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.