Section 197 and Section 197A: Lower or Nil TDS and No Deduction of Tax
Sections 197 and 197A of the Income-tax Act, 1961 dealt with two important TDS relief mechanisms: a certificate for deduction at a lower or nil rate, and a declaration for specified income to be received without deduction of tax. From 1 April 2026, the Income-tax Act, 2025 is in force, so the current corresponding provisions must be read under that Act.
Section 197 of the Income-tax Act, 1961: Certificate for deduction at lower rate
Former Section 197 enabled a recipient of income to apply for a certificate authorising deduction of income-tax at a lower rate or at a nil rate where the Assessing Officer was satisfied that the recipient's total income justified such treatment. The provision applied to the TDS sections specifically listed in Section 197(1), including salary, interest, contractor payments, commission, rent, professional or technical fees, certain investment income and specified payments to non-residents.
Once a certificate was issued, the person responsible for paying the income was required to deduct tax at the rate specified in the certificate, or make no deduction where the certificate so authorised, until the certificate ceased to apply or was cancelled in accordance with law.
The last operative text of Section 197 under the 1961 Act included, among others, Sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195.
Current law: Section 395(1) of the Income-tax Act, 2025
For tax years beginning on or after 1 April 2026, the corresponding lower or nil withholding certificate mechanism is contained in Section 395(1) of the Income-tax Act, 2025. In substance, the recipient may seek a certificate where the estimated total income justifies deduction at a lower rate or no deduction.
For Tax Year 2026-27, the Income Tax Department has clarified that a lower or nil certificate issued under former Section 197 may remain valid for payments or credits on or after 1 April 2026 where it was issued in respect of projected receivables for that tax year. Applications under the new framework use the form prescribed under the Income-tax Rules, 2026 and are handled through the prescribed electronic process.
Section 197A of the Income-tax Act, 1961: No deduction in certain cases
Former Section 197A allowed eligible persons to furnish a prescribed declaration to the payer so that tax would not be deducted from specified types of income when the statutory conditions were met. It was a declaration-based mechanism, unlike Section 197, which depended on a certificate issued by the tax authority.
Under the 1961 Act framework, Form 15G was used by eligible persons other than companies and firms, subject to the statutory conditions, while Form 15H was used by eligible resident individuals aged 60 years or more. Section 197A contained special rules for senior citizens and also dealt with specified cases in which tax was not to be deducted.
Current law: Section 393(6) and Form No. 121
From 1 April 2026, the corresponding declaration for receipt of specified income without TDS is governed by Section 393(6) of the Income-tax Act, 2025. The declaration states, in the prescribed form and manner, that the tax on the declarant's estimated total income for the relevant tax year will be nil.
Form No. 121 under Rule 211 of the Income-tax Rules, 2026 replaces the earlier Form 15G and Form 15H framework for tax years beginning on or after 1 April 2026. The form combines the declaration mechanism into the new statutory format. Companies and firms are not eligible to use this declaration, and the conditions prescribed by Section 393(6), its table and the applicable rules must be checked before filing.
For persons other than a resident individual aged 60 years or more, the statutory ceiling linked to the maximum amount not chargeable to tax continues to be relevant under Section 393(6). The declaration should therefore be used only after checking the declarant's status, estimated total income, nature of payment and applicable threshold conditions.
Lower or nil TDS certificate compared with no-deduction declaration
| Point | Lower or nil TDS certificate | No-deduction declaration |
|---|---|---|
| 1961 Act reference | Section 197 | Section 197A |
| Current 2025 Act reference | Section 395(1) | Section 393(6) and related provisions |
| Nature | Certificate issued by the income-tax authority after application and satisfaction of statutory conditions | Self-declaration by an eligible recipient, subject to statutory conditions |
| Current form | Application in the form prescribed under the Income-tax Rules, 2026 | Form No. 121 under Rule 211 |
| Effect | Payer deducts at the rate specified in the certificate or at nil rate, as authorised | Payer does not deduct TDS on specified payments when a valid declaration applies |
Meaning of important terms
Tax deducted at source or TDS
TDS is a withholding mechanism under which a person responsible for making a specified payment deducts income-tax at the applicable time and rate and deposits it with the Central Government, subject to the governing provisions, thresholds, exemptions and relief mechanisms.
Lower or nil deduction certificate
A lower or nil deduction certificate is an authorisation issued under the applicable statutory provision permitting tax to be deducted at a rate lower than the ordinary applicable rate, or not deducted, for the income, payer, amount and period covered by the certificate.
No-deduction declaration
A no-deduction declaration is a prescribed self-declaration available only to persons and payments covered by the statute and rules. It does not operate as a general exemption from income-tax; it concerns deduction of tax at source on the specified income.
Official Income Tax Department resources
For the current statutory text and forms, refer to the official Income Tax Department resources: Income Tax Department, Income Tax e-Filing Portal, the official Section 393 page, and the official Forms and Guidance under the Income-tax Rules, 2026.
Updated: 29 September 2026. This page explains the statutory framework for general information. Applicability depends on the taxpayer, nature of income, tax year, payer, thresholds and the law in force for the relevant transaction.