No More Nil TDS Certificates Under New Tax Bill 2025: Impact on Indians and NRIs Explained
Taxpayers can now only apply for a Lower TDS certificate, which indicates that while there will be no nil deduction, tax will still be withheld at a lower rate than the usual TDS rate
Income Tax Bill 2025 – TDS Certificates – No More Nil TDS Certificates – taxscan
Income Tax Bill 2025 – TDS Certificates – No More Nil TDS Certificates – taxscan
The proposed Income Tax Bill 2025 has removes the option to obtain a Nil TDS certificate for all the taxpayers, including Indian residents and NRIs. The proposed new Income Tax Bill 2025 appears to eliminate the concept of a "nil TDS" certificate for both Indian taxpayers and non-residents, including non-resident Indians ( NRIs ), by eliminating the two terms "no deduction."
When a taxpayer anticipates receiving income on which no income tax is due for any reason, they must apply online for a nil TDS certificate. The Income Tax Department provides the Nil TDS certificate to offer assistance to taxpayers, both residents and non-resident individuals.
It allows certain taxpayers to receive payments without any tax being deducted. If the taxpayer's income is below the taxable limit or they are exempt from paying taxes, they can use this certificate to avoid TDS.
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Taxpayers can now only apply for a Lower TDS certificate, which indicates that while there will be no nil deduction, tax will still be withheld at a lower rate than the usual TDS rate. This will help government to track income better by removing Nil TDS certificates and also prevent taxpayers from underreporting their income.
Impact Indian Residents
It becomes mandatory to deduct TDS even if the taxpayer's income is below the taxable limit when considering the effect on the residents. Additionally, if too much tax is withheld, filling out becomes required. Furthermore, in contrast to the previous system, which completely avoided deductions with a Nil TDS certificate, taxpayers now have to file an ITR in order to obtain a refund.
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Impact in NRIs
Section 195 of the Income Tax Act defines one of the main sources of income for the Government of India is the tax collected from money paid to another individual or organisation. This is relevant whether a person earns money through interest or other sources.
NRIs would now only receive a Lower TDS certificate if their income was exempt or they owed no taxes, rather than a Nil TDS certificate. Refunds for any excess TDS deducted need the filing of an ITR.
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How to apply?
- You can apply by filling out Form 13 on the TRACES website, which asks for information about your income, tax liability, and why you want a lower rate.
- Details of income, PAN, and evidence of losses or exemptions are the necessary documents. A Tax Residency Certificate might be required for NRIs to access DTAA advantages.
NRIs and Indian citizens alike would face additional compliance burdens as a result of the Income Tax Bill 2025's elimination of the Nil TDS Certificate, which is a move toward tighter tax monitoring. Even if a taxpayer has no outstanding taxes, they will still be required to file an ITR in order to receive a refund.
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