According to section 197 of the Income Tax Act, 1961, when the actual tax payable on the income of the assessee is lower than the TDS to be deducted by the payer as per, then the assessing officer, if satisfied that the recipient of such income justifies the deduction of income tax at any lower rates or no deduction of the income tax, shall grant him a certificate as may be appropriate upon the application made by the assessee.
Before going to the procedure of filing an application for a lower tax deduction, let us make a note of sections under which TDS shall be deducted as per Chapter-XVII, which are covered under section 197:
- Section 192- Payment of Salary
- Section 193- Payment of Interest on securities
- Section 194- Payment of Dividends
- Section 194A- Payment of interest on other than securities
- Section 194C- Payment to contractors and sub-contractors
- Section 194D- Payment of insurance commission
- Section 194G- Payment of commission on the sale of lottery
- Section 194H- Payment of commission or brokerage
- Section 194I- Payment of Rent
- Section 194J- Payment of Fees for Technical services
- Section 194K- Payment of income in respect of units
- Section 194LA- Payment of compensation on acquisition of immovable property
- Section 194LBB- Payment of income in respect of units of investment fund
- Section 194LBC- Payment of income in respect of investment in securitization trust
- Section 194M- Payment of commission by individual and HUF pursuance of a contract (other than covered under section 194C, 194H and 194J)
- Section 194O- Payment by e-commerce operator to e-commerce participant
- Section 195- Payment to non-resident or foreign companies
No application for the lower tax deduction certificate shall be filed for the purpose of payments other than the ones mentioned above.
Let us now understand the procedure of filing an application for the lower tax deduction certificate:
As per Rule 28 of Income Tax Rules, an application for Lower Tax Deduction Certificate shall be made online by logging in to the TRACES portal in Form 13. Below are the detailed steps for making an application-
Step-1: Click on the link to Log in to the Traces portal and select 'Taxpayer/PAO' and enter the user ID, password, PAN of the Taxpayer and the verification code - https://www.tdscpc.gov.in/app/login.xhtml
Step-2: From 'Statements/Forms' menu select 'Request for Form 13'. Select the option as appearing on the screen. If we are applying for a non-resident person or a foreign company, then select 'Non Resident' or 'Not Ordinarily Resident' as the case may be and if we are applying for a resident assessee, then select 'Resident'.
Step-3 Select 'Request Type' as 'Original' and then select the Financial Year for which we are applying for a Lower Tax Deduction Certificate. Then click on 'Proceed'.
Step-4: After step-3, a detailed Form 13 will appear on the screen and below mentioned details are required to be filled-
- Status: Whether it's a company, LLP, Partnership firm or individual
- Residential Status: Whether resident or non-resident
- PAN: PAN of the assessee
- Email Id: Email id should be a valid one. Any communication or query raised by the department would be notified on this mail id only
- Mobile No.: A message after filing the application and further communication from the department would be notified on this mobile no. as well
- State: State can be selected as per the convenience of the assessee
- District: Select from the drop down menu. Jurisdictional A.O will be assigned on the basis of State & District given by taxpayer in Original application of Form-13
- Detail of existing Income Tax liability: A table need to be filled up for any liability which is unpaid for the financial year for which application is being filed
- Estimated total income of the previous year for which application is filed: A projected gross receipt shall be entered here. Note that the LDC will be issued by the department upto this amount only. Therefore, this amount shall be entered carefully
- Total tax payable including interest for the above mentioned income: Tax liability which will be computed on the basis of above mentioned projected income shall be entered here. The tax rate applicable to the assessee will be calculated on the basis of this tax liability and projected receipts as mentioned above.
- Details of income claimed to be exempt: If any income has been claimed to be exempt and included in the projected receipts as reported above, shall be entered here.
- Details of payment of advance-tax and tax already deducted/collected: A table needs to be filled up by entering the amount which has already been paid as Advance Tax or deducted as TDS. These details may be taken from Form 26AS.
- Thereafter some declaration shall be checked by clicking against the respective options. After all this click on the 'Save & Proceed' button.
Step-5: Select the 'Annexure-I' and click on the 'Proceed' button.
Step-6: After clicking on the proceed button as stated in Step-5, a table will appear. In this table we need to fill the details of the deductor like TAN, section under which TDS to be deducted, nature of payment (which will be selected from the drop down menu), Estimated amount and tax rate at which the assessee wishes to apply.
Step-7: At last, supporting documents shall be attached by clicking on the respective links. Document shall be attached by clicking on 'Browse' button as provided against each document description. A template shall also be filled up by clicking on the 'Template' button.
Below is the list of documents to be attached along with the Form 13-
- Projected balance sheet and computation for the financial year for which application is filed. In the case of individuals, only projected computation is required.
- Audited balance sheet and computation for any one of the four previous years. This is not required in case of an individual who is not carrying any business or profession
- Copy of exemption certificate, if any exemption is claimed
- Copy of assessment order for the last four years, if any
- Copy of ITR acknowledgment for last four years
- Any other documents e.g. Property papers, copy of agreements etc.
After uploading all the documents, click on the 'Preview & Submit' button and a preview will appear on screen, through which you can cross check all the details and download the preview as well. Later, you can submit the Form by 'using DSC or mobile OTP'.
The Jurisdiction will be assigned automatically within 2 or 3 days after submission of Form 13. The assessing officer, upon verification of the form, may raise further query which can be replied online through the link which will be available when you check the status of your application.
The certificate once issued by the authority can be downloaded from the link which will be available when you check the status of the application.
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