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Certificate issued under section 400(3) income tax 2025

A certificate issued under section 400(3) of the Income-tax Act, 2025, is an official authorization that allows a payer to deduct Tax Deducted at Source (TDS) at a lower or nil rate when making payments (other than salary) to a non-resident or a foreign company.

Under this section, the tax board can notify specific cases where the person responsible for making the payment can apply to the Assessing Officer (AO) to determine the exact proportion of the sum that is actually chargeable to tax in India.

Here is what the certificate means in practice:

Avoidance of Excessive TDS: The primary purpose of this certificate is to prevent excessive tax deduction on cross-border transactions. Because entire payments made to non-residents might not be fully taxable in India, the certificate ensures TDS is only applied to the genuinely taxable portion.
Consideration of Tax Treaties: When determining the taxable proportion, the AO will consider the provisions of the Income-tax Act, 2025, as well as any applicable Double Taxation Avoidance Agreements (DTAA).
Application via Form 129: To obtain this certificate, the payer must file an application using Form No. 129.
Electronic Issuance: If the applicant meets the eligibility and compliance criteria, the AO will electronically generate the certificate on the TRACES portal, which legally authorizes the payer to deduct tax only on the determined proportion of the payment.