lower TDS certification
This query is : Resolved
19 May 2017
Can new company apply for lower tds under section 197?
if yes then please provide the details.
20 May 2017
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.
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.
20 May 2017
New company will not be able to provide last 3 audited balance sheet and tax audit...so how can they apply without this?
03 August 2024
Yes, a new company can apply for a lower TDS rate under Section 197 of the Income Tax Act. The process for a new company to apply for a lower TDS rate involves some specific steps, especially when they may not have the historical financial data typically required. Here's how a new company can approach this:
### Applying for Lower TDS Under Section 197 for a New Company
1. **Determine the Basis for Lower TDS Rate:**
- **Projected Income/Loss:** Since the company is new and doesn’t have previous financial data, the application should be based on the projected income and estimated tax liability for the current financial year.
- **Reason for Lower TDS:** Clearly state the reason for requesting a lower TDS rate. For instance, if the company expects to incur losses or has a projected tax liability lower than the TDS rate, this should be detailed.
2. **Prepare Required Documentation:**
- **Form 13:** Complete Form 13 for requesting a lower TDS rate. You can find Form 13 on the Income Tax Department's website.
- **Projected Financial Statements:** Include projections of financial statements, such as estimated profit and loss accounts and balance sheets.
- **Declaration of Estimated Tax Liability:** Provide a declaration or computation of estimated tax liability showing how you arrived at the projected figures.
- **Company Details:** Include all relevant company details such as PAN, address, nature of business, etc.
3. **Submit Form 13:**
- **Online Submission:**
- Log in to the Income Tax e-filing portal.
- Go to the ‘e-File’ menu and select ‘Income Tax Forms’.
- Choose ‘Form 13’ and complete it with the required details.
- **Physical Submission:**
- Alternatively, submit Form 13 along with the supporting documents to your local Assessing Officer (AO) if you prefer a physical submission.
4. **Receive Lower TDS Certificate:**
- **Processing Time:** It may take a few days to a few weeks for the Income Tax Department to process the application and issue a lower TDS certificate.
- **Certificate Details:** The certificate will specify the TDS rate to be applied or confirm that no TDS should be deducted.
5. **Provide Certificate to Deductor:**
- **Submit to Deductor:** Once you receive the lower TDS certificate, provide it to your deductor (clients or other entities making payments to the company) so they can apply the reduced TDS rate.
### Key Considerations for a New Company
- **Lack of Historical Data:** Although the company may not have the last three audited balance sheets, the focus should be on the projected figures and reasoned estimation of income and tax liability for the current year.
- **Accuracy of Projections:** Ensure that your projections are realistic and based on reasonable assumptions to avoid any issues with the application.
- **Compliance:** Make sure to follow up on the application to confirm that it has been processed and obtain the lower TDS certificate in a timely manner.
### Sample Approach for a New Company
1. **Calculate Projected Income/Loss:**
- Estimate the revenue and expenses for the current financial year.
- Determine the projected tax liability based on these estimates.
2. **Prepare Form 13:**
- Provide details about the projected financial situation and why a lower TDS rate is justified.
3. **Submit the Application:**
- Submit Form 13 either online or physically to your Assessing Officer along with the supporting documents.
4. **Receive and Use the Certificate:**
- Once issued, use the lower TDS certificate to ensure that the TDS deducted is at the lower rate specified.
This approach allows a new company to manage its cash flows effectively by reducing the TDS rate based on its projected financial situation.
### Applying for Lower TDS Under Section 197 for a New Company
1. **Determine the Basis for Lower TDS Rate:**
- **Projected Income/Loss:** Since the company is new and doesn’t have previous financial data, the application should be based on the projected income and estimated tax liability for the current financial year.
- **Reason for Lower TDS:** Clearly state the reason for requesting a lower TDS rate. For instance, if the company expects to incur losses or has a projected tax liability lower than the TDS rate, this should be detailed.
2. **Prepare Required Documentation:**
- **Form 13:** Complete Form 13 for requesting a lower TDS rate. You can find Form 13 on the Income Tax Department's website.
- **Projected Financial Statements:** Include projections of financial statements, such as estimated profit and loss accounts and balance sheets.
- **Declaration of Estimated Tax Liability:** Provide a declaration or computation of estimated tax liability showing how you arrived at the projected figures.
- **Company Details:** Include all relevant company details such as PAN, address, nature of business, etc.
3. **Submit Form 13:**
- **Online Submission:**
- Log in to the Income Tax e-filing portal.
- Go to the ‘e-File’ menu and select ‘Income Tax Forms’.
- Choose ‘Form 13’ and complete it with the required details.
- **Physical Submission:**
- Alternatively, submit Form 13 along with the supporting documents to your local Assessing Officer (AO) if you prefer a physical submission.
4. **Receive Lower TDS Certificate:**
- **Processing Time:** It may take a few days to a few weeks for the Income Tax Department to process the application and issue a lower TDS certificate.
- **Certificate Details:** The certificate will specify the TDS rate to be applied or confirm that no TDS should be deducted.
5. **Provide Certificate to Deductor:**
- **Submit to Deductor:** Once you receive the lower TDS certificate, provide it to your deductor (clients or other entities making payments to the company) so they can apply the reduced TDS rate.
### Key Considerations for a New Company
- **Lack of Historical Data:** Although the company may not have the last three audited balance sheets, the focus should be on the projected figures and reasoned estimation of income and tax liability for the current year.
- **Accuracy of Projections:** Ensure that your projections are realistic and based on reasonable assumptions to avoid any issues with the application.
- **Compliance:** Make sure to follow up on the application to confirm that it has been processed and obtain the lower TDS certificate in a timely manner.
### Sample Approach for a New Company
1. **Calculate Projected Income/Loss:**
- Estimate the revenue and expenses for the current financial year.
- Determine the projected tax liability based on these estimates.
2. **Prepare Form 13:**
- Provide details about the projected financial situation and why a lower TDS rate is justified.
3. **Submit the Application:**
- Submit Form 13 either online or physically to your Assessing Officer along with the supporting documents.
4. **Receive and Use the Certificate:**
- Once issued, use the lower TDS certificate to ensure that the TDS deducted is at the lower rate specified.
This approach allows a new company to manage its cash flows effectively by reducing the TDS rate based on its projected financial situation.
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