Certificate for Lower/NIL Deduction of TDS: Application Procedure

When a person makes any payment to the other person should deduct TDS (Tax Deducted at Source) either at the time of credit to the account of that person or at the time of making payment whichever is earlier. 

Section 197 of Income Tax Act, 1961 helps to reduce the burden of claiming refund from the Income Tax Department if the tax deducted is more than actual tax liability.  When a person who receives income assumes that his total income tax liability calculated as per the Income Tax Rates is lower than TDS amount deducted, he may request for lower or nil deduction of TDS by making an application in Form 13 to the Income Tax Officer. 

The Income Tax Officer after receiving the application and if he satisfied that the total income of the recipient is eligible for lower or nil deduction, may issue a certificate for such lower or nil deduction of TDS.  This certificate is given to the person responsible for deducting TDS and he has to deduct TDS at the rates specified in the certificate or deduct no tax up to the time when the certificate is valid.

The certificate for lower or nil deduction of TDS contains the details of the persons who are responsible to deduct TDS and period when the certificate is valid.  Only those whose name mentioned in the certificate can deduct at lower rate or nil TDS.

Important Details to be provided in the Form 13:

• Status regarding if Individual, HUF, Company, etc.
• Residential Status
• Permanent Account Number (PAN)
• Tax Deduction and Collection Account Number (TAN)
• Details of returns due but not filed
• Details of returned income or assessed income for the last three assessment years (copies of returns along with enclosures, copies of assessment orders to be enclosed)
• Details of tax payment for the last three assessment years
• Details of sales, profit, etc. for the last three previous years if the income includes the income from the head ‘Profits and Gains of Business or Profession’.
• Details of existing tax liability under Income Tax Act, 1961 and Wealth Tax Act, 1957
• Assessment year to which the payments related
• Details of payment of Advance tax and tax deducted or collected already for the assessment year relevant to the current previous year till date.

Note: This certificate of lower or nil deduction of TDS is not applicable for the Interest income other than interest on securities received from banks and others as per Section 194A. Form 15G or Form 15H can be submitted for nil deduction of TDS for the Income from Interest.

Click HERE to download the Form 13