Form 128 Income Tax Act 2025 – Lower/Nil TDS & TCS Certificate Guide

Form 13 is replaced by Form 128 of the Income Tax Act 2026. It is filed to obtain a certificate that instructs your payer to deduct TDS at a lower rate or skip it altogether. Once the Assessing Officer approves it through the TRACES portal, your payer has to honour the lower rate; hence, the maximum of your money stays with you through the year instead of sitting with the government till refund. 

What is Form 128 under the Income Tax Act, 2025?

Form 128 is an application form used by a taxpayer to request the Income Tax Department to issue a certificate authorising their payer (deductor/collector) to deduct or collect tax at a lower rate, or not deduct tax at all. 

The form is governed by Section 395 of the Income Tax Act, 2025, and Rule 213 of the Income Tax Rules, 2026. It is effective from 1 April 2026, replacing Form 13 under the old Income Tax Act, 1961.

Who is Eligible to file Form 128 ?

Any person whose actual tax liability is lower than the TDS or TCS deducted can file Form 128.
Irrespective of whether you are an individual or a company, receiving business income, capital gains or other income, you are eligible to file Form 128.

Form 128 classifies applicants into four categories:

How to File Form 128 on TRACES Portal - Step-by-Step

Form 128 must be filed online. There is no offline option - it cannot be submitted manually or through the income tax e-filing portal (incometax.gov.in). The only route is the TRACES portal at www.tdscpc.gov.in.

1. Log in to the TRACES Portal - Visit TRACES portal  and log in as a Taxpayer using your PAN and TRACES credentials.
2. Navigate to Form 128 - Go to: TRACES Dashboard - e-file and View - File Forms - Form No. 128
3. Fill the Online Form - Select your applicant category, fill in income details, payer information, and tax liability particulars. The new smart form auto-populates several fields from your TRACES profile.
4. Upload Supporting Documents - Upload your income computation, ITRs, financial statements, and any other required documents in the prescribed format.
5. E-Verify and Submit - Verify using a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC), such as Aadhaar OTP or net banking.
6. Receive ARN - On successful submission, you receive an Acknowledgement Receipt Number (ARN) confirming that the application has been filed.
7. Application Processed by AO - Your application is reviewed and processed by the Assessing Officer or the automated system.
8. Download the Certificate - Once approved, the lower/nil deduction certificate is available digitally on TRACES for download and sharing with your payer.

What is the Structure of Form 128

Annexures Required 

Documents and Information Required to File Form 128

Lower TDS Certificate for Property sale transactions

One of the most common uses of Form 128 is for property sale transactions. When a property is sold in India, the buyer is required to deduct TDS on the sale consideration. 
Key points for property transactions:

• Apply before the sale transaction is finalised - the certificate must be in place before TDS is deducted
• Provide the buyer's details (TAN) in Annexure-I of Form 128
• The certificate specifies the exact lower rate at which the buyer must deduct TDS
• Persons buying property from NRIs can apply for lower deduction directly on the Income Tax Portal using PAN based facility.

Key Takeaways

1. Form 128 replaces the old Form 13 under the Income Tax Act 2026, which is governed by Section 395 and Rule 213 of the Income Tax Rules, 2026. 
2. Form 128 is used to request a certificate authorising your payer to deduct TDS/TCS at a minimal rate or no deduction at all. 
3. Filing Form 128 is optional, but it helps with cash flow management by keeping more money with you throughout the year instead of waiting to get a refund. 
4. Any company or individual whose actual tax liability is lower than the TDS/TCS deducted can apply for four types of applicants:  NGO’s, Specified Entities, Business/Profession earners and others. 
5. Form 128 must be filed online through the TRACES portal only. 

Conclusion 

Form 128 allows you to get tax deducted at a lower rate instead of waiting for a refund after filing your ITR. It is not mandatory, but worth applying for it if your actual tax liability is lower than the usual TDS/TCS rate, specifically for regular income like rent or professional fees, or one-off transactions like property sales. Form 128 is filed online through the TRACES portal and needs Assessing Officer approval; apply in advance so your prayer can honour the lower rate from the start.