—Guide
Lower TDS Certificate in India: When to Apply and How It Works
When a lower or nil TDS certificate makes sense, how to apply on TRACES, what the officer considers, and how payers apply the certificate.
If your customers deduct TDS at standard rates but your actual tax will be much lower, you end up waiting a long time for refunds. A lower or nil deduction certificate fixes that at the source. This guide explains how it works.
Note: this article describes the rules under the Income-tax Act, 1961. The Income-tax Act, 2025 applies from 1 April 2026 (tax year 2026-27), with renumbered provisions, so check the current position for later periods.
When It Makes Sense
- Businesses with thin margins, where TDS on gross receipts exceeds tax on profit.
- Businesses with current or brought-forward losses.
- Entities with exempt income.
- Landlords whose rental TDS is high relative to their overall tax.
How to Apply
- Prepare a projection of income and tax for the current year.
- List the payers expected to deduct TDS, with their TANs and estimated amounts.
- Apply online through TRACES, with past returns and supporting documents.
- Respond to any queries from the Assessing Officer.
What the Officer Considers
- Your estimated income and tax for the year.
- Your tax history, including past returns and assessments.
- Outstanding tax demands.
- TDS already deducted in the year.
What You Get
A certificate specifying the rate — lower or nil — for payments from named payers, up to specified amounts, for the financial year.
Using It
- Give a copy to each named payer.
- Payers apply the certified rate from the date they receive it.
- Once payments exceed the certified amount, the normal rate applies again.
- Apply again each year.
Apply Early
Certificates generally apply only from when they're issued, not retrospectively. Applying in April captures the most benefit.
Getting Help
Think Filing prepares projections and applies for lower or nil TDS certificates for businesses and landlords.