Rule 208 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 208 of the Income-tax Rules, 2026 lets a specified senior citizen file Form No. 125 so the specified bank computes his total income and deducts the tax itself; rule 210 takes UTI unit income of an NRI bought from NRE funds out of TDS altogether.
The declaration under rule 208
Sub-rule (1) of rule 208: the declaration under section 402(39)(c) read with section 393(1) may be furnished by the specified senior citizen to the specified bank in Form No. 125. The 1962 parallel is rule 26D.
The scheme rule 208 implements is the one that relieves a qualifying senior citizen of filing a return at all. In exchange, the bank does the computation the return would have done — which is why the rule loads four duties onto the bank and only one onto the citizen.
What the specified bank must do
| Sub-rule | The specified bank's duty under rule 208 |
|---|---|
| (2) | After giving effect to the deduction allowable under Chapter VIII and the rebate allowable under section 156, compute the total income of the specified senior citizen for the relevant tax year and deduct income-tax on such total income at the rates in force |
| (3) | Give effect to the Chapter VIII deduction based on the evidence furnished by the specified senior citizen during the tax year |
| (4) | Properly maintain the declaration and the evidence, and make them available to the Chief Commissioner of Income-tax as and when required |
Ordinary TDS is a flat percentage of a payment. Rule 208(2) is different in kind: the specified bank computes the total income, allows Chapter VIII deductions and the section 156 rebate, and then applies the rates in force — which means slab rates on a computed total, not a flat rate on a receipt. In many cases the correct deduction will be nil. A bank that applies its usual interest-TDS logic to a Form No. 125 account has not complied with the rule.
Note also what sub-rule (3) of rule 208 does not say. The bank gives effect to Chapter VIII on evidence furnished during the tax year — so a deduction the citizen proves in April of the following year, however genuine, has no route into the bank's computation. The timing is the citizen's responsibility.
Sub-rule (4) sets no retention period in years. The obligation is open-ended: the papers must be available to the Chief Commissioner as and when required.
Rule 210 — UTI units held by a non-resident
Rule 210 is a single sentence and prescribes no form. Income payable in respect of units of the Unit Trust of India to a non-resident Indian or a non-resident Hindu undivided family shall not be subject to deduction of tax at source, where the units were acquired from the Unit Trust of India out of:
- funds in a non-resident (External) account maintained with any bank in India; or
- remittance of funds in foreign currency,
in either case in accordance with FEMA, 1999 and the rules made under it. It sits under section 393(2) read with section 393(4) , and has no 1962 parallel rule number in the source list.
Being a non-resident Indian is necessary but not sufficient under rule 210. The relief attaches to how the units were bought — NRE funds or a foreign-currency remittance, and compliantly under FEMA. Units bought out of an NRO account, or out of rupee funds already in India, fall outside the rule even though the holder is the same person. The evidence that matters is therefore the acquisition trail, not the current residential status certificate, and it has to survive for as long as the units are held.
What the two rules have in common
- Both remove or reduce deduction at source for a defined class of recipient.
- Both put the burden of proof on the recipient — evidence during the year under rule 208, the acquisition trail under rule 210.
- Neither is automatic: rule 208 needs Form No. 125 to be furnished; rule 210 needs the funding condition to be satisfied and demonstrable.
They differ in mechanism. Rule 208 keeps the deduction but makes it accurate; rule 210 removes it entirely.
Worked example
| Facts | Position under rule 208 and rule 210 |
|---|---|
| Specified senior citizen files Form No. 125 in April | Bank computes total income for the year under rule 208(2) |
| He submits proof of a Chapter VIII investment in February | Allowed — furnished during the tax year |
| He submits the same proof in May of the next year | Too late for the bank's computation under sub-rule (3) |
| Computed total income falls within the section 156 rebate | Deduction can be nil — the bank applies the rates to the computed total |
| Bank deducts flat TDS on interest ignoring Form No. 125 | Non-compliant with rule 208(2) |
| Chief Commissioner calls for the declaration three years later | Bank must produce it — sub-rule (4) sets no expiry |
| NRI holds UTI units bought by remittance in foreign currency | No TDS under rule 210 |
| NRI holds UTI units bought from an NRO account | Outside rule 210 — the funding condition fails |
| Non-resident HUF holds units bought from NRE funds | Covered — rule 210 names the non-resident HUF expressly |
Compliance checklist
- Confirm the citizen actually meets the specified senior citizen conditions before filing Form No. 125.
- File Form No. 125 with the specified bank early enough to govern the whole year's deduction.
- Submit Chapter VIII evidence during the tax year, not afterwards — rule 208(3) is strict on timing.
- Check the bank has allowed the section 156 rebate as well as the Chapter VIII deductions.
- Expect a computed slab liability, which may be nil, rather than a flat percentage.
- On the bank's side, retain the declaration and evidence indefinitely against a call from the Chief Commissioner.
- For UTI units, preserve the NRE debit advice or foreign-currency remittance evidence from the date of acquisition.
- Do not assume rule 210 follows residential status — it follows the source of funds.
Common mistakes
- Deducting flat TDS on a Form No. 125 account instead of computing total income.
- Omitting the section 156 rebate from the bank's computation.
- Submitting Chapter VIII proof after the year end and expecting it to be given effect.
- Discarding the declaration after a fixed retention period.
- Claiming rule 210 on NRO-funded units.
- Overlooking the non-resident HUF, which rule 210 covers alongside the NRI.
Which year this governs
The Income-tax Rules, 2026 are made under the Income-tax Act, 2025. The 1962 parallel to rule 208 is rule 26D, given for tracing only; rule 210 has no 1962 parallel in the source list. Verify the current text before acting on a live matter.