The Income-tax Act, 2025, as amended by the Finance Act, 2026, provides for certain situations where tax may not need to be deducted at source (TDS). Eligible taxpayers can submit a self-declaration in Form 121 to claim non-deduction of tax on specified types of income.
When Can Form 121 Be Filed?
A self-declaration in Form 121 can be submitted by eligible individuals for specified income where the applicable conditions are satisfied. Importantly, the declaration needs to be filed again if the estimated income of the payee changes.
For Resident Non-Senior Citizens
A resident individual can submit Form 121 where the relevant income does not exceed the maximum exemption limit and the tax payable on the estimated total income for the tax year is nil.
The provisions cover specified payments such as:
- Accumulated balance due to an employee
- Insurance commission
- Rent
- Income from specified units
- Interest on securities
- Interest other than interest on securities
- Dividend
- Certain payments under life insurance policies
For Non-Corporate Taxpayers
Certain non-corporate taxpayers, excluding companies, firms and individuals, can also furnish a declaration for specified income. The key conditions are that the relevant income should not exceed the maximum exemption limit and the tax on estimated total income should be nil.
For Resident Senior Citizens
Resident senior citizens aged 60 years or above can submit a declaration for specified categories of income if their tax liability on estimated total income is nil for the tax year after considering the rebate available under Section 156. The eligible income includes accumulated employee balances, insurance commission, rent, income from specified units, interest on securities, other interest, dividends and certain life insurance policy payments.
How to Submit Form 121?
The declaration can be furnished to the payer in duplicate, either in paper form or electronically after verification. Once the declaration and PAN are provided to the payer, tax is not deducted at source for the eligible payment.
For certain specified income from units, interest on securities and dividends, a single declaration can instead be submitted electronically to the depository, provided the relevant financial instruments are held in dematerialised form with a depository and listed on a recognised stock exchange.
However, other income such as bank interest and interest from unlisted debentures held in physical form will continue to require a declaration to each payer where there are multiple payers.
UIN and Reporting Requirements for Payers
The payer is required to allot a Unique Identification Number (UIN) to every Form 121 declaration received. The UIN contains three components:
- A sequence number beginning with D followed by nine digits
- The tax year for which the declaration is furnished
- The payer's TAN
Payers must upload electronic and digitised declarations on the income-tax e-filing portal on a quarterly basis, by the 7th day of the month immediately following the end of each quarter. Details of transactions covered by Form 121 must also be included in the quarterly TDS statement, even where no tax has been deducted.
Form 121 Must Be Preserved for 7 Years
The person responsible for making the payment is required to retain the declaration. An income-tax authority may require the declaration to be produced for verification or proceedings under the Act before the end of seven years from the end of the tax year in which Form 121 was received.
What Taxpayers and Payers Should Keep in Mind
Form 121 can help eligible taxpayers avoid TDS on specified payments where their tax liability is nil, but the facility is subject to specific eligibility conditions. Taxpayers should ensure that the declaration is furnished correctly and updated whenever their estimated income changes.
For payers, the compliance does not end with accepting the declaration. Maintaining UINs, digitising paper declarations, quarterly reporting and preserving records are important parts of the process.
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