The Indian government has introduced a revolutionary change in the Income Tax regime with the New Tax Bill 2025, and one of its most impactful clauses is the abolition of Nil TDS Certificates for all taxpayers whether NRIs. The decision is going to have a long-lasting impact on taxpayers as well as businesses, on the treatment and reporting of TDS (Tax Deducted at Source).
What Are Nil TDS Certificates?
A Nil TDS Certificate is given by the Income Tax Department to a taxpayer who is exempted from receipts without a deduction of tax at source. This usually remains valid for individuals or parties whose total income is under the tax threshold or they are exempted from allowances or deductions under specific provisions. Such certificates have prevented undue tax deduction and the lengthy refund process.
What’s New with the New Tax Bill 2025?
Nil TDS Certificates will no longer be issued under the new act w.e.f. FY 2025-26. All the taxpayers, Non-Resident Indians (NRIs) included who previously were eligible for applying for such certificates will no longer be granted one. No matter the income or exemption, deductors now have to deduct TDS at rates mandated.
The reasoning of the government is to improve tax transparency, facilitate effortless revenue flow on a continuous basis, and close loopholes in compliance. However, it puts additional administrative load on taxpayers who are now required to reclaim excess tax withheld in refund after TDS Return filing.
Effect on Taxpayers and NRIs
The above amendment will have the following effect on types of taxpayers:
- Small-scale enterprises and professionals with low income per year who previously were relying on Nil TDS Certificates to maintain liquidity.
- Senior citizens and pensioners whose income is lesser than the taxable income.
- NRIs, particularly with passive income such as rent, dividends, or interest from Indian sources. Until now, NRIs have been able to submit Nil or reduced TDS certificates through Form 13, but their Indian income will now be charged full TDS in advance.
Implications for TDS Return Filing
Since all payments will now be covered by TDS without exception, refund claims will rise multifold. Proper and timely TDS Return Filing is, therefore, more important than ever before.
For deductors:
- Have to deduct TDS from all payable payments, even if the payee earlier had received a Nil TDS Certificate.
- Have to make proper PAN/Aadhaar verification and TDS deposit due dates to escape penalties.
For deductees:
- Should report all TDS deductions under Form 26AS and reconcile them appropriately while filing income tax returns.
- Should file TDS Return in time to receive refunds early and not lose interest.
What Needs to be Done Now
- Pre-plan for any possible cash flow problems due to increased TDS deductions.
- Keep proper income records so that refunds can be easily filed.
- Take a tax consultant’s advice, particularly if you are an NRI or have more than one Indian income source.
Conclusion
The withdrawal of Nil TDS Certificates under the New Tax Bill 2025 is a monumental policy change in India. While it makes India transparent and reduces the administration of TDS on the government side, it adds a cost of compliance for taxpayers. With the amendments ready to roll out, residents as well as NRIs have to change their tax strategy and be actively filing their TDS Return to enable fast refunds and compliance.
Need assistance with the new TDS rules or filing your returns correctly? Let e-Startup India make it easy for you. From expert tax advice to convenient TDS Return Filing, we’ve got you covered. Be compliant and worry-free.
For any further assistance or to get your doubts cleared, our experts are happy to be here to help you. Call us: 8881-069-069.
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