According to Income Tax Act, 1961 (‘Act’), in case of any income payable to any person, TDS is required to be deducted at the time of credit or payment, whichever is earlier. However, there may be a situation where the person receiving the income has the income lower than the taxable income & is not liable to pay tax during the relevant year. In such case, TDS deducted on such income of the person will unnecessarily create the situation of filing the return & claiming the refund. Funds are also blocked in the form of TDS.
In such scenario, recipient of such income can apply for certificate for lower deduction or NIL deduction of TDS. Act has specified certain situations where such certificates can be filed by the recipient.
In practical scenarios, certificate under Section 197 can be applied under following cases:
- Loss making businesses
- Business having less profitable margins
- Recipient having carried forward losses to set off in Current year
- Recipient having eligible deductions of profits
- Non-resident selling immovable property
Incomes under following sections under which certificate can be applied:
- Salary income under Section 192
- Interest on securities under Section 193
- Dividends under Section 194
- Interest other than Interest on securities under Section 194A
- Contractual receipts under Section 194C
- Insurance commission Section 194D
- Commission/remuneration/prize on lottery tickets Section 194G
- Commission or brokerage Section 194H
- Rent Section 194I
- Fee for Professional or technical services Section 194J
- Compensation on acquisition of immovable property Section 194LA
- Income in respect of units of investment fund Section 194LBB
- Income in respect of investment in securitization trust Section 194LBC
- Income of non-residents under Section 195
Upon application under Section 197, Assessing officer shall issue the certificate under Section 197 for lower or NIL deduction of TDS on examination of all relevant documents & details.
The assessing officer shall analyze the estimated amount of total income for the previous year for which application has been filed, tax payable of last three years & existing tax liability.
Assessee shall submit Form 13 on Traces portal for application for issuing the certificate. Certificate shall be valid for the period as may be specified in the certificate unless cancelled by Assessing officer.
Details required under Form 13
- Name of the Assessee
- Status
- PAN, Email id & mobile no.
- Details of existing liability in Income Tax act & wealth Tax Axt (if any)
- Estimated total income of previous year for which certificate is being applied
- Exemption certificates under Section, 10,11 or 12 (if any)
- Return of income for four previous years
- Requested rate of deduction of TDS
- Section under which TDS is being deducted
Form 13 is required to be submitted alongwith the above details & documents & digitally signed & uploaded on Traces Portal. Assessing Officer is required to dispose off the application within 30 days from the end of the month in which the application complete in all aspects is received.
Conclusion: Navigate the intricacies of tax management by understanding the provisions under Section 197 of the Income Tax Act. By filing for lower or nil deduction certificates, taxpayers can efficiently manage their cash flows, eliminate the need for refunds, and streamline the tax filing process. This comprehensive guide provides insights into the application process and the key details required for a successful submission.
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