Lower deduction certificate

What the certificate does

Tax deducted at source is often more than the tax actually owed. A certificate from the Assessing Officer authorises the payer to deduct at a lower or nil rate instead, so that the excess does not have to be recovered later as a refund.

From 1 April 2026 the application is made under section 395 of the Income-tax Act, 2025 in Form 128. These replace section 197 and Form 13 of the 1961 Act.

When it is usually sought

• Sale of Indian property by a non-resident, where tax would otherwise be deducted on the whole sale price rather than on the gain
• Rent paid to a non-resident landlord
• Interest and other income, where total Indian income is low
• Payments to non-resident group entities and service providers

How the application runs

• The real liability is computed from the transaction documents
• Form 128 is prepared and filed online, with supporting papers
• Queries from the Assessing Officer are answered
• The certificate is shared with the payer before payment

Timing

The application has to be made before the payment, and processing takes time. It is best started as soon as the transaction is reasonably certain.