Small Taxpayers to Get Lower, Nil TDS Certificates without Applications to Assessing Officer: Union Budget 2026

The Union Budget for the financial year 2026-27 was presented by Finance Minister NirmalaSitharaman in the Lok Sabha on Sunday, February 1, 2026, marking the ninth consecutive budget presented by Sitharaman.

In a significant compliance relief measure for small taxpayers, the Finance Minister has announced that certificates for lower or nil Tax Deducted at Source (TDS) will now be issued through a rule-based automated process, without requiring applications to be filed before the Assessing Officer (AO).

The measures were introduced as part of the direct tax proposals in Part B of the Budget.

Primarily, the reform intends to simplify procedures and reduce taxpayers’ interface with the income tax department. At present, taxpayers seeking lower or nil deduction of tax at source are required to submit applications to the Assessing Officer, who examines the request and grants approval on a case-by-case basis. This process is often long-drawn out and time-consuming, and can even be subject to recurrent procedural delays.

The system-driven process is intended to replace the discretionary approval mechanism with an objective framework that ensures uniformity in grant of certificates.

TDS and Cash Flow

The Finance Minister noted that excessive deduction of tax at source often results in avoidable cash flow issues for small taxpayers, particularly when their final tax liability is substantially lower or nil.

As government processes continue to acquiesce themselves with digital measures, it is proposed that ordinary citizens will benefit by ease of doing business and reduced human intervention in tax administration will make it much more effective and accurate.

While the Budget announcement sets out the policy change, the detailed framework, including eligibility conditions, thresholds and operational mechanisms are expected to be prescribed through relevant rules.

The eligibility conditions are likely to rely on parameters such as past returns, income patterns and tax payment history of the relevant taxpayers.

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