Lower and nil TDS certificates
Income tax
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On demand
High customer receipts can produce withholding far above the tax payable on the year’s profit. A lower or nil deduction certificate can reduce that cash-flow gap if the tax authority accepts the forecast and issues a certificate covering the receipts. TheTaxCo prepares and files the application with its supporting computation and payer schedule, answers authority queries, checks the issued certificate and tracks its use.
For Tax Year 2026–27, the application is Form 128 under section 395(1). The Assessing Officer decides whether the estimated income supports a reduced or nil rate. The certificate states its rate and validity; the application itself does not authorise a customer to reduce deduction. Income Tax Department certificate guidance.
Is the application worth preparing?
The review compares expected final tax with ordinary withholding and the timing of customer receipts. It can be useful for a low-margin contract, a business with supported losses or a year in which receipts are much larger than taxable profit. We compare the preparation timetable with the expected receipts so the application can address the cash-flow gap while it still matters.
A forecast loss needs supporting accounts and assumptions. If those records are incomplete, we first identify what can be established from current results, confirmed contracts and expected costs. A hoped-for result cannot support the requested rate.
The certificate route concerns future withholding. Tax already deducted may need to be addressed through the return and refund process. We separate those amounts so that the forecast does not promise to recover cash through the wrong route.
Building the payer-wise case
We reconcile prior returns and computations to current accounts, then build an estimate for the relevant tax year. Seasonal revenue, contract milestones and unusual costs are shown explicitly. The workings explain why gross receipts and taxable income differ.
The receipt schedule identifies each payer, the nature of income, contract value, expected payment dates and ordinary withholding. We compare that schedule with tax credits, earlier advance-tax payments, available losses and any outstanding demands that affect the application.
Prepare the following records for the detailed work:
Earlier returns, computations and assessment or demand records.
Current accounts and a forecast supported by contracts and expected costs.
Customer details and expected receipts, including amounts already credited or paid.
Tax-credit and payment records, earlier certificates and their utilisation.
The requested rate follows the calculation. We do not begin with a preferred percentage and adjust the forecast to reach it.
Application, authority queries and certificate use
You receive the computation, assumptions, payer schedule and Form 128 application information for approval. After your approval and required authentication, we file the application, answer authority queries and review the issued certificate. The engagement identifies the tax year and payers; a changed forecast is reconciled before any further submission.
A query is answered by reconciling the authority’s question to the same accounts and contracts used in the application. If the evidence changes the forecast materially, the revised computation is explained before the response is approved.
After issue, the certificate is compared with the requested rate, payers, period and permitted amounts. Each customer needs the terms relevant to its payments. We prepare the payer allocation and monitor utilisation against the certificate’s limits. A changed payer, exhausted amount or expired period is flagged before further reliance.
Certificates issued under the earlier law are not automatically invalid after 01-04-2026: the Department confirms continuation where the certificate relates to projected receipts for Tax Year 2026–27. The actual terms still need checking. Income Tax Department transition guidance.
Timing
Start before the first significant covered receipt. Preparation depends on the forecast, outstanding tax records and the number of payers. The authority controls processing and may ask for further evidence, so there is no guaranteed issue date.
We track authority queries and the application status, then record the certificate’s expiry and utilisation. A later renewal uses a fresh forecast; a substantial change in receipts or payers is reviewed before relying on the existing certificate.
Common questions
Can a customer use the application acknowledgement to deduct less? It should apply only the rate legally available to it. A pending application does not substitute for an issued certificate covering the payment.
Can one certificate cover every customer? Only to the extent its issued terms cover those payers and receipts. We compare the document with the customer schedule before advising on use.
What if revenue or margins improve after issue? Update the forecast and examine the certificate’s continuing conditions. The certificate does not determine the final annual tax liability.
Will the certificate remove the need for a return? No. The return still determines the annual income and tax position under the applicable filing rules.
Related services
Email TheTaxCo, message us on WhatsApp or book a call. Share the tax year, expected receipts, broad profit forecast and date of the next large customer payment.