As per the provisions of the Income Tax Act, TDS/TCS is required to be deducted at the time of making any payment. This TDS is deducted by the person making the payment and is required to be deposited with the Income Tax Deptt before the due date of depositing TDS.
- Recommended Read: TDS Rate Chart
In some circumstances, a case may arise that TDS is being deducted from the income of the receiver, but his total tax liability computed at the end of the year as per the Income Tax Slab Rates is less than the TDS deducted.
- Recommended Read: Income Tax Slab Rate
In such cases, TDS is first deducted and then the taxpayer claims refund of TDS at the time of filing his income tax return. In many cases, this takes time and is burdensome for the taxpayer as first his TDS is being deducted by the person making the payment, then such TDS is deposited with the govt, and then a refund of TDS is being claimed.
To reduce the hardships faced by the taxpayers, the govt has inserted Section 197 which states that in case the total tax liability at the end of the person whose TDS is being deducted is less than the amount of TDS that is being deducted, he may file an application to the Income Tax Officer to give him a certificate for Nil/ Lower deduction of TDS.
Once such a certificate is granted under Section 197, the TDS will be deducted as per the TDS Rate stated in the Certificate.
An application for Nil/ Lower deduction of TDS is required to be filed in Form 13 to the Income Tax Officer, and the tax officer on being satisfied that lower deduction of TDS is justified shall issue a certificate for the same under Section 197.
Nil/ Lower deduction of TDS is only applicable once the Income tax officer has issued a certificate for the same in response to an application made in Form 13. This certificate is required to be submitted to the person who is deducting the TDS. This certificate is required in all cases except where payment is being made as Interest on Securities or Interest on Fixed Deposits under Section 197A. In such cases, Form 15G/ Form 15H is required to be submitted.
- Recommended Read: Form 15G/15H for Lower Deduction of TDS on Interest
Procedure for filing Form 13 to Income Tax Officer
An application for nil/ lower deduction of TDS under Section 197 is required to be made by the taxpayer to the income tax officer in Form 13. Various details are required to be furnished by the taxpayer in this Form 13, some of which include:-
- Name and PAN No.
- Details regarding the purpose for which the payment is being received
- Details of income of the last 3 years and the projected current year’s income
- Details of payment of tax of the last 3 years
- Details of tax deducted/ paid for the current year
A copy of Form 13 has been attached herewith for your ready reference
As per Section 28AA, the certificate so issued by the income tax officer under Section 197 is valid only for the assessment year mentioned in the certificate unless cancelled before the expiry of the date mentioned in the certificate.
Moreover, this is not a blanket certificate and the deductor shall make a lower deduction of TDS only if his name is specifically mentioned in the Certificate which is to be issued on an application made to the Income Tax Officer in Form 13.
Sections for which application for Nil/ Lower Deduction of TDS can be filed
- Section 192 – Salary
- Section 193 – Interest on Securities
- Section 194 – Dividends
- Section 194A – Interest other than “Interest on Securities”
- Section 194C – Payment to Contractors
- Section 194D – Insurance Commission
- Section 194G – Commission etc on Sale of Lottery Tickets
- Section 194H – Commission or Brokerage
- Section 194I – Rent
- Section 194J – Fees for Professional or Technical Services
- Section 194K – Income in respect of Units
- Section 194LA – Payment of compensation on acquisition on certain immovable properties
- Section 194LBB – Income in respect of units of investment fund
- Section 194LBC – Income in respect of investment in securitisation trust
- Section 195 – Other sums
Sections for which Certificate for Nil/ Lower Deduction of TDS cannot be obtained
- Section 192A – Payment of Accumulated Balance due to an employee from recognised provident fund
- Section 194B – Winnings from Lotteries, Cross word Puzzles, Online Games, TV Game Shows etc
- Section 194BB – Winnings from Horse Race
- Section 194DA – Payment in respect of Life Insurance Policy
- Section 194E – Payment to Non-Resident sportsmen or Sports association
- Section 194EE – Payment in respect of Deposits under National Savings Scheme
- Section 194IA – Payment in respect of Sale of Property by Resident Indian
- Section 194IB – Payment of Rent by certain categories of taxpayers
- Section 194IC – Payment for certain type of agreements
- Section 194LB – Payment by way of interest from infrastructure debt fund
- Section 194LBA – Certain income from units of a business trust
- Section 194LC – Income by way of interest from Indian Company
- Section 194LD – Income by way of interest on certain bonds and Govt Securities
- Section 196A, 196B, 196C, 196D