Comprehensive Guide to Income Tax Form No. 126 (Replacing Forms 15C and 15D)

With the introduction of the Income-tax Act, 2025 and corresponding amendments in the Income-tax Rules, 2026, the compliance landscape for non-resident branches operating in India has been significantly streamlined. A key change is the substitution of earlier Form 15C and Form 15D with a single consolidated Form No. 126, governed by Section 395(1) read with Rule 209.

This guide explains in detail the legal framework, eligibility, procedural steps, and practical implications of Form No. 126, which enables eligible non-resident entities to receive specified sums in India without deduction of tax at source (TDS).

1.1 Statutory Linkages

Form No. 126 is anchored in the following provisions:

  • Section 395(1) of the Income-tax Act, 2025 – dealing with receipt of certain sums without TDS, subject to certificate from the Assessing Officer.
  • Rule 209 of the Income-tax Rules, 2026 – specifying the classes of persons and conditions for availing nil TDS certificates.
  • Correspondence with erstwhile regime:
    • Earlier section: Section 195 of the Income Tax Act 1961
    • Earlier rules: Rule 29B of the Income-tax Rules, 1962
    • Earlier forms: Form 15C and Form 15D

The current framework consolidates these two earlier forms into a single, system-compatible e-form – Form No. 126.

1.2 Purpose of Form No. 126

Form No. 126 has a dual purpose:

  1. Self-declaration: The assessee (non-resident branch) declares that it meets the prescribed conditions under Rule 209.
  2. Treaty-benefit request and nil TDS application: The assessee requests the Assessing Officer (AO) to issue a certificate under Section 395(1) allowing receipt of certain income without TDS, considering the Income-tax Act, 2025 and applicable Double Taxation Avoidance Agreements (DTAA).

In effect, the form ensures that TDS is not deducted where no tax is ultimately payable, thereby preventing excessive withholding and aligning collections with actual tax liability.

2. Who Can Use Form No. 126?

Form No. 126 is specifically meant for non-resident persons operating through branches in India as defined in Rule 209. Broadly, there are two categories of eligible applicants:

2.1 Banking companies and insurers

Form No. 126 may be filed by:

  • A banking company, or
  • An insurer (as defined in section (2)(9)(d) of the Insurance Act, 1938),

provided that:

  1. It is not a domestic/Indian company.
  2. It has not made the statutorily prescribed arrangements for declaration and payment of dividends within India.
  3. It is carrying on operations in India through a branch.
  4. The income in question is interest or other sums, but not:
    • dividends, or
    • “interest on securities”.

These entities will be required to complete Part B of Form No. 126 after filling Part A.

2.2 Other non-resident entities with Indian branches

Any non-resident assessee other than a banking company or insurer may also file Form No. 126 if all of the following are satisfied:

  1. It is not a banking company.
  2. It carries on business or profession in India through one or more branches.
  3. It is entitled to receive income chargeable to tax in India in the relevant tax year.
  4. The income sought to be covered is not in the nature of interest or dividend.

Such assessees need to complete Part C of the form, along with Part A.

3. Conditions for Eligibility Under Rule 209

In addition to category-based qualification, specific pre-conditions must be met to seek a nil TDS certificate.

3.1 Common conditions for banking companies/insurers (Part B)

A banking company or insurer must confirm that:

  1. It has been regularly assessed to income tax in India.
  2. It has filed all pending income tax returns (ITRs) for the last five tax years.
  3. It is not in default and not deemed to be in default with respect to any:
    • tax
    • interest
    • penalty
    • fine
    • or any other sum payable under the Income-tax Act, 2025.
  4. The interest or other sums are receivable by the Indian branches on their own account, and not on behalf of:
    • the foreign head office,
    • any overseas branch, or
    • any other third party.