How I Helped a Client Secure a Lower TDS Certificate—and What You Should Know Before Applying
Your business has just secured a major contract. Payments are rolling in, but with every invoice, 2% is automatically deducted as TDS. By the end of the year, you realize you’ve paid far more tax than your actual liability—and now you’re stuck waiting months for a refund.
Sound familiar?
There’s a smarter, more efficient way to handle this: applying for a Lower TDS Deduction Certificate under Section 197 of the Income Tax Act.
In this blog, I’m sharing my recent experience of obtaining a lower TDS certificate for one of our clients—what went right, the challenges we faced, and what you should be prepared for when you file.
Step-by-Step Process to Apply for a Lower TDS Certificate
1. Login to TRACES Portal
The process begins by logging in to the TRACES portal using the taxpayer’s credentials.
2. File Form 13
Form 13 must be filled and submitted electronically under Rule 28 of the Income Tax Rules. Along with the form, we attached the following documents:
- Audited financial statements for the last 3 years
- Projected financials for the financial year for which the certificate is sought
- Projected computation of income and tax liability for the same year
- Provisional financials and computation for the immediately preceding year
- Section-wise and party-wise details of income on which lower TDS is requested
- Copies of previous assessment orders (if any)
3. Responding to Clarifications from the Assessing Officer
Within two days of filing the application, we received a clarification request from the Assessing Officer, with a deadline of five days to respond. Some of the questions and document requests included:
- TAN of the applicant
- Nature of business and brief business profile
- Copy of previously issued lower deduction certificate, if applicable
- Whether application was filed by counsel (with Power of Attorney & affidavit on ₹10
- stamp
- paper if yes)
♦ Certified trial balance for the month preceding application
♦ Intimation under Section 143(1)
♦ Details of any ongoing scrutiny, reassessment, or penalty proceedings
♦ Information on exempt income
♦ Quarter-wise TDS payment data and acknowledgements for 24Q/26Q
♦ Section-wise projected income for which LDC is sought (with Excel format)
♦ Copies of major contract agreements relevant to 194C, 194J, 194I, or 194H (with Excel)
♦ Affidavit by the Principal Officer / Director / Partner / Proprietor / Trustee
4. Physical Submission of Documents
Despite filing all documents online, we were asked to submit physical copies during a visit to the Income Tax Department. Some of these requirements felt redundant and overly detailed, but complying with the department’s request was necessary to move the process forward.
5. Issuance of Certificate
After all clarifications were submitted and reviewed, the Assessing Officer issued the lower TDS certificate. The certificate included:
- Applicable reduced TDS rate
- Validity period
- List of deductors allowed to apply the lower rate
Key Benefits of a Lower TDS Certificate
1. Improved Cash Flow
Funds aren’t unnecessarily locked in as advance tax, allowing better liquidity for operations or investments.
2. Avoid Refund Delays
Avoids the hassle of overpaying and then waiting months for refunds during tax return processing.
3. Tax Efficiency
Ensures TDS is aligned with your actual tax liability.
4. Professional Credibility
Shows proactive and well-managed tax planning—useful in banking, funding, and compliance assessments.
Final Thoughts
Applying for a Lower or Nil TDS Deduction Certificate can significantly ease the tax burden and improve cash flow for businesses, professionals, and consultants. However, the process involves substantial documentation and coordination with the Assessing Officer.
Based on my experience, preparing a detailed file in advance, maintaining transparency, and being responsive to follow-ups can make the process smoother and faster.
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