The government has proposed to simplify the process of filing declarations for non-deduction of tax at source (TDS) on certain incomes by allowing such declarations to be submitted directly to the depository.
At present, Section 393(6) of the Income-tax Act provides that no TDS is required on specified incomes such as dividends, interest from securities, and income from mutual fund units provided the assessee submits a written declaration to each person responsible for making the payment.
Existing System: Multiple Declarations, Higher Compliance
Under the current framework, investors holding multiple securities or mutual fund units must file separate declarations with each payer, such as companies, mutual funds, or other paying entities. This often results in duplication of effort, increased paperwork, and higher compliance costs particularly for retail investors with diversified portfolios.
What's Changing
To reduce this burden, the proposed amendment will allow eligible investors to file a single declaration with the depository, which will then electronically share the declaration with the relevant income-paying entities.
This shift centralises the declaration mechanism and removes the need for repetitive submissions across multiple payers.
Quarterly Reporting Instead of Monthly
In another compliance-friendly change, the proposal also revises the timeline for income payers to forward these declarations to the prescribed Income-tax authority. Instead of the current monthly reporting requirement, the information will now be furnished on a quarterly basis , easing administrative pressure on payers.
Who Can Use This Facility
The facility to file declarations through a depository will be available only to investors who meet the following conditions:
- The securities or units are held in dematerialised form with a depository
- The securities are listed on a registered stock exchange in India
Investors holding physical securities or unlisted instruments will continue to follow the existing declaration process.
Effective Date
These amendments will come into force from 1st April 2027, as provided under Clause 72 of the proposed changes.
Why This Matters
By routing declarations through depositories, the government aims to modernise compliance, reduce duplication, and improve ease of doing business for investors. The proposal reflects a broader push towards digitisation and simplification of TDS procedures in India’s evolving tax framework.
Official copy of the Clause is as follows
Enabling filing of declaration for no deduction to a depository
Section 393(6) of the Act provides that tax is not to be deducted at source in certain cases. As per the provisions of the said section, a written declaration is to be filed by the assessee for no deduction of tax at source to the person responsible for paying any income or sum of the nature as specified in Column C of the Table in section 393(6). The said income include dividend, interest from securities and income from units of mutual fund.
2. Investors earning income from multiple units and securities face a cumbersome process, needing to submit separate forms to all entities thus leading to enhanced compliance. In order to reduce compliance burden of such investors, it is proposed to allow filing of the declaration to the depository which in turn shall provide such declaration to the person responsible for paying such income.
3. Further, in order to ease the compliance for the person responsible for paying income or sum of the nature as specified in Column C of the Table in section 393(6), the time limit for furnishing the declaration received by them to the prescribed Income tax authority have been changed from monthly basis to quarterly basis.
4. However, only those investors who have held the securities or units in the depository and where the securities are listed in registered stock exchange in India are proposed to furnish the declaration to the depository.
5. The amendment will take effect from the 1st day of April, 2027.
[Clause 72]
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