Draft Income Tax Rule 212, 213 – Buyer Declaration for No TCS u/s 394(2); Application for Lower/Nil TDS or TCS Certificate
Rules 212 and 213 of the Draft Income-tax Rules, 2026 prescribe procedures for non-collection or lower collection/deduction of tax at source. Rule 212 provides that a buyer seeking no collection of tax at source (TCS) under section 394(2) must furnish a declaration in Form No. 127, certifying that goods referred to in section 394(1) (Sl. No. 1 to 5) are purchased for manufacturing, processing, or production and not for trading. The declaration must be furnished in duplicate to the collector, who must forward one copy to the jurisdictional Chief Commissioner or Commissioner by the seventh day of the following month. Rule 213 governs applications for certificates for lower or nil deduction/collection of tax under section 395(1) or 395(3) through Form No. 128. The Assessing Officer considers estimated tax liability, past tax compliance for four years, existing liabilities, and available tax credits before granting the certificate. Additional conditions apply to specified entities, registered non-profit organizations, and dividend income cases, including shareholding and exemption requirements. Certificates are valid for the specified period unless cancelled and apply only to specified payments or receipts. In cases involving numerous deductors, applicants may generate certificates through the Income-tax Department portal. These rules establish structured compliance for reduced or nil TDS/TCS relief.
Extract of Rule No. 212, 213 of Draft Income-tax Rules, 2026
Rule 212
Declaration by a buyer for no collection of tax at source under Section 394(2) of the Act.
(1) A declaration under section 394(2) certifying that the goods, being purchased referred to in Section 394(1) [Table: Sl. No. 1 to 5] are to be utilised for the purposes of manufacturing, processing or producing articles or things and not for trading purposes shall be in Form No 127 and shall be verified in the manner indicated therein.
(2) The declaration referred to in sub-rule (1) shall be furnished in duplicate to the person responsible for collecting tax.
(3) The person referred to in sub-rule (2) shall deliver or cause to be delivered to the Chief Commissioner of Income-tax or Commissioner of Income-tax, one copy of the declaration referred to in sub-rule (1) on or before the seventh day of the month next following the month in which the declaration is furnished to him.
(4) For the purposes of sub-rule (3), the Chief Commissioner of Income-tax or Commissioner of Income-tax means the Chief Commissioner or Commissioner to whom the Assessing Officer, having jurisdiction to assess the person referred to in sub-rule (2), is subordinate.
Rule 213
Application for grant of certificates for deduction or collection of income-tax at any lower rates or no deduction or collection of income-tax.
(1) An application shall be made in Form No. 128 for grant of a certificate for ¬¬—
(a) the deduction of income-tax at any lower rates or no deduction of income-tax under section 395(1) of the Act; or
(b) the collection of income-tax at any lower rates or no collection of income-tax under section 395(3) of the Act.
(2) The provisions of sub-rule (1) may not be applicable to the person who is eligible for a certificate of no deduction of tax in respect of income or sum specified under rule 209.
(3) The Assessing Officer may issue the certificate specified in sub-rule (1) after taking into consideration the following: ¬—
(a) tax payable on the estimated income for the tax year under consideration;
(b) tax paid or payable on the returned income, assessed income or estimated income, as the case may be, of last four tax years;
(c) existing liability under the Act, and the Income-tax Act, 1961;
(d) advance tax payments, taxes deducted or collected at source at the credit of the taxpayer as on the date of application for the tax year for which application is made.
(4) In case of a person being a specified entity as referred to in section 263(9)(c) or a registered non-profit organization, the Assessing Officer, before issue of certificate specified under sub-rule (1), shall in addition to conditions specified in sub-rule (3) above, take into consideration the following: —
(a) the specified entity is approved for the purpose of exemption from income-tax as on the date of application and also as on date of grant of certificate for that tax year; and
(b) the person concerned has furnished the returns of income for last four tax years for which such returns became due on or before the date on which the application under sub-rule (1) is made.
(5) In a case where a certificate is to be issued in respect of dividend income referred to in section 393(1) [Table: Sl. No 7], the following conditions shall also be required to be fulfilled, in addition to conditions specified in sub-rule (3) above, namely: ––
(a) the shares in respect of which the certificate is sought shall be shares in public companies; and
(b) (i) such shares stand in the name of the applicant and are beneficially owned by him and the dividends therefrom are not includible in total income of any other person under section 96 to 99, or
(ii) such shares stand in the name of the applicant and are held by him on behalf of a registered non-profit organization and the dividends therefrom are exempt from tax under Chapter XVII-B.
(6) The certificate specified under sub-rule (5) shall cease to operate from the date of notice to the company for transfer of shares mentioned therein to another person, to the extent of income corresponding to the shares so transferred.
(7) The certificate specified under this rule shall be valid for such period of the tax year as may be specified in the certificate, unless it is cancelled by the Assessing Officer at any time before the expiry of the specified period.
(8) The certificate shall be issued in the name of the person responsible for deducting or collecting the tax under advice to the applicant and shall be valid only in respect of––
(a) specified payment from the specified deductor to the extent of the amount specified in the certificate;
(b) specified receipt from the specified collector to the extent of the amount specified in the certificate.
(9) Where the number of persons responsible for deducting the tax is likely to exceed 100 and details of such persons are not available with the applicant at the time of making application, the certificate for deduction of income-tax at lower rate may be issued in the name of the applicant authorising him —
(a) to receive specified payments at appropriate rate of deduction; and
(b) to generate appropriate certificate and provide to the person responsible for deducting tax; and
(c) such certificate shall be generated from the portal of the Income-tax Department.
