How to apply for lower TDS deduction certificate us 197 of Income Tax Act, 1961

TDS is a compliance where many taxpayers face numerous issues and complexities. It is possible that the TDS deducted from the taxpayer’s income is more than what they are liable to pay. The provisions contained in Section 197 of the Income Tax Act, permit taxpayers a facility of Nil or lower tax rate deduction of TDS or exemption of TDS. Form 13 under Section 197 of the Income Tax Act, 1961, is a crucial tool for taxpayers in India seeking relief from the high rates of Tax Deducted at Source (TDS) on their income.

What is Form 13?
Form 13 is an application form submitted by taxpayers to the Income Tax Department to request a lower or nil TDS certificate. This certificate allows the taxpayer to receive income without the usual deduction of tax or with a lower deduction rate, based on the taxpayer’s estimated income and tax liability for the financial year. The primary purpose of Form 13 is to avoid the situation where taxpayers are subject to higher TDS rates than their actual tax liability, which can lead to later applying for claiming refund of tax. By obtaining a certificate under Section 197, taxpayers can ensure that tax is deducted at a rate that more accurately reflects their expected tax liability. This literally means that TDS will be deducted as per the rate mentioned in the certificate obtained. There are different exemptions or restrictions for taxpayers depending upon their residential status.

How to Apply for Form 13?

The validity of this certificate obtained through application of Form 13 is valid throughout the year.

Let us understand, how to apply for form 13.

Select “request for form 13” option.
Next select residential status.

A Checklist screen will open and you will have to proceed to form filing.

Fill necessary details in form 13 and submit the application.

Upon successful completion of application and acknowledgement will be generated.

Upon receipt of the application, the assessing officer shall determine the estimated tax liability after taking into consideration tax payable on the estimated income of the ongoing financial year and also considers the tax payable/paid on the assessed or returned or estimated income, as the case may be, of the previous four financial years. Assessing after will issue a certificate upon his satisfaction under section 197.

Documents to be submitted along with application :

ITR-V/Acknowledgement of filing Income Tax return for relevant financial years to be provided.
Computation of Income for relevant financial years.
Balance Sheet and Profit and Loss Account for relevant financial years with all Schedules/Annexures.
Audit report in Form-3CD/3CA-3CB/10B ( Whichever is applicable) for relevant financial years.
Complete Chart showing all the payments made, the head of such expenses (e.g. contract payment, legal professional fees, etc.) and the section under which tax has been deducted by the applicant.

Conclusion:

Form 13 under Section 197 of the Income Tax Act is a valuable tool for taxpayers to manage their tax liabilities more efficiently. By applying for a lower or nil TDS certificate, taxpayers can avoid unnecessary deductions. If you believe you qualify for a reduced TDS rate, it’s prudent to consider filing Form 13. A Section 197 certificate, granting lower or nil Tax Deduction at Source (TDS), typically lapses within the financial year of its issuance. It’s validity extends from the date of issuance until March 31st, the conclusion of the Indian financial year or till the assessing officer cancels it .

About Author:
CA Chinmay Shirish Agate
Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis.