Whether Section 395(1) applicable : Meaning under income tax Act

Last Updated on: April 8, 2026

Whether Section 395(1) applicable : Meaning under income tax Act 2025 for TDS

Section 395(1) of the Income-tax Act, 2025 deals with the provisions for obtaining a lower or nil withholding (TDS) certificate. It is the corresponding provision to the erstwhile Section 197 under the old Income-tax Act, 1961.

Here are the key points regarding the applicability of Section 395(1):

Purpose: It allows a payee to apply to the Assessing Officer (AO) to have their Tax Deducted at Source (TDS) deducted at a lower rate or a nil rate, provided their estimated total income justifies this reduction.
Issuance and Effect: If the AO is satisfied that the payee’s total income justifies the request, they will issue the appropriate certificate. Once issued, the person responsible for paying the income or sum must deduct the tax exactly at the rate specified in the certificate (or make no deduction at all) for as long as the certificate remains valid.
Application Procedure: To claim this benefit, the taxpayer must submit an application using the designated Form No. 128. Additionally, furnishing a valid Permanent Account Number (PAN) is strictly mandatory; if a valid PAN is not provided, the certificate under Section 395(1) will not be granted.
Validity of Old Certificates: If a taxpayer holds a lower/nil withholding certificate issued under Section 197 of the old 1961 Act, it shall remain valid for payments or credits made on or after April 1, 2026, provided that it was issued specifically for projected receivables for the tax year 2026-27.

Solved Queries

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