Goodbye Form 13, Hello Form 128: Key Changes Taxpayers Must Know

The compliance framework for obtaining a Nil or Lower TDS (Tax Deducted at Source) Certificate has undergone an important transformation with the introduction of Form 128 under the Income-tax Act, 2025. This new form replaces the earlier Form 13, bringing with it structural simplifications, reduced documentation requirements, and a more focused data submission process.

For taxpayers involved in property transactions, high-value payments, non-resident remittances, or cases where actual tax liability is lower than prescribed TDS rates, this change carries significant practical implications. Let’s examine the development in depth.

1. Understanding the Purpose of Nil/Lower TDS Certificates

Under the TDS mechanism, tax is deducted at prescribed rates at the time of payment or credit. While this ensures steady revenue collection for the government, it can sometimes lead to excess deduction, especially where:

• The taxpayer’s estimated income is lower.
• Brought-forward losses reduce taxable income.
• Exemptions or deductions significantly impact final tax liability.
• A property sale generates lower capital gains than the standard TDS rate assumes.
• A non-resident’s effective tax liability is lower due to treaty benefits.

To address such situations, the law allows taxpayers to apply for a Nil or Lower TDS Certificate, authorizing the payer to deduct tax at a reduced rate or not deduct at all.

Until now, this application was made using Form 13. With the enactment of the Income-tax Act, 2025, Form 128 has replaced Form 13.

2. Why the Shift from Form 13 to Form 128?

The earlier Form 13 process was widely viewed as documentation-heavy and administratively cumbersome. Applicants were required to submit:

• Complete Income Tax Returns (ITRs) for the preceding four assessment years
• Computation statements
• Supporting financial documents
• PAN, TAN, or Aadhaar details of the payer
• Extensive disclosures beyond core data points

In practical scenarios – particularly property transactions – this resulted in:

• Delays in application filing
• Increased compliance costs
• Duplication of information already available in the tax department’s database
• Administrative back-and-forth with the Assessing Officer

Recognizing these challenges, the new Form 128 seeks to reduce redundancy while preserving verification standards.

3. Major Structural Changes Introduced in Form 128

A. Reduced ITR Documentation

Earlier (Form 13): Applicants were required to upload copies of ITRs for the previous four assessment years.

Now (Form 128): Only essential ITR particulars are required, including:

• ITR acknowledgement number
• Date of filing
• Taxable income declared
• Tax liability computed

This shift is significant. Instead of submitting full return documents, applicants now provide key reference data. Since the tax department already has access to filed returns, this change eliminates unnecessary duplication.

Impact:

• Lower documentation burden
• Faster application preparation
• Reduced file size and procedural complexity

B. Simplified Payer Identification Requirements

Under the old regime, applicants had to furnish:

• TAN, PAN, or Aadhaar of the payer.

Under Form 128:

• Only either TAN or PAN of the payer is required.

This is particularly helpful in property transactions or cross-border payments where collecting multiple identification details from the payer created avoidable friction.

C. Focused Financial Disclosure

While documentation has been reduced, the form still requires:

• Estimated income for the relevant financial year
• Projected tax liability
• Details of payments subject to TDS
• Justification for requesting lower or nil deduction

The Assessing Officer continues to evaluate:

• Past compliance history
• Current year income estimates
• Outstanding tax demands (if any)
• Accuracy and consistency of disclosures

Thus, simplification does not mean relaxation of scrutiny – it means smart compliance.

4. Procedural Framework: What Remains the Same?

Although the format is streamlined, the procedure continues to be largely manual:

1. Submission: Form 128 is filed electronically through the Income Tax e-filing portal.
2. Examination: The Assessing Officer reviews the application.
3. Clarifications (if required): Additional information may be requested.
4. Approval/Rejection: If satisfied, the officer issues a Nil or Lower TDS Certificate.
5. Validity Period: The certificate is valid for a specified time or transaction amount.

The certificate typically specifies:

• The applicable TDS rate (nil or reduced)
• The deductor’s details
• The transaction or payment category
• The validity duration

5. Special Relevance for Property Transactions

Property transactions often involve significant TDS implications, especially in cases involving:

• Sale of immovable property
• Transactions involving non-residents
• Capital gains significantly lower than gross sale consideration

Since TDS in such cases is often applied on gross value rather than net capital gain, taxpayers may face excessive deduction and subsequent refund delays.

Form 128 simplifies the process of applying for lower TDS in such cases, potentially improving:

• Cash flow management
• Transaction efficiency
• Certainty in deal structuring

6. Practical Compliance Considerations

Despite simplification, taxpayers must exercise diligence:

1. Ensure ITRs Are Filed

Even though full returns are not uploaded, acknowledgement numbers must correspond to valid filings.

2. Provide Realistic Projections

Overly aggressive or inaccurate income estimates may lead to rejection.

3. Clear Outstanding Demands

Existing tax demands may affect approval.

4. Apply in Advance

Since the process involves officer scrutiny, last-minute applications may delay transactions.

7. Benefits of Form 128

The introduction of Form 128 offers multiple advantages:

1. Administrative Efficiency

Less paperwork, fewer uploads, streamlined data entry.

2. Improved Ease of Doing Business

Particularly helpful for businesses and individuals handling high-value or time-sensitive transactions.

3. Reduced Compliance Costs

Lower professional time and documentation effort.

4. Better Cash Flow Planning

Timely issuance of certificates reduces excess tax deduction and refund dependency.

8. Is the Process Fully Digital?

While filing is done through the e-filing portal, the backend evaluation remains officer-driven. A fully automated, risk-based processing system may evolve over time, but currently:

• Applications are examined manually.
• Officers may request clarifications.
• Approval timelines can vary depending on jurisdiction.

However, the reduced documentation format is a step toward eventual automation.

9. Strategic Implications for Taxpayers and Professionals

For tax professionals, CAs, and corporate finance teams, Form 128 means:

• Faster compilation of applications
• Reduced data collation effort
• Easier client coordination
• Streamlined documentation checklist

For taxpayers, it means:

• Lower administrative stress
• Greater transparency in requirements
• Improved predictability in compliance

Conclusion: 

The replacement of Form 13 with Form 128 under the Income-tax Act, 2025 reflects a broader shift toward efficiency-driven tax governance. By eliminating redundant documentation and focusing on essential financial particulars, the new framework balances compliance integrity with administrative ease.

While the process remains manual, the structural improvements significantly reduce friction in obtaining Nil or Lower TDS Certificates – especially in property transactions and high-value payments.

Taxpayers planning transactions subject to TDS should familiarize themselves with Form 128 requirements well in advance. Proper preparation, accurate disclosures, and timely application remain key to securing smooth approval.