Lower TDS Certificate
Lower TDS Certificate
As a Taxpayer earning income subject to TDS deduction, you may encounter a situation when the TDS amount is more than the tax liability of the recipient. You can handle it by obtaining a Lower Tax Deduction Certificate (LDC) under Section 197.
The provisions contained in Section 197 of the Income Tax Act 1961, 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
Individuals who wish to apply for a Lower Tax Deduction Certificate (commonly known as Form 13) typically fall into the following categories:
1. Salaried Employees
Employees whose total income includes salary income and who anticipate that the total tax payable on their estimated total income for the financial year will be lower than the tax deductible at source (TDS) amount. They can apply for a Lower Tax Deduction Certificate to ensure that TDS on their salary income is deducted at a lower rate.
2. Freelancers and Professionals
Individuals receiving professional fees, freelance income, or other non-salary income sources can apply for a Lower Tax Deduction Certificate if they expect their total tax liability to be lower than the TDS applicable on their payments.
3. Senior Citizens
Senior citizens who have income sources subject to TDS (such as interest income, pension, etc.) and expect their tax liability to be lower than the TDS deducted can also apply for a Lower Tax Deduction Certificate.
4. Non-Resident Indians (NRIs)
NRIs who have income (such as interest income, rental income, capital gains, etc.) in India and are subject to TDS can apply for a Lower Tax Deduction Certificate if they anticipate that their actual tax liability will be lower than the TDS deducted on their income.
5. Other Individuals
Any individual who has income subject to TDS and reasonably expects their total tax liability to be lower than the TDS deducted can apply for a Lower Tax Deduction Certificate.
The Income Tax provisions with regard to lower or NIL TDS deduction convey the implication that where TDS is required to be deducted, but the income of the recipient satisfies the assessing officer for lower or no deduction of TDS, then, in such cases, the assessing officer, on an application made in this behalf, would issue a certificate for lower or nil deduction of TDS. On the basis of the certificate, the deductor would either deduct the TDS at lower rates or would not deduct TDS at all. An application for lower or no deduction of TDS is to be done in FORM 13. The Central Board of Direct Taxes, vide notification no. 8/2018 dated 31st December 2018, has provided the procedure for electronic filing of FORM 13 online and generation of the certificate through TRACES. The electronic filing procedure of FORM 13 is discussed in the present article.
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List of Documents Required
Form 13 (Lower Tds Certificate)
- PAN card copy
- Tax Deduction Account Number (TAN) of parties paying you
- Estimated income during the financial year
- Computation of income statement for last 3 financial years
- Estimated computation of income for the current financial year
- Copies of assessment orders for the last 3 financial years (if applicable)
- Copies of IT returns with enclosures and acknowledgment for the last 3 financial years
- Copies of financial statements and audit reports for the last 3 financial years (if applicable)
- Projected profit and loss account for the current financial year
- Digital signature
Frequently Asked Questions
What is Form 13?
Form 13 is an application for a Certificate under Section 197/206C (9) of the Income Tax Act, allowing for lower deduction or non-deduction of TDS.
Who can apply for a Lower Tax Deduction Certificate?
Tax planning should start at the beginning of a financial year, as it enables individuals and businesses to settle their financial affairs and take advantage of the best tax-saving opportunities. However, you can still benefit from it at any time during the year.
What kind of incomes are eligible for a Lower Tax Deduction Certificate?
Various types of incomes are eligible for a Lower Tax Deduction Certificate. These include income from diverse sources such as rent, commission, interest, and capital gain on the sale of property. Any income subject to TDS can be considered for a Lower Tax Deduction Certificate.
How long is a Lower Tax Deduction Certificate valid?
The Lower Tax Deduction Certificate mentions its validity period. Usually, it is valid for a particular financial year or for a specified period as determined by the Assessing Officer.
How long does it take to get a Lower Tax Deduction Certificate?
You can expect the process to take 5-6 weeks. The Assessing Officer may issue a certificate within this period if satisfied with the details and documentation provided in Form 13. The certificate specifies the income eligible for a lower tax deduction.
Can Form 13 be modified?
Form 13 cannot be altered after submission. However, the taxpayer can withdraw the application any time before approval by the assessing officer.
How to Submit Form 13 Online?
Log into the TRACES portal, select 'Submit Request,' choose 'Form 13,' fill in details, attach necessary documents, and submit. The Assessing Officer will review and process the submission.
How to Download Form 13 from TRACES?
Log in to the TRACES portal, select 'Downloads,' and choose 'Form 13.' Ensure accuracy before using the form.
How to File Form 13 for Lower Deduction?
File Form 13 for Lower Deduction on the TRACES portal. Log in, select 'Request for Form 13,' provide details, attach documents, and submit. The Assessing Officer will review and approve if eligible.
NRI Selling Property in India – Form 13 Requirement?
Yes, NRIs selling property in India to a resident buyer need to apply for Form 13 to avail lower deduction or non-deduction of TDS.
Can I Apply Nil Deduction of TDS in Form 13?
Yes, you can apply for nil deduction of TDS in Form 13 if you meet the conditions specified under the Income Tax Act.
Time Taken for Form 13 Certificate Approval?
The time taken for Form 13 certificate approval varies, but it typically ranges from a few weeks to a couple of months, depending on the workload of the Assessing Officer.
Consequences if Form 13 is Not Approved?
If Form 13 is not approved by the Assessing Officer, TDS will be deducted at the regular rates specified under the Income Tax Act.
Validity Period of Form 13?
Form 13 is typically valid for the financial year for which it is issued. However, the validity period may vary based on the decision of the Assessing Officer.
