Analysis of Form 13 for applying lower/Nil TDS/TCS deduction/collection

DETAILED VIEW OF FORM 13 OF INCOME TAX ACT

FORM No. 13 is released under rules 28 and 37G of Income TAx Rules and is for Application by a person for a certificate under section 197 and/or sub-section (9) of section 206C of the Income-tax Act, 1961, for no deduction of tax or deduction or collection of tax at a lower rate.

WHAT IS FORM 13

FORM 13 of the Income Tax Act is an option provided to the taxpayers to avail benefit of lower deduction/ Non-deduction of taxes u/s 197 on their respective income which is liable for deduction of taxes in accordance with Chapter XVII-B of the Income Tax Act as well as lower or No Collection of taxes in regard to the transaction covered under Sec 206C of the Income tax Act. For availing this Scheme, taxpayer need to submit Form 13 (through traces website) to the Assessing Officer furnishing the relevant details required in the said Form.

Hence, application for Form 13 can be made by a person for a Certificate under Sec 197and/or sub section (9) of sec 206C of the Income Tax Act for no deduction of tax or deduction or collection of tax at lower rate.

Who is eligible to apply for Form 13

Every person is eligible to apply for Form 13, however benefit of lower/Non deduction of taxes will be allowed only when the Assessing officer is satisfied that the income of the assesse is justified for lower/ Non deduction of taxes or where deduction or collection of taxes at higher rate would create an undue hardship against the assesse.

i.e. All person covered here i.e. Individual, HUF, AOP, BOI, Trust claiming benefit of section 11 or section 12 or section 10 of the Income Tax Act, society, company, firm etc.

Sub rule (1) of Rule 28– An application in Form 13 for deduction of tax at lower rate or no deduction of tax can be made electronically either :

• through Digital Signature
• through electronic verification code

Rule 28AB-Further, Rule 28AB of the Income Tax rules provides that an entity belonging to the category described below may make an application to the Assessing officer for non-deduction of tax in respect of the income derived subject to the fulfillment of certain conditions specified under sub rule (2) of Rule 28AB

First- Nature of Entity (sub rule (1) of Rule 28AB)

• In the case of an entities deriving income from the property held under trust for charitable and religious purpose and claiming exemption under Sec 11 or 12 , or
• In the case of an entities claiming exemption under Section 10 and required to file Return of Income under Sec 139(4C) of the Income Tax Act

Second- Conditions to be fulfilled ( sub rule (2) of Rule 28AB)

• That the return of income of such category of person specified above has been furnished for all assessment years for which such returns became due on or on before the date of making the application,
• That such trust, scientific research association, news agency, association or institution, fund or trust or university or other educational institution or any hospital or other medical institution or trade union referred has been approved by the Income tax Authority for claiming exemption under Sec 11 or 12 or Sec

CERTIFICATE UNDER SEC 197 OF THE INCOME TAX ACT

After making an application in Form 13 for seeking Lower/ Non deduction of tax with regard to income earned by the taxpayer and on which tax is liable to be deducted under Sec 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBB, 194LBC, 194M and Section 195.

Rule 28AA– Application made in Form 13 is examined and verified by the Assessing officer, and if the A.O is satisfied that the existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, as the case may be, the Assessing Officer shall issue a certificate in accordance with the provisions of sub-section (1) of section 197 for deduction of tax at such lower rate or no deduction of tax.

(2) The existing and estimated liability referred to in sub-rule (1) of Rule 28 shall be determined by the Assessing Officer after taking into consideration the following:—

(i) tax payable on estimated income of the previous year relevant to the assessment year;

(ii) tax payable on the assessed or returned income of previous years,

(iii) existing liability under the Income-tax Act, 1961 and Wealth-tax Act, 1957;

(iv) advance tax payment

Rule 29 Further Rule 29 specifies that where an application for lower deduction of tax or non-deduction of tax is made by the taxpayer in respect of the Dividend income, the A.O shall issue certificate authorizing the payment of Dividend without deduction of tax or deduction of tax at lower rate as the case may be subject to the fulfillment of following conditions:

1. The shares in respect of which the certificate is sought for—

(i) are shares in public companies; and

(ii) stand in his name and are beneficially owned by him, and the dividends therefrom are not includible in the total income of any other person under sections 60 to 64,

or

stand in his name and are held by him under trust wholly for charitable or religious purposes, and the dividends therefrom [are exempt from tax under the provisions of sections 11 to 13].

Issue of certificate

Sub rule (4) of Rule 28AA provides that the Certificate for lower deduction of tax or non-deduction of tax shall be issued directly to the person responsible for making payment and deducting the tax.

Provided that where the number of persons responsible for deducting the tax is likely to exceed one hundred and the details of such persons are not available at the time of making application with the person making such application, the certificate for deduction of tax at lower rate may be issued to the person who made an application for issue of such certificate, authorising him to receive income or sum after deduction of tax at lower rate.

Validity of Certificate

Further, sub section (2) of Sec 197 states that where such a certificate is issued by the Assessing officer , it remain valid until it get cancelled and the payer responsible for paying any income to such taxpayer will deduct income tax at the rate specified in the certificate or deduct no tax , as the case may be.

In the case of any entity claiming exemption under Sec 10 or Sec 11 or 12 , certificate issued by the Assessing officer under Sec 197 shall remain for the financial year specified therein or until the expiry of the said financial year.

CERTIFICATE UNDER SUB SECTION (9) OF SECTION 206C

SEC 206C- Collection of tax at source in respect of business of trading in alcoholic liquor, forest produce, scrap etc.

Sec 206C(1)- Every seller shall at the time of receipt of amount from the buyer in cash or cheque or at the time of debiting the account of the buyer collect tax at source from the buyer of goods of the nature specified in the table below at the specified % which is detailed below:

S.No	Nature of goods	% of TCS
1.	Alcoholic liquor for human consumption	1%
2.	Tendu Leaves	5%
3.	Timber obtained under a Forest lease	2.5%
4.	Timber obtained by any mode other than Forest lease	2.5%
5.	Any other forest produce not being timber or tendu leaves	2.5%
6.	Scrap	1%
7.	Minerals, being coal or lignite or iron ore	1%

Sec 206C(1C)-

Every person, who grants a lease or a licence or enters into a contract or otherwise transfers any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry, to another person, other than a public sector company (hereafter in this section referred to as “licensee or lessee”) for the use of such parking lot or toll plaza or mine or quarry for the purpose of business shall, at the time of debiting of the account of licensee or lessee or at the time of receipt of such amount from the licensee or lessee in cash or by the issue of a cheque, whichever is earlier, collect tax at source from the buyer of goods of the nature specified in the table below at the specified % which is detailed below:

S.No	Nature of goods	% of TCS
1.	Parking Lot	2%
2.	Toll Plaza	2%
3.	Mining and quarrying	2%

Application for Certificate under sub section (9) of Sec 206C

Rule 37G-

An application by the buyer or licensee or lessee for a certificate under sub- section (9) of section 206C shall be made in Form No. 13 electronically,—

(i) under digital signature; or

(ii) through electronic verification code.

Certificate under sub section (9) of Sec 206C

Where an application in Form No.13 in accordance with sub rule (1) of Rule 37G has been submitted by the buyer or licensee or lessee for lower collection of taxes or Non collection of taxes with regard to the transactions referred to in sub section (1) of Sec 206C or sub section (1C) of section 206C and the Assessing officer is satisfied that the total income of the buyer or licensee or lessee justifies the collection of the tax at any lower rate than the relevant rate specified in sub-section (1) or sub-section (1C), the Assessing Officer shall issue a certificate for collection of tax at such lower rate than the relevant rate specified in sub-section (1) or sub-section (1C) of section 206C.