Form 128 is an application used to request a lower or nil deduction of TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) from the Income Tax Department.
It has been introduced under the Income Tax Act, 2025, and replaces the earlier Form 13 under the Income Tax Act 1961. The purpose of this form is simple:
If your actual tax liability is lower than the standard TDS/TCS rate, you can apply to reduce or eliminate tax deduction at source.
Once approved, the Assessing Officer issues a certificate specifying the reduced or nil rate, which must be followed by the payer while deducting tax.
| Basis |
Form 13 |
Form 128 |
| Applicable Law |
Income Tax Act, 1961 |
Income Tax Act, 2025 |
| Relevant Sections |
Section 197 & 206C(9) |
Section 395(1) & 395(3) |
| Applicability Period |
Up to FY 2025–26 |
From FY 2026–27 |
| Form Structure |
Basic format |
Structured, category-based form |
| Features & Functionality |
Limited tracking and flexibility |
Improved tracking, multiple deductors, better usability |
- Any taxpayer whose total tax liability is expected to be lower than the TDS or TCS being deducted can apply through Form 128 to reduce or eliminate such deductions.
- The form is available to all types of taxpayers, including individuals, companies, firms, HUFs, and NRIs, regardless of their residential or business status.
- It can be used for different types of income such as business or professional income, capital gains, interest, rent, commission, or any other income where TDS/TCS is applicable.
- Form 128 classifies applicants into four categories: Registered Non-Profit Organization, Specified Entity referred to in Section 263(9)(c) of the Income Tax Act, 2025, persons carrying on business or profession, and others (such as individuals, HUFs, investors, and NRIs).
- The category selected while filing the form determines the applicable annexures, disclosures, and declarations, making it important to choose the correct classification for smooth processing and approval.
No, Form 128 is not mandatory. It is an optional form that taxpayers can use when needed.
You can file Form 128 if you want a certificate for lower or nil TDS/TCS. This is useful when you expect your total tax liability for the year to be lower than the tax that would normally be deducted or collected on your income.
However, Form 128 applies only to income that is subject to TDS or TCS, such as professional fees, interest, rent, commission, or contract payments. If your income is not subject to TDS or TCS, you cannot use this form.
| Scenario |
Form 128 Filing |
| An individual earns interest from fixed deposits, but their total income is below the taxable limit |
Yes |
| A business incurs a loss during the year despite usually being profitable |
No |
| An individual earns rental income, but their total income is within the basic exemption limit |
Yes |
| A doctor earns professional fees, and total income exceeds the exemption limit |
No |
| A consultant earns professional income, but total income is below the exemption limit |
Yes |
There is no fixed deadline to file Form 128. You can apply at any time during the financial year.
However, you should file it before TDS or TCS is deducted or collected. Once tax has already been deducted on a transaction, the benefit cannot be applied to that transaction.
For best results, apply:
- At the start of the financial year (April) for regular income like interest, rent, or professional fees
- Before the transaction for one-time or irregular income
You can file Form 128 multiple times in a year as your income changes. The certificate remains valid for the period mentioned in it, usually for the same financial year, unless cancelled or modified earlier.
Form 128 is organised into multiple sections to capture complete details required for issuing a lower or nil TDS/TCS certificate:
Part A: Applicant Information
This section records the applicant’s basic profile, including name, PAN, address, contact details, residential status, and category (individual, company, HUF, etc.). These details help establish the identity and tax status of the applicant.
Part B: Application Details
Here, the applicant selects the applicable category and specifies the nature of income or transaction for which the lower or nil deduction certificate is requested. It also includes relevant details of the payer or transaction, where applicable.
Part C: Income and Tax Details
This section captures financial information such as estimated income for the year, existing tax liability, advance tax already paid, and TDS/TCS credits available. It helps the tax authority assess whether a lower or nil deduction is justified.
Part D & E: Declarations
Part D is specifically for registered non-profit organizations and specified entities covered under Rule 213, where they provide required declarations.
Part E applies to all other applicants, including individuals, firms, and companies, confirming the correctness of the information provided.
Part F: Verification
In this final section, the applicant verifies that all details are accurate and complete. The form is then authenticated using a digital signature or an appropriate verification method before submission.
Annexures:
- Annexure I: Used for TDS applications where details of deductors (payers) are available at the time of filing
- Annexure II: Applicable when the number of deductors is large (more than 100) or their details are not available. In such cases, the certificate is issued in the applicant’s name, allowing them to generate separate child certificates for each deductor
- Annexure III: Used for TCS applications, where tax is collected at source instead of being deducted.
| Document |
Purpose |
| Applicant’s PAN |
Mandatory - Form 128 cannot be submitted without PAN |
| Calculation of estimated total income and tax liability for the year |
Main document justifying the request |
| ITRs, Audit Reports, and financial statements of past 4 years |
Financial data reviewed by the Assessing Officer |
| Details of advance tax paid and TDS/TCS credits |
Shows existing tax payments to support the lower liability claim |
| Details of payers, including their TAN |
Required to identify the deductor/collector of tax at the approved lower rate |
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Log in to the TRACES portal
Visit the TRACES website and log in as a taxpayer using your PAN and registered credentials.
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Access Form 128
From the dashboard, navigate to the e-filing section and select the option to file Form 128.
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Fill in the application details
Choose the correct applicant category and enter details such as estimated income, tax liability, and payer (deductor) information. Some fields may be auto-filled based on your profile.
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Upload supporting documents
Attach required documents like income computation, previous ITRs, and financial statements in the prescribed format.
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Verify the application
Complete verification using a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC), such as Aadhaar OTP or net banking.
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Submit and receive ARN
After submission, an Acknowledgement Receipt Number (ARN) is generated for tracking your application.
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Processing by the department
The application is reviewed by the Assessing Officer or processed through the system.
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Download the certificate
Once approved, download the lower or nil TDS/TCS certificate from the TRACES portal and share it with the payer.
Lower TDS Certificate for Property Sale Transactions
Form 128 is widely used in property transactions, especially where the applicable TDS rate is higher than the actual tax liability. Under tax provisions, the buyer is required to deduct TDS on the total sale consideration, which can result in excess deduction if the seller’s taxable gain is lower.
To avoid this, the seller can apply for a lower or nil TDS certificate using Form 128.
Some important points to keep in mind:
- The application should be made before the transaction is completed, as the certificate must be available before TDS is deducted.
- Details of the buyer, including TAN, must be provided while filing the form (typically in Annexure-I).
- Once issued, the certificate will clearly mention the reduced rate at which the buyer should deduct TDS.
In cases where property is being purchased from an NRI, the buyer may also have the option to apply for a lower deduction certificate through the income tax portal using a PAN-based facility, depending on the applicable process.
In cases where you have a large number of payers and their details are not fully available at the time of filing, Form 128 allows you to apply using Annexure-II. Based on this, the Income Tax Department issues a primary or master certificate in your name.
This master certificate sets the approved lower or nil TDS rate for your income. From this, you can generate separate child certificates for each payer or deductor. Each child certificate clearly specifies the rate at which that particular payer must deduct tax.
This system is especially useful for taxpayers dealing with multiple clients or income sources, as it allows better control and flexibility in managing TDS across different payers.
