The Finance Bill, 2026 introduces a compliance-easing reform by enabling investors to file declarations for non-deduction of tax at source (TDS) directly with a depository, instead of submitting separate declarations to each payer of income. Under section 393(6) of the Income-Tax Act, 2025, eligible assessees can seek no TDS on specified incomes such as dividends, interest on securities, and income from mutual fund units. Previously, investors earning income from multiple securities had to file multiple declarations, creating avoidable compliance burden. The proposed insertion of sub-section 393(6A) allows such declarations to be furnished electronically to a depository, which will transmit them to the relevant payers within a prescribed timeline. This facility is limited to investors holding listed securities or units through a recognised depository in India. Additionally, the reporting timeline for payers to submit received declarations to tax authorities is rationalised from a monthly to a quarterly basis. These amendments take effect from 1 April 2027.
Enabling filing of declaration for no deduction to a depository
Section 393(6) of the Act provides that tax is not to be deducted at source in certain cases. As per the provisions of the said section, a written declaration is to be filed by the assessee for no deduction of tax at source to the person responsible for paying any income or sum of the nature as specified in Column C of the Table in section 393(6). The said income include dividend, interest from securities and income from units of mutual fund.
2. Investors earning income from multiple units and securities face a cumbersome process, needing to submit separate forms to all entities thus leading to enhanced compliance. In order to reduce compliance burden of such investors, it is proposed to allow filing of the declaration to the depository which in turn shall provide such declaration to the person responsible for paying such income.
3. Further, in order to ease the compliance for the person responsible for paying income or sum of the nature as specified in Column C of the Table in section 393(6), the time limit for furnishing the declaration received by them to the prescribed Income tax authority have been changed from monthly basis to quarterly basis.
4. However, only those investors who have held the securities or units in the depository and where the securities are listed in registered stock exchange in India are proposed to furnish the declaration to the depository.
5. The amendment will take effect from the 1st day of April, 2027.
[Clause 72]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 72 seeks to amend section 393 of the Income-tax Act, 2025 relating to tax to be deducted at source.
It is proposed to make consequential amendment in sub-section (1) of the said section regarding cross reference.
Sub-section (4) [Table: Sl. No. 7] of the said section provides for condition where tax is not required to be deducted at source in respect of interest on income other than interest on securities referred to in sub-section (1) [Table Sl. No. 5(ii) and 5(iii)] of the said section.
It is further proposed to amend clause (a)(i) of sub-section (4) [Table: Sl. No. 7. C] so as to provide that interest income paid or credited to any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank) shall be exempt from applicability of deduction of tax at source.
It is also proposed to amend clause (b)(c)(iv) thereof so as to provide for non-applicability of tax to be deducted at source on the payment or credit of interest on the compensation amount awarded by a Motor Accidents Claims Tribunal, in case of deductee being an individual. For persons other than individuals, the earlier threshold of ₹50000 in the said clause shall continue.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years.
It is also proposed to insert a new sub-section (6A) in the said section so as to allow depository to accept declaration from the assessee as per the provisions of section 393(6) of the said Act and provide it to the person responsible for paying income of the nature referred to in 393(1) [Table: Sl. Nos. 4(i), 5(i) and 7] within a fixed timeline. However, this additional option shall be available only to those investors who have held the securities in the depository as defined in section 2(e) of the Depositories Act, 1996 and where the securities are listed in a registered stock exchange in India.
It is also proposed to make consequential amendments in sub-section (7) of the said section.
These amendments will take effect from 1st April, 2027 and will, accordingly, apply in relation to the tax year 2027-2028 and subsequent years.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
72. Amendment of section 393.
In section 393 of the Income-tax Act,––
(a) in sub-section (1), in the Table, in serial number (3), in Note 3, for the words, figures and brackets “serial number 3(iii)”, the words, figures and brackets, “serial number 3(i)” shall be substituted;
(b) in sub-section (4), in the Table, against serial number 7, in column C,––
(i) in clause (a), in sub-clause (i), after the words “banking company”, the words and brackets “or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank)” shall be inserted;
(ii) in clause (b), in the long line, in sub-clause (c), for item (iv), the following item shall be substituted, namely:—
“(iv) on the compensation amount awarded by a Motor Accidents Claims Tribunal—
(A) to an individual; or
(B) to a person other than an individual, where the aggregate interest on such compensation does not exceed ₹ 50000 during the tax year;”;
(c) sub-section (6) shall be renumbered as sub-section (6) (a) thereof and after sub-section (6) (a) as so renumbered, the following clause shall be inserted with effect from the 1st April, 2027, namely:––
“(b) The declaration referred in clause (a) may also be furnished electronically to a depository, as defined in section (2)(e) of the Depositories Act, 1996, where––
(i) the income is from units, interest on securities or dividends, as the case may be, as referred to in section 393(1) [Table: 4(i), 5(i) or 7];
(ii) such units or securities are held with such depository; and
(iii) such securities are listed on a recognised stock exchange, in accordance with such procedure and manner, as may be prescribed.”;
(d) for sub-section (7), the following sub-section shall be substituted, namely:––
“(7) The person responsible for paying any income or sum of the nature referred to in sub-section (6) shall deliver or cause to be delivered, such declaration referred therein, received from the person, as specified in column (B) of the Table in sub-section (6) or the depository, to the prescribed income-tax authority, on or before the seventh day of the month immediately following the end of each quarter in which declaration is furnished to him as per sub-section (6).”.
