Summary of this article
Union Budget 2026 proposes automated lower or nil TDS certificate issuance
Past tax data to replace manual approvals for TDS relief
Change eases cashflow pressure for seniors, freelancers, professionals
Reform aims to cut refunds, paperwork, and tax department interaction
Union Budget 2026 proposes a simpler way for small taxpayers to obtain lower or nil tax deducted at source (TDS) certificates, reducing paperwork and delays in the process.
Many taxpayers end up with more TDS than what they finally owe. This is common among senior citizens, freelancers, and others whose income does not come in a steady monthly stream. To prevent this, they have to apply for a lower or nil TDS certificate.
How It Works Today
At present, taxpayers have to apply to the tax department and attach supporting documents, a process that often takes time to clear. Until a decision is made, tax continues to be deducted at the higher rate. In many cases, the extra tax comes back only as a refund at the end of the year.
1 January 2026
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What Budget 2026 Proposes
Budget 2026 suggests ending individual approvals for these requests. Instead, eligibility for a lower or nil TDS certificate will be decided using data it already has on record, such as earlier tax filings and deductions claimed. Where the numbers add up, the certificate will be generated on its own, without the taxpayer having to chase the department.
Says Ankit Jain, partner, Ved Jain and Associates: “The proposal to allow an automated process for enabling lower or nil rate certificates is a welcome step. Based on the past history of the taxpayer, generating a lower rate certificate would help in reducing working capital requirements for many businesses and unlock working capital for them. This is especially going to be helpful for many professional firms that have a higher rate of 10 per cent on which tax is deducted.”
What It Means For You
For people with irregular income or those living largely on interest, this means less money getting stuck with the tax department during the year.
It could also cut down the need to claim refunds after filing returns.
The impact will depend on how the system works in practice. Errors or delays in updating data could still create problems. But if the process runs as planned, it may ease a long-standing compliance issue for small taxpayers.
Adds Kunal Savani, partner, Cyril Amarchand Mangaldas: “Yes, the proposed TDS changes reduce the compliance hassles. For instance, earlier the taxpayer had to make a physical application for obtaining a nil or lower withholding tax certificate, which is now proposed to enable electronic verification and issuance of the certificate. These changes will reduce the interaction with the tax authorities and simplify the procedural part with faster resolution.”
