.
2. Check the payee named on it, the rate, and the period. A certificate for one payee does not travel to a group company.
3. Record the certificate number against that deductee on the statement, and keep the certificate with the deduction file.

How do I confirm the Form 128 process?

Confirm the Form 128 process against the official Income Tax forms FAQ, the Form 141 page for the payer-side field, and the text of section 395 itself. Three steps close the loop.

1. Read the lower-withholding answers on the official Income Tax Forms FAQ. That page carries the section 197 to section 395(1) mapping, Form 128, and the validity of an existing certificate.
2. Check the certificate field on the official Form 141 page if you are the payer on a PAN based statement.
3. Read section 395 for the provision itself, and file only through e-Filing or TRACES.

Where are Form 128 changes published?

CBDT publishes Form 128 changes, portal-route changes and clarifications on certificate validity as notifications and e-Filing help updates. The test the officer applies stays in the Act; the paperwork around it moves. CBDT updates on Complied AI keep those beside section 395, so a payee applying in the second quarter is not filling last year's form.