Rule 213: Lower or nil TDS and lower TCS certificate (Form 128)
Rule 213 prescribes the application and conditions for a certificate under section 395 for deduction of tax at a lower rate or no deduction (section 395(1)), or collection of tax at a lower rate (section 395(3)). The application is made in Form No. 128. The Assessing Officer considers the estimated tax for the year, the tax record of the last four tax years, existing liabilities and taxes already paid. Extra conditions apply to specified entities, registered non-profit organisations and dividend income. The certificate is issued in the name of the deductor or collector and is limited to the specified payments and amounts.
Official notified Income-tax Rules, 2026Need advice on Rule 213?
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Rule 213 - Application for grant of certificates for deduction or collection of income-tax at any lower rates, or no deduction of income-tax
(1) An application shall be made in Form No. 128 for grant of a certificate for — (a) the deduction of income-tax at any lower rates, or no deduction of income-tax, under sub-section (1) of section 395; or (b) the collection of income-tax at any lower rates under sub-section (3) of the said section.
(2) The provisions of sub-rule (1) may not be applicable to the person, who is eligible for a certificate of no deduction of tax in respect of income or sum specified under rule 209.
(3) The Assessing Officer may issue the certificate specified in sub-rule (1), after taking into consideration the following:— (a) tax payable on the estimated income for the tax year under consideration; (b) tax paid or payable on the returned income, assessed income or estimated income, as the case may be, of last four tax years; (c) existing liability under the Act, and the Income-tax Act, 1961 (43 of 1961) (as it existed prior to its repeal); and (d) advance tax payments, taxes deducted or collected at source at the credit of the taxpayer as on the date of application for the tax year for which application is made.
(4) In case of a person being a specified entity, as referred to in section 263(9)(c), or a registered non-profit organisation, the Assessing Officer, before issue of certificate specified under sub-rule (1), shall in addition to conditions specified in sub-rule (3), take into consideration the following:— (a) the specified entity is approved for the purpose of exemption from income-tax as on the date of application and also as on date of grant of certificate for that tax year; and (b) the person concerned has furnished the returns of income for last four tax years, for which such returns became due on or before the date on which the application under sub-rule (1) is made.
(5) In a case, where a certificate is to be issued in respect of dividend income referred to in section 393(1) [Table: Sl. No. 7], the following conditions shall also be required to be fulfilled, in addition to conditions specified in sub-rule (3): –– (a) the shares in respect of which the certificate is sought shall be shares in public companies; and (b) (i) such shares stand in the name of the applicant and are beneficially owned by him and the dividends therefrom are not includible in total income of any other person under sections 96 to 99; or (ii) such shares stand in the name of the applicant and are held by him on behalf of a registered non-profit organisation and the dividends therefrom are exempt from tax under Chapter XIX-B of the Act.
(6) The certificate specified under sub-rule (5) shall cease to operate from the date of notice to the company for transfer of shares mentioned therein to another person, to the extent of income corresponding to the shares so transferred.
(7) The certificate specified under this rule shall be valid for such period of the tax year, as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period.
(8) The certificate shall be issued in the name of the person responsible for deducting or collecting the tax, under advice to the applicant and shall be valid only in respect of–– (a) a specified payment from the specified deductor, to the extent of the amount specified in the certificate; and (b) a specified receipt from the specified collector, to the extent of the amount specified in the certificate.
(9) Where the number of persons responsible for deducting the tax is likely to exceed one hundred and details of such persons are not available with the applicant at the time of making application, the certificate for deduction of income-tax at lower rate may be issued in the name of the applicant authorising him— (a) to receive specified payments at appropriate rate of deduction; (b) to generate appropriate certificate and provide to the person responsible for deducting tax; and (c) such certificate shall be generated from the portal of the Income-tax Department.
Rule breakdown
Application — Rule 213(1) and (2)
An application in Form No. 128 is made for a certificate for deduction at a lower rate or no deduction under section 395(1), or for collection at a lower rate under section 395(3).
Sub-rule (1) "may not be applicable" to a person eligible for a no-deduction certificate under Rule 209. That person uses Form No. 126 under Rule 209.
What the Assessing Officer considers — Rule 213(3) to (5)
The Assessing Officer considers (a) tax payable on the estimated income for the tax year; (b) tax paid or payable on the returned, assessed or estimated income of the last four tax years; (c) existing liability under the Act and under the Income-tax Act, 1961 as it existed before its repeal; and (d) advance tax and TDS or TCS at the credit of the taxpayer on the application date for that tax year.
For a specified entity referred to in section 263(9)(c) or a registered non-profit organisation, the Assessing Officer also considers whether the entity is approved for exemption both on the application date and on the date of grant, and whether returns for the last four tax years that fell due have been furnished.
For dividend income under section 393(1) [Table: Sl. No. 7], the shares must be in public companies and either stand in the applicant's name and be beneficially owned by him (with dividends not includible in another person's income under sections 96 to 99), or stand in his name and be held on behalf of a registered non-profit organisation whose dividends are exempt, as the sub-rule is printed.
Validity and scope — Rule 213(6) to (9)
A dividend certificate stops operating from the date the company is given notice of transfer of the shares, to the extent of income on the transferred shares.
The certificate is valid for the period of the tax year specified in it, unless the Assessing Officer cancels it earlier.
It is issued in the name of the person responsible for deducting or collecting tax, under advice to the applicant, and is valid only for the specified payment from the specified deductor, or the specified receipt from the specified collector, up to the amount specified.
Where deductors are likely to exceed one hundred and their details are not available when applying, a lower-rate certificate may be issued in the applicant's name authorising him to receive specified payments at the appropriate rate and to generate the appropriate certificate, from the Income-tax Department portal, and provide it to the person responsible for deducting tax.
Finance Act 2026 change to section 395
Section 86 of the Finance Act, 2026 inserted section 395(6). It allows the application under section 395(1)(a) also to be filed before the prescribed income-tax authority, subject to prescribed conditions. That authority, on electronic verification, may issue a lower or nil deduction certificate or reject the application. The same section amended section 395(1)(c) to cover certificates issued under section 395(6). Rule 213 as notified, and the amendments reviewed for this page, do not prescribe that authority or those conditions.
Key takeaways
Form No. 128
Lower or nil TDS and lower TCS certificates are applied for in Form No. 128.
Four-year record
The Assessing Officer looks at the last four tax years and existing liabilities.
Deductor-specific
The certificate is issued in the deductor's or collector's name for specified payments and amounts.
Practical checklist
- Prepare an estimate of income and tax for the year before applying.
- Clear or explain existing tax liabilities.
- List each deductor and the expected payments, unless Rule 213(9) applies.
Avoid
- Do not use Form No. 128 where Rule 209 and Form No. 126 apply.
- Do not apply a certificate to payments or amounts it does not specify.
FAQs
Which form is used to apply for a lower TDS certificate?
Form No. 128, under Rule 213(1).
What does the Assessing Officer look at?
Estimated tax for the year, tax on income of the last four tax years, existing liabilities under both Acts, and advance tax and TDS or TCS already at the taxpayer's credit (Rule 213(3)).
Is the certificate valid for all payers?
No. It is issued in the name of the deductor or collector and covers only the specified payment or receipt up to the specified amount, except in the over-one-hundred-deductors case in Rule 213(9).
Can a certificate be cancelled?
Yes. Rule 213(7) refers to cancellation by the Assessing Officer before the specified period ends, and section 395(5) of the Act allows cancellation after giving the applicant a reasonable opportunity.
Glossary
- Form No. 128
- Application for a lower or nil deduction or lower collection certificate.
- Specified entity
- An entity referred to in section 263(9)(c) of the Act.
- Registered non-profit organisation
- A non-profit organisation registered under the Act.