Person responsible for making the payment is entrusted with the responsibility of deducting the tax at specified rates either at the time of credit in the books or payment to the recipient, whichever is earlier and only pay the balance amount to the recipient. This ensures tax is collected in advance, checks tax evasion and also helps track income of recipients in the future. However, this scheme of deducting tax at source itself may create hardship to few taxpayers who may not be have a taxable income at all. Such scenarios could arise where:

1. Taxpayer has incurred a loss for the current year;
   
2. Taxpayer has carried forward losses of previous years available for set off in the current year;
   
3. Taxpayer is eligible to claim certain exemptions or deductions during the year;
   

The above could result in the taxpayer not having any taxable income at all for the year. While TDS rates are determined in general considering larger income population as a whole and income category, it might lead to undue difficulties to certain taxpayers as above who would not have any taxable income yet tax gets deducted at source for them which they end up claiming as refund. No doubt these taxpayers are eligible for an interest on such refund, funds unnecessarily get blocked till refund is received.

Moreover, they have to go through the process of filing their return to claim it (in a case where it was not otherwise mandatory for them to file it under law). Therefore, with an objective to remove this undue hardship on such taxpayers, income tax law provides for an option to obtain a certificate from the Assessing officer confirming either a lower rate of TDS compared to the rate specified under the law or a NIL rate of TDS, depending on facts and circumstances of each case based on the application made. Section 197 governs these provisions. In this article we will discuss provisions on applying for a certificate for lower deduction of TDS.

Income Covered Under Section 197

Section 197 application can be made by the recipient of income in case of the following category of receipts where TDS is required to be made under the following Sections:

·         Section 192 – Salary income

·         Section 193 – Interest on securities

·         Section 194 – Dividends

·         Section 194A – Interest other than interest on securities

·         Section 194C – Contractors income

·         Section 194D – Insurance commission

·         Section 194G – Commission/remuneration/prize on lottery tickets

·         Section 194H – Commission or brokerage

·         Section 194-I – Rent

·         Section 194J – Fee for Professional or technical services

·         Section 194LA – Compensation on acquisition of immovable property

·         Section 194LBB – Income in respect of units of investment fund

·         Section 194LBC – Income in respect of investment in securitization trust

·         Section 195 – Income of non residents

Eligibility for Making an Application Under Section 197

Application can be made where income of any person attracts TDS as per above mentioned sections and income of the recipient justifies non-deduction or lower deduction of income tax based on his estimated final tax liability.

Timeline for Making the Application

Income-tax provision does not provide for a deadline to make an application under Section 197. However, as TDS is made on income of on-going financial year it is advisable to make an application at the beginning of financial year in case of regular income throughout the financial year and as and when the need arises in case of one-off incomes.

Form 13 Online Filing & Generation

1. Visit the site https://contents.tdscpc.gov.in/
   
2. Click on Login and select Register as New User option;
   
3. Select ‘Taxpayer’ from the drop-down list;
   
4. After selecting Proceed, the registration form would be displayed;
   
5. Fill in the appropriate information and submit and the registration in TRACES would be done.
   

Generation of Certificate

1. After successful submission of an application in FORM 13 through TRACES by the applicant, on the basis of the information/details furnished in FORM 13, the application shall be forwarded to the appropriate TDS assessing officer.
   
2. After carrying out appropriate verification of information/details furnished in FORM 13, and on receipt of approval of the competent authority, the Assessing Officer would generate the certificate.
   
3. Since the certificate would be system generated, there will not be any requirement of the signature. The applicant, as well as the deductor, can download the generated certificate through their TRACES login.
   

Validity of an Application Made Under Section 197

Section 197 is issued for a particular financial year and stands valid from the date of issue and throughout the financial year unless cancelled by the assessing officer (TDS) before the expiry.

For more information on this visit www.taxaj.com.

Posted by Pooja

Team Taxaj