Certificates
[Section-395 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 395(1) of Income Tax Act 2025
395(1) Where tax is required to be deducted on any income or sum under this Chapter, then subject to the rules made under this Act,—
- 395(1)(a) the payee may make an application before the Assessing Officer for deduction of tax at a lower rate; and
- 395(1)(b) the Assessing Officer on being satisfied that the total income of the payee justifies a lower deduction, shall issue a certificate as appropriate; and
- 395(1)(c) when a certificate is issued under clause (b), the person responsible for paying the income or amount shall deduct the tax at the rate specified in such certificate till its validity.
Section 395(2) of Income Tax Act 2025
395(2)(a) The person responsible for paying to a non-resident any sum chargeable under this Act (other than salary), may make an application to the Assessing Officer in such form and manner as prescribed, where he considers that the whole of such sum would not be chargeable in the case of the recipient;
395(2)(b) the application under clause (a) shall be for determination of the appropriate proportion of the sum chargeable to tax, by the Assessing Officer in the manner as prescribed; and
395(2)(c) when the determination is made by the Assessing Officer as per clause (b), the tax shall be deducted under section 393(2) (Table: Sl. No. 17) only on that proportion of sum which is chargeable to tax under the Act.
Section 395(3) of Income Tax Act 2025
395(3) Where tax is required to be collected on any amount under this Chapter, then subject to the rules made under this Act,––
- 395(3)(a) the buyer or licensee or lessee may make an application before the Assessing Officer for collection of tax at a lower rate; and;
- 395(3)(b) the Assessing Officer on being satisfied that the total income of the buyer or licensee or lessee justifies a lower collection, shall issue a certificate as may be appropriate; and
- 395(3)(c) when a certificate is issued under clause (b), the person responsible for collecting tax shall collect it at the rates specified in such certificate till its validity.
Section 395(4) of Income Tax Act 2025
395(4) (a) Every person deducting or collecting tax shall issue a certificate to the deductee or collectee, as the case may be, specifying––
- (i) the amount of tax that has been deducted or collected;
- (ii) the rate at which tax has been deducted or collected; and
- (iii) any other particulars, as prescribed,
within such period as prescribed.
395(4)(b) An employer referred to in section 392(2)(a) shall issue a certificate to the employee, in respect of whose income payment of tax has been made by the employer, that the tax has been paid to the Central Government, and specify––
- (i) the amount of tax so paid;
- (ii) the rate at which tax has been paid; and
- (iii) any other particulars, as prescribed,
within such period, as prescribed.
Section 395(5) of Income Tax Act 2025
395(5) The assessing officer may cancel the certificate granted under sub-section (1) or (3) after giving reasonable opportunity to the applicant.
FAQs on Section 395 of Income Tax Act 2025
What is the purpose of Section 395 of the Income Tax Act, 2025?
Section 395 provides for issuance of certificates for deduction or collection of tax at lower rates and mandates the issuance of tax deduction/collection certificates by deductors/collectors.
Who can apply for a certificate for lower deduction of tax under Section 395(1)?
The payee (recipient of income) can apply to the Assessing Officer for deduction of tax at a lower rate.
On what basis does the Assessing Officer issue a lower deduction certificate under Section 395(1)(b)?
The Assessing Officer issues the certificate if satisfied that the payee’s total income justifies deduction at a lower rate.
What must the payer do once a lower deduction certificate is issued under Section 395(1)(c)?
The payer must deduct tax at the rate specified in the certificate until it remains valid.
Can a payer apply for determination of taxability when paying a non-resident under Section 395(2)?
Yes, if the payer believes that the whole of the amount paid to a non-resident (other than salary) is not chargeable to tax, they can apply to the Assessing Officer.
What happens once the Assessing Officer determines the chargeable portion under Section 395(2)(b)?
Tax is deducted only on the proportion of the sum that is chargeable to tax as per the determination.
Which section is referred to for deduction after the proportionate determination under Section 395(2)(c)?
Deduction is made under section 393(2), specifically Table: Sl. No. 17, on the chargeable portion.
Can buyers, licensees or lessees apply for lower collection certificates?
Yes, under Section 395(3), they can apply to the Assessing Officer for collection at a lower rate.
What does the Assessing Officer consider before issuing a lower collection certificate under Section 395(3)(b)?
The Assessing Officer must be satisfied that the total income of the buyer/licensee/lessee justifies lower collection.
What is the responsibility of the collector after a certificate under Section 395(3)(c) is issued?
The collector must collect tax at the rate specified in the certificate until its validity expires.
Is the issuance of a tax deduction or collection certificate mandatory for every deduction or collection?
Yes, under Section 395(4)(a), every person deducting or collecting tax must issue a certificate to the deductee or collectee.
What details must the tax deduction/collection certificate contain as per Section 395(4)(a)?
It must specify the amount of tax deducted or collected, the rate applied, and any other prescribed particulars.
What certificate must an employer issue under Section 395(4)(b)?
The employer must issue a certificate confirming tax has been paid to the Central Government on behalf of the employee and specify the amount, rate, and other prescribed details.
What is the time limit for issuing certificates under Section 395(4)?
Certificates must be issued within the time prescribed under the rules made under the Act.
Can a certificate issued under Section 395(1) or 395(3) be cancelled?
Yes, under Section 395(5), the Assessing Officer may cancel the certificate after giving a reasonable opportunity to the applicant.
Is there a specific format or procedure for applications under Section 395?
Yes, applications must be made in the form and manner prescribed under the rules made under the Act.
Who is responsible for ensuring compliance with certificates issued under Section 395?
The payer or collector is responsible for complying with the rate and validity terms specified in the issued certificate.
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