Where a taxpayer believes that its total income justifies withholding of tax at a lower rate, it can apply to the assessing officer for a  certificate of withholding tax at a lower rate. The application by the taxpayer to the AO for a certificate of withholding tax at a lower rate is governed by Rule 28AA of the Income-tax Rules, 1962 (the Rules).

Procedure – Lower / Nil rate TDS deduction Certificate is as under:

1. Every finance professional are making estimated accounts of the company and based on that you can also prepare the estimated computation of total income assuming same adjustments as done for the previous year.

2. Determine the expected tax liability of the company

3. Determine the TDS deducted and advance tax paid till date and also determine the expected TDS on the revenue for the balance period of the financial year.

4. Based on the above, review the tax payable/ refundable periodically.

5. In case there is expected tax refundable for the company, the finance professional should not block this company’s fund in the hands of Income tax department for next 2-3 years and should apply for lower TDS application to the TDS department immediately.

6. For applying lower TDS certificate to the TDS department, following documents are required to be submitted :

  • Covering letter disclosing nature of business of the company, reason for company should get lower TDS certificate and also details of the party with their correct address & TAN.
  • New Form 13
  • Estimated financials & computation of Total Income
  • Audited financials for the last 3 Years
  • Tax Audit Report of the Last 3 Years
  • Income tax return acknowledgment of last 3 Years
  • E TDS return acknowledgment for last 2 years of all the 4 quarters.
  • In case of any short payment of TDS in last 3 years, proof of the payment of TDS.
  • Copy of application & certificate obtained for earlier years.
  • No Dues Certificate from Your Assessing officer in respect of Income tax

7. After submitting the aforesaid application to the TDS department , the AO will review your documents and they may ask further queries & documents to satisfy that your company is eligible for getting the lower TDS certificate.

8. It must be noted that AO is not bound to issue TDS certificate, once the application had been filed. The AO issue the certificate based on the merit on case to case basis.

9. You must provide the correct TAN of all the parties for whom you want the TDS certificate as now a days, department are issuing only system generated certificate based on the TAN.

10. As we all know that, now department are not issuing nil TDS certificate to anyone. Hence, you must apply only for lower TDS certificate only and must mention the lower rate as required.

Republished with Amendments

Also Read recent communications related to Lower / Nil rate TDS deduction Certificate

1. Certificates for lower rate/nil deduction/collection of TDS or TCS- Reg
2. Lower/nil rate of TDS/TCS applications to be disposed liberally by 27.04.2020
3. Apply Lower/Nil tax deduction certificates before Financial Year Start

More Under Income Tax

4 Comments

  1. Santosh Finlease Pvt Ltd says:

    We have to file form 13 for the lower rate of Deduction of Tax as the Company is working in Delhi as Commpany has to file in Income Tax Aplication in Delhi or weather Company has to file it with Bengaluru.

  2. R Siva says:

    Applicability of dates for Lower deduction of TDS
    Suppose if the LD TDS Certificate is issued in the middle of the year say on Aug’2014 and prior to Aug’14 (between April to July14) there were some transactions on which TDS is deducted at Normal rates.
    Let us assume that For the first 4 months total taxable transaction is worth 80000 and TDS is deducted at normal rate of 10%
    In Aug14 LD TDS certificate is furnished as Up to 100000 TDS @ 2% and beyond 100000 it will be at normal rate.
    In Aug14 there is a transaction of 20k and TDS will be deducted at 2%
    In Sep14 if there is a transaction for 10k what should be the % that should be considered 2% or 10% (since transaction till Aug has reached 100000 limit)

    Please advice

  3. ANWAR SIDDIQUI says:

    I want to know how to get lower deduction of TDS-Certoficate(0.01%). 
    And What is the Necessary  Requirement to get this certificate.

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