Draft Income Tax Rule 209 – Application by the payee for certificate authorising receipt of interest and other sums without deduction of tax
Rule 209 of the Draft Income-tax Rules, 2026 sets out the procedure and eligibility criteria for obtaining a certificate under section 395(1) authorising receipt of interest or other specified sums without deduction of tax. Eligible applicants include a banking company or insurer (as defined under the Insurance Act, 1938) that is not a domestic company but operates in India through a branch, as well as any other non-specified person carrying on business or profession in India through a branch. Applicants must have been regularly assessed to income-tax in India and must have filed returns for the preceding five tax years where due, must not be in default in respect of tax, interest, penalty, or other sums, and the income must be receivable by the Indian branch on its own account and not on behalf of head office or any other branch outside India. In addition, non-banking applicants must have carried on business in India for at least five continuous years and must have fixed assets in India exceeding ₹50 lakh as per books for the relevant preceding year. Applications must be made in Form No. 126 for specified income categories. The certificate issued by the Assessing Officer remains valid for the specified tax year unless cancelled earlier, and fresh applications may be made upon or shortly before expiry.
Extract of Rule No. 209 of Draft Income-tax Rules, 2026
Rule 209
Application by the payee for certificate authorising receipt of interest and other sums without deduction of tax
(1) Any person as mentioned in column B of the Table below, entitled to receive any interest or any other sum of the nature specified in section 393(2) [Table: Sl. No. 17], on fulfilment of the conditions specified in column C thereof may make an application in Form No. specified in Column D thereof, for grant of a certificate under section 395(1) authorising him to receive without deduction of tax any such income or sum as specified in column E thereof:
TABLE
| Sl. No. | Person | Conditions | Form No. | Nature of income or sum |
| A | B | C | D | E |
| (i)
|
Banking company or an insurer (as defined in section (2)(9)(d) of Insurance Act, 1938), which is not a domestic company, and which carries on operations in India through a branch |
(a) The person concerned has been regularly assessed to income-tax in India and has furnished the returns of income for last five tax years for which such returns became due on or before the date on which the application under this rule is made;(b) he is not in default or deemed to be in default in respect of any tax (including advance tax and tax payable under section 266), interest, penalty, fine, or any other sum payable under the Act;(c) interest or other sum is receivable by the branches on their own account and not on behalf of its head office or any branch situated outside India, or any other person. ; |
126
|
Any income by way of interest, not being interest on securities (other than interest payable on securities referred to in section 393(4) [Table: Sl. No. 6]), or any other sum, not being dividends. ; |
| (ii) |
Any person other than the person |
(a) Conditions specified in Sl. No. (i) above;
(b) he has been carrying on business or profession in India continuously for a period of not less than five years immediately preceding the date of the application, and (c) the value of the fixed assets in India of such business or profession as shown in his books for the tax year which ended immediately before the date of the application, or where the accounts in respect of such tax year have not been made up before the said date, the tax year immediately |
126 | Any sum not being interest or dividends |
(2) The certificate granted by the Assessing Officer under section 395(1) shall be valid for the tax year specified therein, unless it is cancelled by him at any time before the expiry of the said tax year.
(3) An application for a fresh certificate may be made, if required, after the expiry of validity of the earlier certificate, or within three months before the expiry thereof.
