Union Budget 2026-27: Small Taxpayers to Obtain Lower or Nil Deduction Certificates Without Approaching the Assessing Officer [Read Finance Bill 2026]

The Union Budget for the Financial Year 2026-27 was presented by Finance Minister Nirmala Sitharaman in the Lok Sabha today (Sunday, 1 February 2026).

The finance minister proposed the scheme for small taxpayers for ease of paying taxes, wherein the small taxpayer can obtain lower or nil deduction certificates from the assessing officer by filing the application.

Section 395(1) of the Income Tax Act, 2025pertains to the issuance of certificates for the deduction of tax at source and tax collection at source at the lower or nil rate

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As per the existing provision, the assessee has to make an application to Assessing officer (AO). Upon verification of the AO that the total income of the assessee justifies the deduction of the income tax at the lower rate or nil income tax, he shall issue a certificate for income tax at the lower rate or nil rate of tax at source.

It was proposed by the finance minister that to ease the compliance of burden of small taxpayers, an option is to be provided to the assesee to file the application for issuance of the certificate for lower or nil deduction of income-tax electronically before the prescribed income-tax authority.

Upon electronic verification of the application, the authority may either issue a certificate for deduction of income-tax at a lower rate or for no deduction, or reject the application where prescribed conditions are not fulfilled or where the application is incomplete.

The amendment will take effect from the 1st day of April, 2026.

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