Budget 2026 Simplifies Tax: Get Lower TDS Certificates Automatically

A Major Leap in Taxpayer Convenience

In a significant move to enhance the 'Ease of Living' for taxpayers, Union Finance Minister Nirmala Sitharaman, during the Union Budget 2026 presentation, announced two major reforms aimed at simplifying the process of Tax Deducted at Source (TDS). The proposals introduce a rule-based automated system for obtaining lower or nil TDS certificates and centralize the submission of Forms 15G and 15H through depositories, marking a pivotal shift from manual processes to a digitally-driven, taxpayer-friendly regime.

Automated Lower TDS Certificates: The End of Manual Applications

Under the existing system, taxpayers whose income is below the taxable limit but are subject to TDS on certain incomes (like interest from fixed deposits or professional fees) have to manually file an application with their Assessing Officer (AO) to obtain a certificate for lower or nil tax deduction. This process is often time-consuming, involves significant paperwork, and is subject to the discretion of the tax officer.

Union Budget 2026 proposes to completely overhaul this system. The Finance Minister announced a new scheme for small taxpayers that will establish a "rule-based automated process" to issue these certificates. This means taxpayers will no longer need to approach an AO. Instead, an automated system will likely evaluate eligibility based on predefined criteria, such as past income tax returns and projected income for the year, to generate the certificate. This reform is expected to drastically reduce the compliance burden, cut down processing times, and bring greater transparency to the procedure.

Centralized Form 15G/15H Submission for Investors

The second key announcement provides substantial relief to investors, particularly senior citizens, who hold securities and deposits across multiple financial institutions. Currently, individuals whose total income is not expected to exceed the basic exemption limit must submit Form 15G (for individuals below 60 years) or Form 15H (for senior citizens) to each deductor (like banks and companies) to ensure that TDS is not deducted on their interest or dividend income.

To eliminate this repetitive and cumbersome task, the budget proposes to empower depositories like the Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL). Under the new framework, an investor can submit their Form 15G or 15H just once to their depository. The depository will then be responsible for providing this information directly to all relevant companies where the investor holds securities. This single-window mechanism will save investors significant time and effort, ensuring that eligible individuals are not subjected to unnecessary tax deductions and the subsequent hassle of claiming refunds.

Comparing the Old and New TDS Processes

The proposed changes represent a fundamental improvement in tax administration. The table below summarizes the key differences:

Feature	Old Process (Pre-Budget 2026)	New Process (Post-Budget 2026)
Lower TDS Certificate	Manual application filed with the Assessing Officer.	A rule-based automated system issues the certificate.
Form 15G/15H Submission	Submitted individually to each company, bank, or financial institution.	Submitted once to the depository (e.g., CDSL/NSDL), which then informs all companies.
Human Intervention	High, requiring manual verification and approval from an AO.	Minimal to none, based on automated rules.
Processing Time	Could take several weeks or even months.	Expected to be significantly faster, potentially near-instantaneous.

Impact on the Tax Ecosystem

These measures are set to have a wide-ranging positive impact:

• For Taxpayers: A significant reduction in compliance burden, paperwork, and physical visits to the tax office.
• For Investors: A streamlined, one-stop solution for preventing unnecessary TDS deductions on investment income.
• For the Income Tax Department: Frees up the valuable time of Assessing Officers from routine administrative tasks, allowing them to focus on more critical assessment and scrutiny functions.
• For Financial Institutions: Simplifies their compliance process by receiving verified information directly from a centralized source like a depository.

A Step Towards a Modern Tax Framework

These TDS-related reforms are aligned with the government's broader vision of simplifying the tax structure, which includes the introduction of the new Income Tax Act, 2025, set to come into effect from April 1, 2026. By leveraging technology to automate processes and reduce manual intervention, the government aims to create a more efficient, transparent, and non-intrusive tax environment. Taxpayers will now await the detailed rules and notifications that will outline the precise operational mechanics of these new, simplified procedures.