Form 128 Explained: Who Needs It And How To File It Correctly
The Indian tax filing mechanism is undergoing a silent overhaul, as different tax forms and certificates are changing for investors.
The primary cause is to align them with the new tax laws, improve transparency, simplify the user experience, and much more. Subsequently, Form 13 was replaced by Form 128 in India, as a part of the broader government initiative to ease compliance and digitise1.
This blog analyses Form 128 in detail, including its meaning, filing timeline, process and more. Understanding these will help identify the
What Is Form 128
In the context of Indian Income Tax, Form 128 is an electronic application through which an applicant seeks the approval of the Income Tax Department to deduct TDS or TCS at a lower or nil rate.2
When a taxpayer anticipates their actual tax liability for the financial year to be lower than the standard TDS or TCS rate, they can submit Form 128 electronically to the Director General of Income-tax (Systems) or any other authorised personnel.
The Form acts as an application for a certificate that authorises them to deduct lower or nil tax under Section 395(1) and 395(3).
| Section | |
| 395(1) | For Tax Deducted at Source (TDS) |
| 395(3) | For Tax Collected at Source (TDS) |
While any person, resident or non-resident, can fill out the Form 128 tax form, certain specifications must be noted.
Who Should File Form 128?
Form 128 is not a mandatory filing requirement; it is an optional form that can be filled out by taxpayers who need it. Discussed below are the two key parameters to fill Form 128.
- Objective: Any person who wants a certificate that allows lower or nil TDS or TCS levy can use Form 128. Such a need usually arises when a taxpayer anticipates a lower tax liability for the year than what would usually be withheld on their income.
- TDS or TCS Applicability of Income: A lower or nil tax can be claimed only on income subject to TDS or TCS, like professional fees, interest, contract payments, commission, rent, etc., through Form 128. Therefore, a taxpayer who does not have such income cannot use this Form.
The table below explains particular cases of taxpayers who can file Form 128.
| Taxpayer Case | Form 128 Filing |
| An investor earning interest from FDs, but the total taxable income is below the taxable threshold | Yes |
| A business that is usually profitable makes a loss | No |
| A man collects rent from his rented apartment every month, but the total taxable income remains below the basic exemption limit | Yes |
| A doctor collects fees, and his total income is above the exemption limit | No |
| A management consultant earns fees, but his total income remains below the exemption limit | Yes |
Now that we know who can file Form 128, let us understand how to do it.
How To Fill Form 128
Form 128 has four key components. Each of them is discussed below.
1. Identification: First, the taxpayer enters their personal details, like name, PAN number, address, residential status, contact details, etc. Not just individuals, but other entities like the registered non-profit organisation, those mentioned in Section 263(9)(c), etc., can also use this form and fill out their identification details.
2. Request: As explained before, Form 128 is an application for a certificate that can help levy lower or nil TDS or TCS. Therefore, in one section of the form, the taxpayer explains their request.
3. Financial Details: The taxpayer substantiates their request by elaborating on their financial particulars. The details of existing tax liabilities, income particulars, etc., must be entered.
4. Declaration and Verification: Based on the nature of the taxpayer, they have to give appropriate declarations. Post this, verification is done to ensure that all information and the request are genuine.
Understanding these components is important for filling out Form 128 accurately to ensure optimal results. With this, here is a step-by-step guide on how to access and fill out the Form.
Step 1: Log in to the TDS Reconciliation Analysis and Correction Enabling System (TRACES) Portal.
Step 2: From the dashboard, select e-file and view and then choose File Forms. From there, select Form 128.
Step 3: Fill out the form online and upload the required documents.
Step 4: Post e-verification, click Submit.
The Form 128 application will be processed. If approval is received, the certificate for lower or nil deduction or collection becomes available for download. The steps to fill out Form 128 are fairly simple and quick, but investors must submit them duly for efficient use.
When To File: Timing and Deadlines
There is no specific filing date for Form 128. It can be filed at any time during the tax year for which the certificate is required. Furthermore, the validity of the certificate remains for the tenure mentioned in it. However, despite no fixed statutory date, there is a general notion that is usually followed when filing Form 128.
Form 128 should ideally be filled out and submitted before TDS or TCS is actually deducted or collected, on a particular income or transaction. Therefore, taxpayers often attempt to fill out this Form as early as possible, so that the certificate received through Form 128 is with the payer before they deduct any TDS or TCS.
Let us now take a look at some common mistakes that taxpayers should avoid when filing Form 128.
Common Mistakes To Avoid
Like any tax file, Form 128 must be filled out with due diligence to avoid errors and ensure seamless approval. Here are some common mistakes that taxpayers must avoid.
- Wrong PAN: If the user enters an incorrect PAN, their Form 128 application is invalid or rejected. Therefore, before starting to fill out the Form, the PAN card should be kept handy.
- Missing Declarations: Omitting or incorrectly stating any required information, such as income, previous tax liability, etc., can result in a rejection of Form 128. While small deviations from projections are understandable, a massive understatement is a concern.
- Late Filing: Form 128 is an application to get the certificate that can help claim lower or nil TDS or TCS. The certificate has to be with the payer before tax is deducted. Submitting Form 128 after TDS or TCS deduction yields no result.
Conclusion
As tax compliance becomes more digital in India, forms like Form 128 can help investors avoid unnecessary tax deductions and improve cash flow during the financial year. Understanding who can file, when to submit it, and how the process works can make tax planning more efficient for both salaried individuals and income earning investors.
While Form 128 helps reduce excess TDS or TCS, choosing the right investments can further improve post tax returns.
Platforms like Grip Invest offer curated investment options such as corporate bonds and fixed income products that can help investors build a more tax aware portfolio.
Explore fixed income opportunities with Grip and make your money work more efficiently.
FAQs On Form 128 Guide
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Author: Grip Invest Editorial Team The Grip Invest Editorial Team is a group of Chartered Accountants, MBA (Finance) graduates, and Qualified Research Analysts dedicated to helping you invest smarter. We dive deep into India's fixed income landscape to deliver content that is accurate, up-to-date, and easy to understand. Whether you're exploring bonds, fixed deposits, or other fixed income opportunities, our guides cut through the noise and give you the clarity to make better financial decisions. |
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