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

Under the new Income Tax Act 2025, Form 128 replaces the old Form 13. It allows both resident and non-resident taxpayers to apply for a certificate authorising their payers to deduct or collect tax at a lower or nil rate. Your Assessing Officer processes the certificate through the TRACES portal and - once approved - your payer is legally bound to honour it.

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.

Quick Reference: Old vs New Mapping

Why Form 128 replaces Form 13?

Since the Income Tax Act 1961 was repealed and the 2025 Act is in force now, all the forms, rules and other compliances have been re-framed and streamlined to comply with the provisions of the Income Tax Act, 2025. 

Key Differences Between Form 13 and Form 128

Who Should 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:

1. Registered Non-Profit Organisation
2. Specified Entity referred to in Section 263(9)(c) of the Income Tax Act, 2025
3. Person carrying on business or profession
4. Others (individuals, HUFs, investors, NRIs, etc.)

The category you select determines which Annexures and declarations become applicable to your filing.

Is Filing Form 128 Mandatory?

No - Form 128 is  optional mechanism usingt which you can pro-actively reduce your TDS implications. In case the form is not filed, the TDS or TCS is deducted at normal rates, and excess deduction can be claimed as TDS refund in ITR.

Filing Form 128 is about cash flow management - it keeps your money in your hands during the financial year instead of with the government.

Form 128 Time Limit

Lower TDS/TCS deduction should be obtained before the transaction or payment occurs. Once TDS/TCS has been deducted or collected on a transaction, the application for that specific transaction cannot be processed.

• It is recommended to apply at the start of the financial year - ideally in April - for regular income like interest, rent, or professional fees.
• For transactions that are not carried out regularly, it is recommended to file form 128 before the transaction occurs. 
• There is no statutory limit on the number of times you can file Form 128 in a Tax Year - you can file multiple applications as income or transactions change.

The certificate, once issued, is valid for the period specified in it - generally for the current Tax Year - unless it is modified or withdrawn earlier by the Assessing Officer.

Structure of Form 128 - Parts A to F and Annexures

Form 128 is a structured multi-part form:

Part A: Applicant Details

Captures the applicant's basic identity: Name, Address, Status (individual/company/HUF/etc), PAN, Residential Status, and Contact Details.

Part B: Nature of Application

The applicant selects their category (from the four listed above) and provides details of the income or transaction for which the lower/nil certificate is being sought.

Part C: Tax Liability and Income Details

Details of existing tax liabilities - advance tax paid, TDS/TCS credits already available, and particulars of the income sources in question.

Part D & E: Declarations

Part D is the declaration section for Registered Non-Profit Organisations and Specified Entities under Rule 213. Part E is the declaration for all other applicants (individuals, businesses, etc.).

Part F: Verification

The final section is where the applicant verifies and digitally signs the application before submission.

Annexures 

• Annexure-I: Applicable for TDS applications where payer details are known
• Annexure-II: Applicable for TDS applications where the number of payers is likely to exceed 100 and their details are not available at the time of application - in such cases, the certificate is issued in the name of the applicant, who then generates Child Certificates for individual deductors
• Annexure-III: Applicable for TCS (Tax Collected at Source) applications

Documents and Information Required to File Form 128

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 a Child Certificate Under Form 128?

When you use Annexure-II of Form 128 (i.e., when you have more than 100 payers whose details are not yet available), the Income Tax Department issues a master certificate in your name. This master certificate authorises you to receive specified payments at the approved lower rate.

From this master certificate, you then generate Child Certificates - one for each payer/deductor who needs to deduct tax on your payments. Each child certificate specifies the exact rate at which that particular payer should deduct TDS.

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.

Also Read:
1. Form 121
2. Form 124
3. Form 130
4. Form 140
5. Form 145
6. Form 188