Section 197: Income Tax Form 13 for Lower Deduction of TDS
Tax Deducted at Source (TDS) is needed to be deducted at the time of any payment under the requirements of the Income Tax Act. TDS is deducted by the individual making the payment and must be deposited with the Income Tax Department before the TDS submission deadline.
TDS may be deducted from the receiver’s income in some instances, but his total tax burden determined at the end of the year using the Income Tax Slab Rates is less than the TDS deducted. This is fairly prevalent when an NRI sells a property and more than 20% TDS is deducted on the full sale price rather than being deducted on the Capital Gains.
In such circumstances, where the TDS is so large, the TDS is deducted first, and then the beneficiary of the income claims a TDS refund while completing his Income Tax Return. Because Income Tax Returns can only be filed at the end of the Financial Year, this is a time-consuming and inconvenient process. Furthermore, if the refund amount is bigger, the refund will be more difficult to process and may take longer for the Income Tax Department to process.
To help taxpayers, the government inserted Section 197, which states that if the total tax liability of the person whose TDS is being deducted at the end of the year is less than the number of TDS being deducted, he may file an application with the Income Tax Officer for a certificate for Nil/Lower TDS deduction.
An application for nil/lower TDS deduction must be submitted to the Income Tax Officer in Form 13, and the tax officer must be satisfied that the lower TDS deduction is justified before issuing a certificate under Section 197.
TDS shall be deducted according to the TDS Rate mentioned in the certificate once it is issued under Section 197. This certificate will be issued electronically, and the taxpayer will be able to download it from the IRS website.
Only once the Income Tax Officer has issued a certificate in response to an application lodged in Form 13 is a nil/lower TDS deduction available. This certificate must be presented to the individual who is deducting the TDS. Except where payment is made as Interest on Securities or Interest on Fixed Deposits under Section 197A, this certificate is necessary for all situations. In certain circumstances, Form 15G/ Form 15H must be completed and submitted.
Procedure for filing Form 13 to Income Tax Officer
The taxpayer must submit Form 13 to the income tax officer in order to request a Nil/Lower TDS deduction under Section 197. The taxpayer is required to provide various details in this Form 13, some of which include:
- Name and PAN No.
- Details regarding the purpose for which the payment is being received
- Details of income for the last 3 years and the projected current year’s income
- Details of payment of tax of the last 3 years
- Details of tax deducted/ paid for the current year
- Estimated Tax Liability for the current year
- Email ID
- Mobile Number
Unless cancelled before the expiration of the date specified in the certificate, the certificate issued by the income tax officer under Section 197 is only valid for the year specified in the certificate. By default, all certificates are valid for one year from the date of issuance until March 31st.
Furthermore, this is not a blanket certificate, and only if the deductor’s name is expressly stated in the Certificate, which is to be provided on an application made to the Income Tax Officer in Form 13, will the deductor make a lesser TDS deduction.
Other Relevant Points regarding Form 13 for Nil/ Lower Deduction of TDS
Section 192, Section 193, Section 194, Section 194A, Section 194C, Section 194D, Section 194G, Section 194H, Section 194I, Section 194J, Section 194K, Section 194LA, Section 194BB, Section 194LBC, Section 194M, Section 194-O, and Section 195 are the only sections on which TDS is required to be deducted. An application in Form 13 cannot be made if the payment is due to be deducted under any other part of the Income Tax Act.
Only if the Income Tax Officer is satisfied that the taxpayer’s income supports a reduced TDS deduction will the Lower/Nil TDS Certificate be given.