India TDS April 07: Form 121 Replaces 15G/15H, What Changes and Who Can File

TDS is set for a major update in India. From April 2026, Form 121 will replace Forms 15G and 15H for TDS exemption declarations under the Income-tax Rules 2026. One form will cover interest, dividends, rent, and similar payments. This change affects banks, brokers, NBFCs, and companies that deduct tax. It also helps investors with nil tax liability manage cash flow better. We explain what changes, who can file, payer reporting via Form 140, and steps to prepare.

What changes with Form 121

Form 121 replaces separate Forms 15G and 15H with a single self-declaration for TDS exemption across interest, dividends, rent, and comparable payouts. This reduces duplicate submissions to different payers. As per early coverage, it aims to simplify compliance for investors while tightening oversight for deductors. See details here: CNBCTV18.

The declaration will work under the Income-tax Rules 2026 from April 2026. Expect a fully digital process with e-verification and PAN-based validation. Investors should submit before the payout or early in the financial year so the payer can apply the TDS rate correctly from the first credit. Keep copies and acknowledgments for your records.

Deductors such as banks, brokers, and companies will need stricter checks before accepting Form 121. They must report accepted declarations through Form 140, creating an audit trail. This reduces wrong TDS and mismatches in Form 26AS. Payers should align systems, map responsible teams, and maintain evidence of review for each declaration.

Who can file and who cannot

Residents who reasonably expect nil tax liability for the year can file Form 121 for TDS exemption. This means the total income, after eligible deductions and applicable rebates, should lead to zero tax. Use a 2026 calculator to compare regimes before declaring: Economic Times.

Earlier, seniors used Form 15H and others used 15G. From April 2026, all eligible residents can use Form 121. Senior citizens may declare if their estimated tax for the year is zero after deductions and rebates. Those with taxable income should not file, since a false claim can lead to interest and demand later.

Companies and firms cannot file. Non-residents are generally not eligible for Form 121, and many NRO interest incomes remain subject to TDS. If your estimated income becomes taxable during the year, withdraw the declaration with your payer and allow TDS from future credits to avoid shortfall and penalties.

Impact on banks, brokers, and companies

Institutions must update onboarding, TDS engines, and core systems to accept, validate, and tag Form 121 at customer or folio level. PAN validation, risk flags, and maker-checker reviews will be important. Ensure records link each payout to a valid declaration and capture period, amounts, and revocation, if any.

Adopt rule-based checks to spot high-risk declarations, mismatched PAN names, and unusual volumes. Keep secure logs and audit trails, as filings via Form 140 will reference accepted Form 121 submissions. Periodic internal reviews can prevent wrong TDS treatment and reduce downstream disputes and reversals.

Send simple guides, FAQs, and reminders before the April 2026 switch. Offer digital journeys with status tracking. Notify customers if a declaration is rejected and explain the reason. Provide an easy path to revoke or update estimates mid-year so TDS can be applied correctly on future payments.

How to file Form 121 in 2026

Keep PAN, address, and bank details ready. Estimate your total income for the year, expected interest, dividends, and rent, and list deductions you plan to claim. Work out if your tax is nil after rebates. Save supporting proofs like fixed deposit advice, dividend statements, and rent agreements for reference.

Check your bank, broker, or company portal for the Form 121 flow once enabled in 2026. Fill the declaration carefully and e-verify as required. Submit early in the financial year or before the first credit. Keep the acknowledgement. If you deal with multiple payers, submit a declaration to each.

Monitor acceptance status in your payer’s portal. If your income outlook changes and tax becomes payable, promptly withdraw the declaration. Ask the payer to start TDS from future credits. Keep your own log of submissions and withdrawals to match Form 26AS and avoid disputes during return filing.

Final Thoughts

Form 121 brings a single, digital path for TDS exemption declarations from April 2026. For investors, the benefit is cleaner cash flow and fewer forms. The responsibility is accurate self-assessment. Check your expected income, deductions, and rebates for FY 2026-27. If tax is nil, file Form 121 early with each payer and save acknowledgements. If your estimates change, revoke quickly and allow TDS to prevent interest and notices. For banks, brokers, and companies, align systems, controls, and reporting through Form 140. Clear communication, robust validation, and audit-ready records will reduce errors and support smooth compliance under the Income-tax Rules 2026.

FAQs

What is Form 121 and why is it replacing Forms 15G and 15H?

Form 121 is a single self-declaration to claim TDS exemption on eligible incomes like interest, dividends, and rent when your estimated tax for the year is zero. From April 2026, it replaces Forms 15G and 15H to simplify filings for investors and standardise checks for payers under the Income-tax Rules 2026.

Who can file Form 121 for TDS exemption?

Resident individuals, including senior citizens, and HUFs can file if they reasonably expect zero tax for the year after deductions and applicable rebates. Companies, firms, and most non-residents are not eligible. If tax later becomes payable, you must withdraw the declaration and let the payer deduct TDS on future credits.

When should I submit Form 121 to my bank or broker?

Submit early in the financial year or before the first credit so the payer can apply the correct TDS treatment from the start. If you have multiple payers, file separately with each. Keep acknowledgements and review status periodically to ensure acceptance is recorded against your account or folio.

What is Form 140 and how does it affect me as a taxpayer?

Form 140 is a reporting form that payers will use to report accepted Form 121 declarations. It improves traceability and reduces wrong TDS. As a taxpayer, ensure your details are correct and keep records. The payer’s accurate reporting helps your Form 26AS reflect the right TDS position during return filing.

What happens if my income estimate changes after filing Form 121?

If your income rises and tax becomes payable, promptly withdraw the declaration with each payer and allow TDS on future credits. Keep evidence of withdrawal. This limits interest on shortfall and reduces the chance of notices. Update your estimates regularly and reconcile with Form 26AS before filing returns.

Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.