Lower TDS certificate: what it saves, and when to apply
Tax is withheld against what you are paid, not against what you earn from it. This is the only thing that changes that at source.
It is a certificate from the Assessing Officer telling whoever is paying you to deduct tax at a lower rate, or none at all. Without it, tax on a payment to a non-resident is withheld against the whole amount rather than your actual income from it. Apply as soon as the deal is agreed — it has no retrospective effect.
If you miss it: A certificate has no retrospective effect. Once the payer has deducted and deposited, it does nothing about the money already gone, and the only route left is a refund the following assessment year at the earliest.
s. 197 with Form 13 up to 2025-26 · s. 395 with Form 128 from 2026-27 · checked 10 September 2026
Key takeaways
- It is the only way to stop over-withholding at source. Once the payer has deducted and deposited, the only route left is a refund.
- It is not just for property. Rent, interest, professional fees and any other payment subject to withholding can be covered.
- Form 15G and Form 15H are for residents. A non-resident cannot use them at all.
- Allow a month to three for processing, and apply before the payment is due rather than before it is made.
- A certificate is specific: to a payer, a rate, an amount and a period. One certificate does not cover a second buyer or a second year.
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 on 1 April 2026 and renumbered almost everything. It did not renumber your notice. Under the repeal-and-savings provision, an assessment, reassessment, appeal or penalty for a tax year before 1 April 2026 stays under the 1961 Act — even where the notice itself arrives after that date. So the number that governs the letter in your hand is decided by the year the letter is about, not by the date it was posted. Both numbers are given on every page here, with the governing one first.
“The provisions of the repealed Income-tax Act shall continue to apply to any proceeding pending on the date of commencement of this Act and to any proceedings initiated on or after the 1st April, 2026 (including notices, assessment, reassessment, recomputation, rectification, penalty, reference, revision and appeals) in respect of any tax year beginning before the 1st April, 2026.”
- Notice about 2025-26 or earlier
- The Income-tax Act, 1961 numbering is the one that governs it — s. 143(2), s. 156, s. 220, Form 26AS, Form 16. That is most letters arriving in 2026.
- Notice about 2026-27 or later
- The Income-tax Act, 2025 numbering governs — s. 270(8), s. 289, s. 411, Form 168, Form 130. In practice, letters from 2027 onward.
What the certificate actually changes
Withholding on a payment to a non-resident is computed against the payment, not against the income in it. On a property sale that means the sale price rather than the gain. On rent it means the rent rather than the rent less what you are allowed against it. The payer has no way to know your costs, so the law does not ask them to work out your income — it asks them to withhold against the sum they are handing over.
The certificate replaces that default with a number the Assessing Officer has looked at. You put your expected income from the payment in front of them, with the evidence; they satisfy themselves; and they issue a certificate directing the payer to deduct at the rate stated, or at nil. The payer then deducts that instead.
That is the whole mechanism, and there is no other one. There is no declaration you can sign, no undertaking you can give the payer, and no letter from a Chartered Accountant that substitutes for it. Form 15G and Form 15H, which residents use to stop deduction on interest, are unavailable to non-residents entirely.
A certificate issued after the payer has deducted and deposited does nothing about the money already gone. That is the single most important operational fact on this page, and it is why the timing section below matters more than anything else here. Once the tax is deposited, you are in the refund queue, and the refund is slower than the certificate would have been.
What it is worth, in money
The question is not whether the certificate is a good idea in the abstract. It is whether the amount it frees up, for the time it frees it up, is worth the fee and the effort of getting it. That is an arithmetic question and it usually answers itself.
| Sale price | Cost | Withheld without a certificate | Actual tax on the gain | Locked up |
|---|---|---|---|---|
| ₹1,50,00,000 | ₹1,10,00,000 | ₹22,42,500 | ₹5,20,000 | ₹17,22,500 |
| ₹80,00,000 | ₹30,00,000 | ₹11,44,000 | ₹6,50,000 | ₹4,94,000 |
| ₹50,00,000 | ₹60,00,000 — sold at a loss | ₹6,50,000 | Nil | ₹6,50,000 |
Long-term, so 12.5% plus surcharge and cess, withheld on the whole price and taxed on the gain. Work your own figures with the calculator linked below rather than reading across from these.
Put the professional fee for obtaining a certificate next to what the locked-up amount would earn you over the eighteen months or so before a refund arrives, and add the fact that a refund can itself go wrong — a mismatch, an unvalidated bank account, an old demand set off against it. On any meaningful sum the certificate wins comfortably. On a small payment with a thin margin over cost, it may not.
It is not only for property sales
Property dominates the search traffic, but the certificate covers any payment on which tax has to be withheld and the withholding exceeds the real liability.
- A property sale, where withholding is on the consideration and tax is on the gain. The largest gap, and the commonest application.
- Rent on a property you own in India, where withholding is on the gross rent and your taxable income is after the statutory deduction, municipal taxes and interest on any loan.
- Interest, where a treaty gives a lower rate than the domestic withholding rate.
- Professional or technical fees, where costs against the receipts are substantial or a treaty applies.
- Any payment where your total Indian income for the year will fall below the threshold at which tax is payable at all — in which case a nil certificate is the right ask.
The provision is not confined to non-residents. A resident whose withholding consistently exceeds their liability — a professional with high costs against receipts, for instance — can apply on the same basis. The reason this subject is dominated by NRI material is that the gap is dramatic on a property sale and merely annoying elsewhere.
When to apply, and why people get this wrong
The right moment is as soon as the transaction is agreed and you can evidence it — typically once the agreement to sell is signed, and before the payment falls due. Not once the buyer asks about it. Not at registration.
Two things drive the timing, and both are outside your control. Processing takes time — commonly somewhere between a month and three, and longer where the officer asks for more material. And the payer needs a tax deduction account number before they can deduct on a payment to a non-resident at all; individual buyers usually do not have one, do not know they need one, and their application adds weeks that nobody budgeted for.
Against that, a sale timetable is rarely generous. The practical consequence is that the certificate application should start before the sale process feels ready for it, and the buyer should be told on day one that they need a tax deduction account number.
- 1The moment a sale looks likely: check you have a PAN, and check the buyer has or is applying for a tax deduction account number.
- 2On signing the agreement to sell: assemble the cost evidence — the original purchase deed, proof of what you paid, and documents for any improvement you will claim.
- 3Immediately after: file the application, with the computation of expected income and the draft agreement.
- 4Through processing: answer queries quickly. A query left for a fortnight adds a fortnight, and the sale does not wait.
- 5On issue: give the certificate to the payer before they pay. Check they have actually applied it — a certificate in your inbox that the buyer never used is worth nothing.
What a certificate covers, and what it does not
A certificate is specific rather than general, and the specificity catches people out.
- It names the payer. A certificate obtained for one buyer does not cover a different buyer if the sale falls through and you sell to someone else.
- It states a rate or a nil direction, and an amount up to which it applies. A payment beyond that amount is outside it.
- It runs for a period, usually within a single financial year. It does not roll forward into the next year on its own.
- It does not settle your liability. It is a direction about withholding, not an assessment, and you still file a return and pay what is actually due.
- It does not bind the department on the merits. Nothing about a nil certificate prevents a later scrutiny of the same transaction.
A certificate issued under section 197 of the 1961 Act for a period falling in tax year 2026-27 remains valid for payments on or after 1 April 2026 — it does not need to be reissued under the new provision. Worth knowing if you obtained one before the changeover and a payer is querying it.
If the money has already been withheld
Then the certificate is no longer the route, and there is no shortcut. You file a return for the year, declare the income, claim credit for the tax withheld, and the excess comes back as a refund after processing — realistically the following assessment year at the earliest.
One thing is worth doing before you file, because it is the commonest reason the refund does not arrive. Check that the withholding actually appears against your PAN in your tax credit statement. It appears only when the payer has both deposited the money and filed the statement reporting it, and an individual buyer handling a non-resident deduction for the first time frequently gets one or both wrong. If the credit is not showing, the refund cannot be claimed, and that is a problem to solve before filing rather than after.
The second thing is the bank account. A refund reaches a pre-validated account, and validation is where non-resident refunds most often stall.
Worked examples
Example 1: A sale where the certificate was worth ₹17 lakh
- Sale price
- ₹1,50,00,000
- Cost
- ₹1,10,00,000
- Held
- 5 years
- Certificate
- Applied for on signing the agreement
- 1.Without a certificate the buyer withholds 14.95% of the whole ₹1.5 crore — ₹22,42,500 — because the consideration exceeds ₹1 crore and attracts the 15% surcharge band.
- 2.The actual liability is 13% of the ₹40,00,000 gain, which is ₹5,20,000.
- 3.The certificate, issued for approximately the real liability, means the buyer withholds around ₹5,20,000 instead of ₹22,42,500.
- 4.₹17,22,500 stays with the seller at completion instead of arriving as a refund eighteen months later.
The certificate was worth more than four times the tax on the transaction. On numbers like these the professional fee is not a close question.
Example 2: A sale at a loss, where nobody thought to apply
- Sale price
- ₹50,00,000
- Cost
- ₹60,00,000
- Gain
- A loss of ₹10,00,000
- Certificate
- None — it did not occur to anyone
- 1.The buyer withholds 13% of ₹50,00,000 — ₹6,50,000 — because withholding is computed on the price and the price does not know what you paid.
- 2.There is no gain, so there is no tax on the transaction at all. Every rupee withheld is refundable.
- 3.A nil certificate was available and would have been straightforward to obtain: the loss is provable from two deeds.
- 4.Instead the seller waits for a refund of the entire amount, and carries the risk that the buyer's reporting goes wrong in the meantime.
₹6,50,000 withheld on a transaction that lost money. This is the case people most often miss, because it does not occur to them that tax can be withheld on a loss — and it is the easiest nil certificate to justify.
Example 3: Rent, where the gap is smaller but annual
- Annual rent
- ₹9,60,000
- Municipal taxes and loan interest
- ₹3,10,000
- Withholding without a certificate
- On the gross rent
- 1.Withholding on rent paid to a non-resident is computed on the gross rent, before the statutory deduction and before municipal taxes and loan interest.
- 2.The taxable income from the property is materially lower than the rent, so the withholding exceeds the liability every year.
- 3.A certificate can be sought for the year, directing the tenant to deduct against the real expected income.
- 4.Because it runs for a period rather than indefinitely, it is an annual exercise rather than a one-off.
Individually smaller than a property sale, but it repeats every year and compounds. Worth doing where the property is financed, because the loan interest is what makes the gap wide.
More questions about this page
What is a lower TDS certificate?▼
Who can apply for a lower TDS certificate?▼
When should I apply for a lower TDS certificate?▼
Can I use Form 15G or Form 15H instead?▼
How long does a lower TDS certificate take?▼
Does one certificate cover more than one buyer or year?▼
Is a certificate issued under section 197 still valid after 1 April 2026?▼
What happens if I do not get a certificate?▼
Does a nil certificate mean I owe no tax?▼
Do I need a Chartered Accountant to apply?▼
Official sources checked
The statutes, rules and regulator pages the statements on this page were checked against.
- Income-tax Act, 2025 — s. 395 (certificates for deduction at a lower rate or nil), s. 393(2) (withholding on payments to non-residents)The successors to ss. 197 and 195 of the 1961 Act, applying from tax year 2026-27. The application form becomes Form 128.
- Income-tax Act, 1961 — s. 197 with Form 13, and s. 195Governs applications and certificates for tax year 2025-26 and earlier, and certificates already issued for periods falling in 2026-27 remain valid without reissue.
- Income-tax Act, 2025 — s. 393(6), and the 1961 Act s. 197AThe declaration route, Form 15G and Form 15H, which is available to residents only and not to non-residents.
You are here
Deciding whether a lower or nil deduction certificate is worth obtaining
What to do next
- 1
Work out what it is worth on your own figures first
Withheld against the sale price, taxed on the gain — the tool shows the gap and how long it sits with the government.
NRI property sale TDS calculator → - 2
If you have decided to apply
What goes in the application, the documents, how long it takes, and what a rejection looks like.
Form 128 → - 3
If you are claiming a treaty rate rather than a lower domestic one
Treaty relief runs on a different document entirely, and it has its own annual cycle.
Form 10F, now Form 41 → - 4
If the money was already withheld and is not showing against your PAN
That stops the refund, and three of the four causes can only be fixed by the payer.
Form 26AS mismatch → - 5
If a notice has already arrived about the transaction
Eight notice types, matched by what the letter says rather than by the section number on it.
Which income tax notice is this? →
This page is general information about procedure and deadlines, checked against the provisions in force on the date shown. It is not advice on your own assessment, and a notice that looks routine can turn on facts a page cannot see. Where money or a limitation period is at stake, put the notice in front of a practising Chartered Accountant.