The Complete Procedure for Getting Lower Deduction of TDS

Many times cases have happened, where a taxpayer believes that his/her total income justifies withholding of tax at a lower rate. In such a situation, Section 197 of the Income Tax Act, 1961 provides the benefit of NIL deduction of tax at source or a deduction at a lower rate of tax.

As per the Section 197 of ITR Act 1961, if the tax liability at the end of the person whose TDS is being deducted is less than the number of TDS that is being deducted, then he/she can make should make an application before the TDS Assessing Officer.

Why must a taxpayer consider obtaining this Lower rate TDS deduction Certificate?

If the high TDS is being deducted from the income, then the recipient of income has to claim a refund of TDS at the time of filing his/her Income Tax Return. And since the ITR can only be filed after the end of the financial year, the process becomes quite time-consuming and strenuous.

Additionally, if the recipient is claiming the higher amount, then the process can be prolonged. Therefore to reduce all these hardships a taxpayer must obtain this Lower rate TDS deduction Certificate.

To reduce the hardships faced by the taxpayers, the Government 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 number of TDS that is being deducted, he may apply for the Income Tax Officer to give him a certificate for Nil/ Lower deduction of TDS.

When can a taxpayer apply for a lower rate of TDS Deduction Certificate?

Although the provision under section 197 doesn’t state any deadline, still it is advisable to make an application at the beginning of the financial year in case of regular income throughout the financial year and as and when the need arises in case of irregular income.

Procedure for filing an Application under Section 197

The applicant is required to make an application for nil/lower deduction of TDS using the FORM 13 with the TDS Assessing Officer. It can be filed either online or offline mode.
Make sure that as an applicant, you provide complete and authentic details for the process of application
Once AO approves, he/she will process the issue of the certificate.
A copy of this certificate can be attached to the invoice given to the deductor, and he/she can use the same for justifying the lower tax deduction.

Validity of the Lower Tax Deduction Certificate under section 197

The certificate under the section is issued for a particular financial year and stands valid from the date of issue and throughout the financial year unless canceled by the assessing officer (TDS) before the expiry.

Documents to Submit with Form 13

  • Signed Form 13
  • Copies of return of income along with enclosures and assessment order for the previous three financial years. It may also ask for other documents depending on the nature of income.
  • Copies of financial statement along with audit report if any for previous 3 financial years, in case the applicant is a business person or earns a professional income.
  • Computation of income statement for previous 3 financial years and estimated computation for the current financial year along with the Copy of PAN Card
  • Tax Deduction Account Number of all parties responsible for paying you
  • E-TDS return acknowledgment for the previous 2 financial years
  • TDS default earlier

In case a taxpayer is not eligible for filing a Lower Tax Deduction Certificate, he/she can also submit a self declaration in specified forms (Form 15G/Form 15H) for non-deduction of TDS.
How can we simplify the process of getting a lower rate of TDS Deduction Certificate?

Amidst the incorporation of business or struggling with your yearly ITR returns, it is strenuous to get involved in all these registration processes. Nevertheless, to save your time as well as efforts, we at Muneembhai accomplish the complete process on your behalf.

Our service structure features end-to-end fulfillment under the guidance of our expert.


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