With the implementation of the Income Tax Act, 2025, taxpayers seeking relief from higher tax deductions at source (TDS) will have to follow a new process. From April 1, 2026, Form 128 will replace the existing Form 13 for applying for Nil or lower TDS certificates on property sales and several other financial transactions.

The objective remains unchanged—to ensure that taxpayers are not burdened with excess TDS when their actual tax liability is lower. However, the procedure has now been simplified, documentation requirements have been reduced, and the overall application process has been streamlined.

Form 128 is a newly notified application form under the Income Tax Act, 2025. It allows eligible taxpayers to request a certificate for zero or reduced TDS on specific transactions, including property sales, contractual payments, professional fees, and other income streams where TDS is applicable.

For example, if an individual plans to sell a property between April and October and expects minimal or no tax liability on the transaction, they can apply for a Nil or lower TDS certificate valid only for that defined period. This prevents unnecessary deduction of tax upfront and avoids refund delays later.

While the core intent of Form 128 is similar to Form 13, several notable changes make it more taxpayer-friendly:

• Reduced documentation: Earlier, applicants had to upload Income Tax Return (ITR) copies for the last four years. Under Form 128, only essential ITR details such as acknowledgement number, filing date, taxable income, and tax liability are required.

• Simplified payer details: Previously, details like TAN, PAN, or Aadhaar of the payer were mandatory. Now, providing either TAN or PAN is sufficient.

• Cleaner digital workflow: The form is designed to work seamlessly with the e-filing portal, reducing errors and processing delays.

These changes aim to reduce compliance burden and speed up approvals.

The new form categorizes applicants into four broad groups:

Although Budget 2026 announced plans for an automated Nil TDS certificate system, Form 128 currently follows a manual approval mechanism for all categories. However, it is expected that smaller taxpayers falling under the “Other” category may benefit from automated approvals once the new technology-driven system is rolled out.

As of now, the procedure remains manual. Taxpayers must submit Form 128 through the income tax e-filing portal. The application is then reviewed by the Assessing Officer, who verifies income details, past tax records, and estimated liability.

Once approved, the Nil or lower TDS certificate is issued for a specified duration and must be shared with the payer. TDS is then deducted at the approved rate.

Earlier, taxpayers applied for Nil or lower TDS certificates under Section 197 using Form 13. With the new law coming into effect, Form 128 becomes the default application form, though the legal framework of Section 197 continues to govern the issuance of such certificates.

Taxpayers planning property sales or high-value transactions from April 2026 onward should familiarize themselves with Form 128 requirements. Applying in advance can help avoid excess TDS deductions and cash flow issues.

The new rules reflect the government’s push towards simplification and digitisation, making tax compliance smoother for individuals and businesses alike.