Revised procedure for TDS certificates: What NRIs need to know

In a recent update, Non-Resident Indians (NRIs) looking to prevent tax deductions on income earned in India now have a revised procedure to obtain Tax Deduction at Source (TDS) certificates. This change comes in light of a circular issued by the Central Board of Direct Taxes (CBDT) on September 27, 2023.

Unlike residents, NRIs cannot use Form 15G/H to avoid TDS on their incomes. Instead, they must apply to the assessing officer for a reduced or zero TDS certificate, which prompts income payers to deduct taxes at a lower rate or not at all.

One significant change in the NRI lower/nil TDS application process is the removal of various verification methods for applications submitted to the assessing officer. Previously, options such as Aadhar OTP and mobile OTP were available for Form 13 applications. However, the only method for verification on the TRACES NRI website is now the Digital Signature Certificate (DSC).


To request a NIL or reduced TDS certificate, NRIs must submit an online application using Form 13 and verify it through DSC. After verification, the assessing officer will further process the application.

Aside from this verification change, no other substantial alterations apply to NRIs in this context.

Applying for lower or nil TDS with Form 13
After an NRI submits an online application using Form 13 for a lower or nil TDS rate, the TDS assessing officer (AO) reviews the reasons and justifications provided. Subsequently, the AO assesses the TDS rate suggested by the income tax department's software, which can be lower, nil, or remain unchanged. If both the system and the AO agree on the current TDS rate, the Form 13 application is rejected.

If the TDS AO approves a lower or nil rate, they issue a certificate specifying the TDS rate, the applicable timeframe, and the Tax Deduction and Collection Account Number (TAN) along with other deductor details. If the AO opts for a different TDS rate, they must provide an explanation for this decision.

When applying for a lower or nil TDS rate through the e-filing income tax return (ITR) portal, the TAN of the deductor is requested. Therefore, the TDS certificate is issued specifically for the mentioned deductor and remains valid for one financial year or a specific transaction.

Which incomes require TDS certificates for NRIs?
Income earned by NRIs in India, including rent, interest, and dividends, is subject to Tax Deduction at Source (TDS). This means that anyone making payments to NRIs must deduct the applicable tax before crediting the income or when it accrues, depending on which comes first.

Change in nil TDS application for Indian residents
For Indian residents, the circular has introduced additional verification methods for Form 13 applications used to request lower or nil TDS certificates. Previously limited to Digital Signature Certificate (DSC) or Electronic Verification Code (EVC), these applications now also accept Aadhaar and mobile OTP options. This change benefits taxpayers with different mobile numbers registered on the income tax portal than on Aadhaar.

Residents with incomes exceeding the basic exemption limit cannot use Form 15G/H to avoid TDS deduction. Instead, they must apply for a lower or nil TDS rate via Form 13 and submit the application on the TRACES portal. This change offers greater flexibility for individuals with substantial investments or high operational costs that may result in lower net taxable income.