SECTION 197A – NO DEDUCTION OF TAX AT SOURCE TO BE MADE IN CER­TAIN CASES

1175. Effect of non obstante clause in the section – Whether sections 193, 194 and 194A continue to be in force and facility provided in the section is in addition to facility under the said sections

1. The Finance Act, 1982 has inserted a new section 197A with effect from June 1, 1982. The section enables an individual who is resident in India and whose estimated total income of the previous year is less than the minimum liable to income-tax to receive interest on securities, dividends and other interest without deduction of tax at source under sections 193, 194 and 194A of the Act on furnishing a declaration, in duplicate, in the prescribed form and verified in the prescribed manner. Rule 29C and Form Nos. 15F, 15G and 15H have been inserted in the Income-tax Rules, 1962 by the Income-tax (Fifth Amendment) Rules, 1982 prescribing the forms for the purposes of section 197A and laying down the procedure for furnishing  the declaration form.

2. The facility of claiming payments of interest on securities, dividends, etc., under section 197A is available only in the case of individuals who are resident in India within the meaning of section 6 of the Act. Accordingly, it is not permissible for Hindu undivided families and other categories of taxpayers to claim payments of interest on securities, dividends, etc., with­out deduction of tax at source on furnishing the declaration in Form No. 15F, 15G or 15H.

3. The declaration in Form No. 15F, Form No. 15G or, as the case may be, Form No. 15H is to be furnished by the declarant to the person responsible for paying any income of the nature referred to in section 193 or section 194 or, as the case may be, section 194A of the Act. As defined in section 204 of the Act, the ex­pression “person responsible for paying” for the purposes of the aforesaid sections means (a) in the case of payments of income chargeable under the head “Interest on securities” (other than payments made by or on behalf of the Central Government or the Government of a State), the local authority, corporation or company, including the principal officer thereof; and (b) in the case of credit or payment of any other sum chargeable under the Income-tax Act, the payer himself, or if the payer is company, the company itself including principal officer thereof. Section 2(35) of the Act defines “principal officer” with reference to a local authority, a company, any other public body; or any associ­ation of persons or body of individuals, to mean (a) the secre­tary, treasurer, manager or agent of the authority, company, organization or body; or (b ) any person connected with the man­agement or administration of the local authority, company, asso­ciation or body upon whom the Income-tax Officer has served a notice of his intention of treating him as the principal officer thereof. Hence, in cases where the declaration in Form No. 15F, 15G or 15H is to be furnished for the purposes of receiving any interest on securities (other than any security of the Central Government or a State Government) dividends or interest other than interest on securities, payable by any person other than the Central Government or a State Government the declaration may be furnished to the local authority, corporation, company or the secretary, treasurer, manager or agent of the local authority, corporation or company. For the purposes of obtaining interest on any Government  security without deduction of tax at source, the declaration in Form No. 15F may be furnished to the public debt officers and Treasury officers who are responsible for paying the interest on such securities.

4. The effect of non obstante clause in section 197A is that it supersedes the provisions of sections 193, 194 and 194A only insofar as these cast a legal obligation on the person responsi­ble for paying the income of the nature referred to in the said sections to deduct tax at source. Thus, the provisions of sections 193, 194 and 194A, which provide a facility for receiving the income referred to therein without deduction of tax at source, continue to be in force and the facility provided in the new section 197A is in addition to the facility provided under the existing provisions in sections 193, 194 and 194A.
5. The declaration in Form No. 15F, 15G or 15H as explained above is to be furnished to the person responsible for paying the income which is sought to be received without deduction of tax at source. As the declarant has to state that his estimated total income of the previous year in which the income of the nature referred to in section 193, 194 or 194A is to be included in computing his total income is below the exemption limit, it will be sufficient if only one declaration is made in respect of the income each year before each person responsible for making the payment. Hence, where payments are to be made by the same person more than once in a year, the declaration in the relevant form may be furnished before the first payment in a year becomes due. It may also be noted that in the declaration in Form No. 15F, 15G  or 15H particulars of only such securities, shares or, as the case may be, other deposits are to be furnished the income from which is payable by the person to whom the declaration is furnished. For example, in the declaration in Form No. 15G furnished to company ‘A’ it is not necessary for the declarant to give particulars of the shares held by him in other companies.

Circular : No. 351 [F.No. 142(32)/82-TPL], dated 26-11-1982.

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