Section 197

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. For availing this benefit, assessees whose income would be liable for a tax deduction at source (TDS) need to furnish an application before assessing officer having jurisdiction over the assessee. The assessee concerned could apply for a certificate for Nil or lower deduction of TDS on the receipts in the prescribed Form No 13 to the jurisdictional assessing officer.

The AO would consider the assessee's total income and estimated tax liability and, accordingly, grant a certificate for TDS at a Nil or lower rate to the applicant.

On the basis of the certificate issued by the Assessing Officer, the person responsible for deducting TDS will deduct tax at a lower rate as specified in the certificate or deduct no tax until the Assessing Officer cancels such certificate.

Procedure for Making the Application

In order to make an application in Form no 13, a taxpayer has to register in the portal https://contents.tdscpc.gov.in/ using his/her PAN. Upon registration under TRACES (TDS-CPC) website, a taxpayer has to log in and under the tab ‘Statements/Forms’, choose ‘Request for Form 13’.

An assessee has to file the application for Nil or lower deduction of tax online using a digital signature (DSC) or electronic verification code (EVC). Similarly, a taxpayer (buyer/licensee/lessee) whose payments are liable for the collection of tax (TCS) under section 206C can file an application in form no 13 seeking a certificate for Nil or lower tax collection at source.

The following documents are to be uploaded along with Form 13:

• Estimated Income Computation of the current FY
• Return of income or assessment order of the four previous FYs
• Computation of estimated total income of the previous four FYs if the return of income has not been filed
• Registration/Exemption Certificate in case of certain entities covered under section 11 or 12 of the Income Tax Act 
• Registration/Exemption Certificate in case of certain entities covered under section 139(4C) where income is exempt under section 10

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.

The assessing officer must also consider the advance tax payment, tax deducted at source, and tax collected at source for the ongoing financial year until the date of the application.

If the assessing officer is satisfied that the estimated tax is NIL or negligible and that tax deduction at generic rates is not necessary, then he/she shall issue the NIL or lower TDS/TCS certificate under section 197. Such certificate shall be specific to the deductor and service (section) and is valid from the date of issue to the end of the financial year or until the assessing officer cancels it.

Sample of Certificate u/s 197