Section 197 of the Income Tax Act, 1961 provides for
the facility of NIL or Lower tax rate deduction of TDS. It was originally in
the statute. Since then, over a period of time, it had undergone several
changes, widening its scope beyond recognisation from what it was when it was.
As on date, the section reads as under:—
Text of section 197
“197. Certificate for deduction
at lower rate
(1) [1][Subject to rules made under
sub-section (2A), [2][where, in the case of any income of any person
[3][or sum payable to any person], income-tax is required to be
deducted at the time of credit or, as the case may be, at the time of payment
at the rates in force under the provisions of sections 192, 193, [4][194],
194A, [5][194C], 194D, [6][194G], [7][194H], [8][194-I],
[9][194J], [10][194K], [11][194LA, [12][194LBB,
194LBC], [13][194M], [14]194-O] and 195, the Assessing
Officer is satisfied that the total income of the recipient justifies the
deduction of income-tax at any lower rates or no deduction of income-tax , as
the case may be, the Assessing Officer shall, on an application made by the
assessee in this behalf, give to him such certificate as may be appropriate.
(2) Where any such certificate is given, the person
responsible for paying the income shall, until such certificate is cancelled by
the Assessing Officer, deduct income-tax at the rates specified in such certificate
or deduct no tax, as the case may be.
[15][(2A) The Board may, having
regard to the convenience of assessees and the interests of revenue, by
notification in the Official Gazette, make rules specifying the cases in which,
and the circumstances under which, an application may be made for the grant of
a certificate under sub-section (1) and the conditions subject to which such
certificate may be granted and providing for all other matters connected
therewith.
[16][xxx]
KEY NOTE
1. Substituted for “Where in the
case of any income of any person other than a company” by the Finance Act, 1987
with effect from 01.06.1987.
2. Substituted by the Finance
Act, 1992 with effect from 01.06.1992.
3. Inserted by the Finance Act,
2003 with effect from 01.06.2003.
4. Inserted by the Finance Act,
1993 with effect from 01.06.1993.
5. Inserted by the Finance Act,
1993 with effect from 01.06.1993.
6. Inserted by the Finance Act,
2003 with effect from 01.06.2003.
7. Inserted by the Finance Act,
2001 with effect from 01.06.2001.
8. Inserted by the Finance Act,
1994 with effect from 01.06.1994.
9. Inserted by the Finance Act,
2003 with effect from 01.06.2003.
10. Inserted by the Finance Act,
1995 with effect from 01.07.1995.
11. Inserted by the Finance (No.
2) Act, 2004, with effect from 01.10.2004.
12. Inserted by the Finance Act,
2016 with effect from 01.06.2016.
13. Substituted by the Finance
(No. 2) Act, 2019, with effect from 01.09.2019.
14 Inserted by the Finance Act,
2020, with effect from 01.04.2020.
15. Inserted by the Finance Act,
1987 with effect from 01.06.1987.
16. Sub-section (3) omitted by
the Finance Act, 1986 with effect from 01.06.1987.
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:—
|
S. No. |
Section |
|
|
(i) |
192 |
Salary income |
|
(ii) |
193 |
Interest on securities |
|
(iii) |
194 |
Dividends |
|
(iv) |
194A |
Interest other than interest on securities |
|
(v) |
194C |
Contractor’s income |
|
(vi) |
194D |
Insurance commission |
|
(vii) |
194G |
Commission/remuneration/prize on lottery tickets |
|
(viii) |
194H |
Commission or brokerage |
|
(ix) |
194I |
Rent |
|
(x) |
194J |
Fee for Professional or technical services |
|
(xi) |
194K |
Income in respect of units. |
|
(xii) |
194LA |
Compensation on acquisition of immovable property |
|
(xiii) |
194LBB |
Income in respect of units of investment fund |
|
(xiv) |
194LBC |
Income in respect of investment in securitization
trust |
|
(xv) |
194M |
Payment to resident contractors and professionals |
|
(xvii) |
194O |
Payment of certain sums by e-commerce operator to
e-commerce participant. |
|
(xviii) |
195 |
Income of non-residents |
Section 197 does not apply to
other provisions
Therefore, section 197 does not apply to other
provisions of tax deduction like sections 194B, 194BB, 194DA, 194E, 194EE,
194F, 194-IA, 194-IB, 194-IC and also to provisions like sections 196A, 196B,
196C and 196D.
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.
Form 13 - Online Application -
Application For Lower / Nil Deduction Certificates under section 197 - Present
Procedure
(i) Application in Form No. 13
Application to be in Form 13 online for
all assesses. (Link to TRACES for Form No. 13)
(ii) Application on TRACES Portal -
The tax-payer/Deductee shall
submit the Form 13 along with supporting documents electronically,
(i) under digital signature; or
(ii) through electronic
verification code.
DSC of the Authorised Person
registered on the Traces needs to sign or through a-verification (Net Banking) permitted.
Registration in the TRACES portal is
mandatory. Consequently, if the taxpayer is not registered in TRACES, then, one
needs to first obtain registration in TRACES. For registration in TRACES,follow
the undermentioned steps:
(a)
Visit the site https://contents.tdscpc.gov.in/
(b)
Click on Login and select Register
as New User option;
(c)
Select ‘Taxpayer’ from the drop-down
list;
(d)
After selecting Proceed, the
registration form would be displayed;
(e)
Fill in the appropriate information
and submit and the registration in TRACES would be done.
(f) Login
in TRACES and under ‘Statements / Form’ tab select ‘Request for Form 13’;
(g) Form
13 would be displayed and appropriate details need to be filled up by the
applicant; and
(h)
Once all the details are filled up
and appropriate documents are uploaded, the applicant is required to submit the
form 13 either by using Digital Signature or by using EVC.
(iii) Details of the Assessee making the
Application;
(iv) Details of Income Tax Returns filed during
the last three Assessment Years containing the Returned Income and Taxes
paid/payable- Refund's Due;
(v) Details of the Current Year (Provisional
Details)
(vi) Details of Sales, profits of the last three
years along with the taxes deducted;
(vii) Details of existing liablities on the date
of application;
(viii) Estimated Total Income for the year for which
the certificate is sought;
(ix) Details of Tax liability on the estimated
income along with the tax liability discharges;
(a)
Computation
of Estimated Total Income to be given Head wise;
(b)
Option
for submission of clarification in respect of increase/decrease in income in
comparision to previous year given
(x) Nature of payments for which the
certificate is sought;
(xi) Details of the Deductee in the required
format along with the PAN and other details;
(xii) Other documentary evidences in support of the
said application;
(xiii)
Indemnity Bond for liability discharge.
Generation of Certificate
(i)
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.
(ii) 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.
(iii) 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.
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
ongoing 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.
There is no time limit for application in Form No.
13. Application can be filed at any time before actual deduction of tax at
source (it may be filed in the current financial year or even before the
commencement of the financial year. - [Indus
Towers Ltd. v. CIT (2014) Taxman 402 (Del)]
Application for grant of
certificates under section 197 for lower/nil TDS/ TCS to be filed
electronically
Application for grant of certificates under section
197 for lower or no deduction/collection of income-tax to be made
electronically in Form 13. Online application be made by logging in to TRACES.
Application for grant of
certificates for deduction of income-tax at any lower rates or no deduction of
income-tax [Rule 28]
“28. (1) An application by a person
for grant of a certificate for the deduction of income-tax at any lower rates
or no deduction of income-tax, as the case may be, under sub-section (1) of
section 197 shall be made in Form No. 13 electronically,—
(i) under digital signature; or
(ii) through electronic
verification code.
(2) The Principal Director
General of Income-tax (Systems) or the Director General of Income-tax
(Systems), as the case may be, shall lay down procedures, formats and standards
for ensuring secure capture and transmission of data and uploading of documents
and the Principal Director General of Income-tax (Systems) or the Director
General of Income-tax (Systems) shall also be responsible for evolving and
implementing appropriate security, archival and
retrieval policies in relation to the furnishing of Form No. 13.”
Certificate for deduction at
lower rates or no deduction of tax from income other than dividends [Rule 28AA]
Text of Rule 28AA
“28AA. Certificate for deduction
at lower rates or no deduction of tax from income other than dividends
(1) Where the Assessing Officer,
on an application made by a person under sub-rule (1) of rule 28 is satisfied
that existing and estimated tax liability of a person justifies the deduction
of tax at lower rate or no deduction of tax, as the case may be, the Assessing
Officer shall issue a certificate in accordance with the provisions of
sub-section (1) of section 197 for deduction of tax at such lower rate or no
deduction of tax.
(2) The existing and estimated
liability referred to in sub-rule (1) shall be determined by the Assessing
Officer after taking into consideration the following:—
(i) tax payable on estimated
income of the previous year relevant to the assessment year;
(ii) tax payable on the assessed
or returned “or estimated income, as the case may be, of last four” previous
years;
(iii) existing liability under
the Income-tax Act, 1961 and Wealth-tax Act, 1957;
(iv) advance tax payment, tax
deducted at source and tax collected at source for the assessment year relevant
to the previous year till the date of making application under sub-rule (1) of
rule 28;
(v) tax deducted at source for
the assessment year relevant to the previous year till the date of making
application under sub-rule (1) of rule 28; and
(vi) tax collected at source for
the assessment year relevant to the previous year till the date of making
application under sub-rule (1) of rule 28.
(3) The certificate shall be
valid for such period of the previous year as may be specified in the
certificate, unless it is cancelled by the Assessing Officer at any time before
the expiry of the specified period.
(4) The certificate for deduction
of tax at any lower rates or no deduction of tax, as the case may be, shall be
issued direct to the person responsible for deducting the tax under advice to
the person who made an application for issue of such certificate:
PROVIDED that where the number of
persons responsible for deducting the tax is likely to exceed one hundred and
the details of such persons are not available at the time of making application
with the person making such application, the certificate for deduction of tax
at lower rate may be issued to the person who made an application for issue of
such certificate, authorising him to receive income or sum after deduction of
tax at lower rate.
(5) The certificates referred to
in sub-rule (4) shall be valid only with regard to the person responsible for
deducting the tax and named therein and certificate referred to in proviso to
the sub-rule (4) shall be valid with regard to the person who made an
application for issue of such certificate.
(6) The Principal Director
General of Income-tax (Systems) or the Director General of Income-tax
(Systems), as the case may be, shall lay down procedures, formats and abcaus.in
standards for issuance of certificates under sub -rule (4) and proviso thereto
and the Principal Director General of Income-tax (Systems) or the Director
General of Income-tax (Systems) shall also be responsible for evolving and
implementing appropriate security, archival and retrieval policies in relation
to the issuance of said certificate.” se
How lower rate is determined
The lower rate is determined on the basis of the
higher of the following rates:—
(a) Average rate of the current year - Current
year‘s average rate is determined on the basis of total income-tax payable on
estimated income, as reduced by the sum of advance tax already paid and tax
already deducted at source, as a percentage of amount in respect of which the
certificate of lower tax deduction is required.
(b) Average of the average rate of tax of preceding
three years - Average of the average rate of tax assessed in the last three assessment
years and total tax paid for each year.
Validity of certificate
The certificate is valid only for the person named
therein and will remain valid for the assessment year so specified in the
certificate, unless it is cancelled by the Assessing Officer at any time before
expiry of specific period. No reason need be given for cancellation of
certificate by Assessing Officer.
Certificate of no deduction of
tax in case of certain entities [Rule 28AB]
“28AB. (1) Subject to the conditions
specified in sub-rule (2), a person—
(a) in receipt of income or
deemed income derived from property held under trust wholly for charitable or
religious purposes and who claims exemption under section 11 or section 12; or
(b) required to file a return in
respect of a scientific research association, news agency, association or
institution, fund or trust or university or other educational institution or
any hospital or other medical institution or trade union referred to in
sub-section (4C) of section 139, may make an application to the Assessing
Officer for the grant of a certificate under sub-section (1) of section 197
authorizing him to receive incomes without deduction of tax at source.
(2) The conditions referred to in
sub-rule (1) are the following, namely:—
(i) the person concerned has
furnished the returns of income for all assessment years for which such returns
became due on or before the date on which the application under sub-rule (1) is
made; and
(ii) the trust, scientific
research association, news agency, association or institution, fund or trust or
university or other educational institution or any hospital or other medical
institution or trade union referred to in sub-rule (1) is for the time being
approved for the purpose of exemption from income-tax;
(iii) the applicant gives a list
of deductors from whom amounts are to be received without deduction of tax at
source every six months alongwith the names, addresses and the amounts
received.
(3) An application for the
certificate is to be made to the Assessing Officer in accordance with sub-rule
(1) of rule 28.
(4) The Assessing Officer may
issue a certificate authorizing payment of incomes without deduction of tax at
source if he is satisfied that all the conditions laid down in sub-rule (2) are
fulfilled and the issue of any such certificate will not be prejudicial to the
interests of revenue.
(5) The applicant may furnish
copies of certificate issued under sub-rule (4) to the person responsible for
paying the income for the purpose of no deduction of tax at source.
(6) The certificate shall be
valid for the financial year specified therein unless it is cancelled by the
Assessing Officer at any time before the expiry of the said financial year.
(7) An application for a fresh
certificate may be made, if the assessee so desires, after the expiry of the
period of validity of the earlier certificate.”
Certificate of no deduction of
tax or deduction at lower rates from dividends [Rule 29]
“29. (1) The Assessing Officer, on
being satisfied that the total income of the shareholder justifies the
deduction of income-tax at any lower rates or no deduction of income-tax, as
the case may be, shall, on an application made under sub-rule (1) of rule 28 by
the assessee, give him a certificate authorising the payment of a dividend to
him, under sub-section (1) of section 197, without deduction of tax or, as the
case may be, after deduction of tax at rates lower than the rates in force only
if the following conditions are satisfied, namely:—
(a) The shares in respect of
which the certificate is sought for by him—
(i) are shares in public
companies; and
(ii) stand in his name and are
beneficially owned by him, and the dividends therefrom are not includible in
the total income of any other person under sections 60 to 64, or stand in his
name and are held by him under trust wholly for charitable or religious
purposes, and the dividends therefrom are exempt from tax under the provisions
of sections 11 to 13.
(b) An application for the
certificate is made to the Assessing Officer in accordance with sub-rule (1) of
rule 28.
(2) The certificate shall be
valid for such period (not exceeding three years from the date of certificate),
as the Assessing Officer may specify therein, unless it is cancelled by him at
any time before the expiry of the specified period. An application for a fresh
certificate may be made, if required, after the expiry of the period of
validity of the earlier certificate.
(3) The certificate shall be
valid only for the person named therein, and shall cease to be operative from
the date of notice to the company of the transfer of any of the shares
mentioned therein to another person, in respect of the shares so transferred.
(4) The certificate shall be
issued direct to the principal officer of the company under advice to the
applicant shareholder.”
Application for certificate for
collection of tax at lower rates under section 206C(9) [Rule 37G]
“37G. (1) An application by the buyer
or licensee or lessee for a certificate under section 206C(9) shall be made in
Form No. 13 electronically,—
(i) under digital signature; or
(ii) through electronic
verification code.
(2) The Principal Director
General of Income-tax (Systems) or the Director General of Income-tax
(Systems), as the case may be, shall lay down procedures, formats and standards
for ensuring secure capture and transmission of data and uploading of documents
and the Principal Director General of Income-tax (Systems) or the Director
General of Income-tax (Systems) shall also be responsible for evolving and
implementing appropriate security, archival and retrieval policies in relation
to the furnishing of Form No. 13.”
Certificate for collection of tax
at lower rates from buyer under section 206C(9) [Rule 37H]
“37H. (1) Where the Assessing Officer,
on an application made by a person under sub-rule (1) of rule 37G is satisfied
that existing and estimated tax liability of a person justifies the collection
of tax at lower rate, the Assessing Officer shall issue a certificate in
accordance with the provisions of sub-section (9) of section 206C for
collection of tax at such lower rate.
(1A) The existing and estimated
tax liability referred to in sub-rule (1) shall be determined by the Assessing
Officer after taking into consideration the following, namely:—
(i) tax payable on estimated
income of the previous year relevant to the assessment year;
(ii) tax payable on the assessed
or returned or estimated income, as the case may be, of the last four previous
years;
(iii) existing liability under
the Act and the Wealth-tax Act, 1957 (27 of 1957);
(iv) advance tax payment, tax
deducted at source and tax collected at source for the relevant assessment year
relevant to the previous year till the date of making application under
sub-rule (1) of rule 37G.
(2) The certificate given under
sub-rule (1) shall be valid for the assessment year specified in that
certificate, unless it is cancelled by the Assessing Officer at any time before
the expiry of the specified period.
(3) An application for a fresh
certificate may be made, if required, after the expiry of the period of
validity of the earlier certificate given under sub-rule (1).
(4) The certificate shall be
valid only for the person named therein.
(5) The certificate shall be
issued direct to the person responsible for collecting the tax under advice to
the buyer who made an application for issue of such certificate.
(6) The Principal Director
General of Income-tax (Systems) or the Director General of Income-tax
(Systems), as the case may be, shall lay down procedures, formats and standards
for issuance of certificate under sub-rule (5) and the Principal Director
General of Income-tax (Systems) or the Director General of Income-tax (Systems)
shall also be responsible for evolving and implementing appropriate security,
archival and retrieval policies in relation to the issuance of said
certificate.”
CBDT clarifies on certificates
for lower rate/nil TDS/TCS certificate Order under section 119 of the Income
Tax Act, 1961 on issue of certificates for lower rate/nil deduction/collection
of TDS or TCS under Sections 195, 197 and 206C(9).
F. No. 275/25/2029- IT( B), dated
09.04.2020
Subject : Clarification on orders dated
31.03.2020 and 03.04.2020 issued under section 119 of the Income-tax Act, 1961
(the Act) by CBDT vide F. No. 275/25/2020- IT(B) regarding issuance of
certificate for lower rate/nil deduction/collection of TDS, TCS under sections
195, 197 and 206C(9) of the Income-tax Act. 1961—Regarding
Representations have been received seeking further
clarifications on orders dated 31.03.2020 and 03.04.2020 issued under section
119 of the Act by CBDT vide F. No. 275/25/2020-IT(B) regarding issuance of
certificate for lower rate/ nil deduction/collection of TDS/TCS under sections
195, 197 and 206C(9) of the Act. The matter has been examined in the Board and
following clarifications w.r.t. above are issued:
(i) Issue of validity period of
lower/nil deduction/collection certificates of Financial year 2019-10:
For the purpose of Para 2 (a) and 2 (b) of the order
dated 31.03.2020, the lower/nil deduction/collection certificates will be valid
for the particular period for which these were issued for Financial year 2019-20
and also for further period from 01.04.2020 to 30.06.2020 for Financial year
2020-21 subject to conditions as mentioned in the order dated 31.03.2020. For
example. if a certificate was issued for a period from 01.10.2019 to 15.12.2019,
the same shall be valid for Financial year 2019-20 for the period from
01.10.2019 to 15.12.2019, and for Financial year 2020-21, the same shall be
valid from 01.04.2020 to 30.06.2020 subject to conditions as mentioned in the
order dated 31.03.2020.
(ii) Issue of
threshold/transaction limit for lower/nil deduction/ collection certificates of
F.Y. 2019-20:
For the purpose of Para 2 (a) and 2 (b) of the order
dated 31.03.2020, threshold/transaction limit mentioned in lower/nil deduction/
collection certificate issued for Financial year 2019-20 will be taken fresh
for period from 01.04.2020 to 30.06.2020 for Financial year 2020-21 and the
amount of threshold limit will be the same as was assigned for these
certificates for Financial year 2019-20 subject to other conditions mentioned
in the order dated 31.03.2020.
(iii) Issue of approval and
communication of lower/nil deduction/ collection certificates:
Official entails or other electronic communication
may be used by field authorities of Income Tax Department for internal approval
for issue of lower/nil deduction/collection certificates and for communication
of the same.
(iv) Issue of new/different TAN
mentioned for lower/nil deduction/ collection application for FY 2020-21 or
revision of rates mentioned in certificates for Financial year 2019-20:
In case the payee or buyer/licensee/lessee taxpayer
had a certificate for lower deduction for Financial year 2019-20 and an application
has been made for Financial year 2020-21 for a new different TAN mentioned in
the application the relaxation as provided in Para 2(a) and 2(b) of the order
dated 31.03.2020 shall not apply to such cases and they have to apply afresh as
per procedure mentioned in annexure of the above mentioned order. Similarly, if
the rates of TDS/TCS mentioned in old certificates are higher and the taxpayer
wants revision of the rates in view of impact of Covid-19 outbreak on its
business, the relaxation as provided in Para 2(a) and 2(b) of the order dated
31.03.2020 shall not apply to such cases and they will have to follow the
procedure mentioned in the annexure of the above mentioned order and apply afresh.
This issues with the approval of Member (IT&R),
CBDT.
Procedure for e-filing of Form 13
at TRACES Portal certificate for nil or lower rate TDS
Procedure, format, standards for
electronic filing of online Form 13 at TRACES Portal for grant of certificate
for nil TDS or at lower rate
F. No. Pr.
DGIT(S)/CPC(TDS)/NOTIFICATION/2018-19 – Notification No. 08/2018, dated
31.12.2018
Subject : Procedure, format and standards
for filing an application for grant of certificate for deduction of Income-tax
at any lower rate or no deduction of Income-tax under sub-section (1) of
Section 197/collection of the tax at any lower rate under sub section (9) of
Section 206C of the Income-tax Act, 1961 through TRACES—Reg.
1. As per sub-section (1) of section 197 of the
Income-tax Act, 1961, where, in the case of any income of any person or sum
payable to any person, income-tax is required to be deducted at the time of
credit or, as the case may be, at the time of payment at the rates in force
under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H,
194-1, 194J, 194K, 194LA, 194LBB, 194LBC and 195, if the Assessing Officer is
satisfied that the total income of the recipient justifies the deduction of
income-tax at any lower rates or no deduction of income-tax, as the case may
be, the Assessing Officer shall, on an application made by the assessee in this
behalf, give to him such certificate as may be appropriate. Further as per
sub-section (9) of section 206C of the Income-tax Act, 1961, where the
Assessing Officer is satisfied that the total income abcaus.in of the buyer or
licensee or lessee justifies the collection of the tax at any lower rate than
the relevant rate specified in sub-section (1) or sub-section (1C), the Assessing
Officer shall, on an application made by the buyer or licensee or lessee in
this behalf, give to him a certificate for collection of tax at such lower rate
than the relevant rate specified in sub-section (1) or sub-section (1C).
2. Vide Central Board of Direct Taxes Notification
74/2018, dated 25.10.2018, Rule 28/37G of the Income-tax Rules, 1962 has been
amended to provide for filing an application for grant of certificate for
deduction of Income-tax at any lower rate or no deduction of Income-tax under
sub-section (1) of Section 197/ collection of the tax at any lower rate under
sub-section (9) of Section 206C of the Income-tax Act, 1961 to be made in Form
No. 13 electronically in accordance to the procedures, formats and standards
for ensuring secure capture and transmission of data and uploading of documents
to be laid down by the Principal Director General of Income-tax (Systems).
3. In exercise of the powers delegated by the
Central Board of Direct Taxes, under sub-rule (2) of Rule 28/sub-rule (2) of
Rule 37G of the Income-tax Rules, 1962, the Principal Director General of
Income-tax {Systems) hereby specifies the procedure, format and standards for the
purpose of electronic filing of Form No. 13 and generation of certificate under
sub-section (1) of section 197/ sub-section (9) of section 206C through TRACES,
as per procedure in the succeeding paragraphs.
4. Procedure for electronic filing of Form 13 shall
be as follows:
4.1 The tax-payer/Deductee shall login in to the
TRACES website for submission of application in Form 13 electronically, for
grant of certificate for deduction of Income-tax at any lower rate or no deduction
of Income-tax under sub-section (1) of Section 197/ collection of the tax at
any lower rate under sub-section (9) of Section 206C of the Income-tax Act,
1961 through TRACES, as per procedure specified herein.
4.1.1 The tax-payer/Deductee who is not registered
at TRACES shall be first required to register at TRACES (www.tdscpc.gov.in) for
login and filing application in Form 13. Detailed procedure for registration
can be accessed through the link https://contents.tdscpc.gov.in/en/ taxpayer-registration-login-etutorial.html
4.2 The tax-payer/Deductee shall submit the Form 13
along with supporting documents electronically,—
(i) under digital signature; or
(ii) through electronic verification code.
4.3 After an online request for lower/no deduction
certificate has been submitted successfully, it shall reach the TDS-Assessing Officer
on ‘TRACES AO Portal’ on his/her The tax-payer/Deductee can track the status of
his/her application through option ‘Track Request for Form 13’ under the
tab ‘Statement/Forms’.
5. Procedure for assignment of application to the
TDS Assessing Officers:
5.1 On the basis of details furnished by the
applicant in Form 13, the application shall be forwarded to the concerned TDS
Assessing Officer.
5.2 For applications filed in Delhi, Mumbai,
Chennai, Kolkata, Bangalore, Hyderabad, Ahmedabad and Pune, cases where revenue
foregone exceeds a sum of 50 Lakh, the applications shall be assigned to the
DCIT/ACIT exercising jurisdiction over TDS matters, and in other cases, the
applications shall be assigned to the ITO exercising jurisdiction over TDS
matters. If the jurisdiction orders are otherwise, the applications shall be
assigned in accordance with such jurisdiction orders.
5.3 For applications filed in remaining cities/towns/jurisdictions,
the applications where revenue foregone exceeds a sum of 10 Lakh, application
shall be assigned to the DCIT/ACIT exercising jurisdiction over TDS matters,
and in other cases, the abcaus. In applications shall be assigned to the ITO
exercising jurisdiction over TDS matters. If the jurisdiction orders are
otherwise, the applications shall be assigned in accordance with such
jurisdiction orders.
5.4 After the applicant has successfully submitted
application in Form 13, the following data, which are considered relevant and
essential for the Assessing Officer to take a decision on the application will be
obtained from CPC -ITR, E-filing and ITBA modules:
(i) Processed data of Income Tax Returns of previous
4 Years (if available).
(ii) PAN demand
(iii) e-filed Income Tax Returns of previous 4 Years.
(iv) Audit Report (along with form 3CD if accounts
are audited) of previous 4Years.
(v) Assessment Orders of previous 4 Years (if
available).
5.5 The application in Form 13 will then be assigned
to the Assessing Officer exercising jurisdiction over TDS matters in respect of
the applicant as explained in paras 2 and 5.3. Such applications can be accessed
by the Assessing Officer through path <Lower/No Deduction Certificate >
Generate Certificate> Certificate under section 197(1)/206C(9) and select
‘Open/Restored’ Request(s)’.
6. Processing of the tax-payer/Deductee’s request by
the TDS Assessing Officer, Range Heads and Commissioners of Income-tax:
6.1 Role of TDS Assessing Officer:
The Assessing Officer shall be required to process
the application through TRACES – AO Portal after login using his/her
credentials.
6.1.1 By navigating through the path ‘Lower/No
Deduction Certificate > Generate Certificate> Certificate under section 197(1J/206C
(9) and select ‘Open/Restored’ Request(s}’, the Assessing Officer shall be able
to access the following information:
(i) Information furnished by the tax-payer/Deductee.
(ii) Documents submitted by the tax-payer/Deductee.
(iii) Information essential for processing the
request in respect of the taxpayer/Deductee, as received from
CPC (ITRL E-filing and
(iv) Information essential for processing the
request in respect of the tax payer/Deductee, as available at
CPC (TDS).
6.1.2 If the Assessing Officer requires any further
clarification or information or documents from the applicant for arriving at
his/her decision, the same shall be obtained online using the option “Seek
Clarification” available within the query raised by the Assessing Officer shall
be forwarded to the applicant through systems for furnishing a suitable response.
The query will be available to the applicant in his/her/its lnbox in TRACES
Portal through the applicants login. The response submitted by the tax-
payer/Deductee shall be visible to the Assessing Officer within the functionality
for taking a decision on the application.
6.1.3 Based on the parameters defined in rule
28AA/28AB/37H of the Income-tax Rules, 1962 an estimated rate of tax will be
suggested by the system. However, the AO shall be free to arrive at independent
rate based on his/her method of calculation or by taking into consideration any
other information available with him/her.
6.1.4 Based on his/her findings, the Assessing
Officer shall allow the deduction/collection at such rate as evidenced in the “Permitted
Tax Rate Table” by making any adjustments in respect of the rate, if the
Assessing Officer may state the reason for arriving at a modified rate, if so,
is the case.
6.1.5 Once the Assessing Officer has taken a
decision on the application in Form 13, the application will be forwarded to
the supervisory authority, i.e. the JCIT or JCIT & CIT for according
administrative approval in accordance with CBDTs Instructions on the subject.
6.2 Role of Range Head:
The Range Head shall be required to process the
application through TRACES – AO Portal after login using his/her credentials for
granting administrative approval to the recommendation of the AO or otherwise.
6.2.1 The Range Head may view the application
details, received for administrative approval, through the path ‘Lower/No Deduction
Certificate> Generate Certificate> Certificate u/ s 197(1)/206C(9) and
select ‘Open Request(s)‘. The following information will be available for
viewing by the Range Head:
(i) Information furnished by the tax-payer/Deductee.
(ii) Documents submitted by the tax-payer/Deductee.
(iii) Information essential for processing the
request in respect of the taxpayer/Deductee, as received from
CPC (ITR), E-filing and ITBA.
(iv) Information essential for processing the
request in respect of the tax payer/Deductee, as available at CPC (TDS).
(v) Recommendation of the TDS Assessing Officer
6.2.2 If required, the Range Head may seek
clarification from the AO and after submission of clarification by the AO
through the AO Portal, the Range Head shall take a final decision on the All
these steps shall be carried out on AO Portal in electronic mode under
respective logins of Range Head and AO.
6.2.3 After a decision on the application has been
taken by the Range Head, if the revenue foregone is within the powers conferred
upon the Range Head (as per CBDTs Instructions on the subject) to accord
administrative approval, the application will be marked back electronically on
AO Portal to the Assessing Officer for issuance/rejection of the certificate
under section 197(1)/206C(9) of the Income-tax Act, 1961. The procedure for
issuance of certificate is prescribed below in paragraph 7. However, if the
revenue foregone is within the powers conferred upon the CIT (as per CBDTs
Instructions on the subject) to accord administrative approval, the application
shall be forwarded to the CIT for a decision in the matter.
6.3 Role of the CIT:
The CIT shall be required to process the application
through TRACES – AO Portal after login using his/her credentials for granting
administrative approval to the recommendation of the AO or otherwise.
6.3.1 The CIT may view the application details,
received for administrative approval, through the path ‘Lower/No Deduction
Certificate > Generate Certificate> Certificate u/s 197(1)/206C (9) and
select ‘Open Request(s}’. The following information will be available for
viewing by the CIT:
(i) Information furnished by the tax-payer/Deductee.
(ii) Documents submitted by the tax-payer/Deductee.
(iii) Information essential for processing the
request in respect of the tax payer/Deductee, as received from CPC (ITR)
E-filing and ITBA.
(iv) Information essential for processing the
request in respect of the tax payer/Deductee as available at CPC (TDS).
(v) Recommendation of the TDS Assessing Officer.
(vi) Recommendation of the Range Head
6.3 .2 If any clarification is required by the CIT,
the application may be sent back to the Range Head through TRACES AO Portal for
submitting clarification on the observations of the CIT by the Range Head/AO.
All these steps shall be carried out on AO Portal in electronic mode under respective
logins of the CIT, Range Head and AO.
6.3.3 The Range Head shall resubmit the case to CIT
alongwith the clarifications as required by the CIT. This will be carried out
electronically on AO Portal.
6.3.4 Based on the information available and the
report of the Range Head and the Assessing Officer, the CIT shall take a decision
in the case.
6.3.5 After a final decision on the application has
been taken by the CIT, the application will be marked back electronically on AO
Portal to the Assessing Officer for issuance/ rejection of the certificate
under section 197(1)/206C(9) of the Income-tax Act, 1961. The procedure for
issuance of certificate is prescribed below in paragraph 7.
7. Issuance of Certificate:
7.1 Once approval of the competent authority has
been received, the Assessing Officer shall generate the approved certificate I
close the request (in case of rejection) based on decision taken on application
filed in Form 13 through TRACES AO Portal. This will be carried out
electronically on AO Portal and the certificate will be system generated and
hence will not require a signature.
7.2 The generated certificates shall be available to
the deductor and the applicant for download through their TRACES login.
7.3 The issued certificates shall be available to
the officers for view through path ‘Lower/No Deduction Certificate >
History> Certificate Issued‘ .
8. This issues with prior approval of the Pr.
Director General of Income-tax (Systems).
Exception from online filing of
application under sections 197 and 206C (9) in the cases of NRIs and resident
applicants Order under section 119(1) of Income-tax Act, 1961—F. No.
275/2912018- IT(B), dated 24.12.2018
Subject : Exception from online
filing of application under sections 197 and 206C(9) in the cases of NRIs and
resident applicants
Vide Notification No. 74/2018, dated 25.10.2018,
rule 28 of the Income-tax Rules was amended to prescribe electronic filing of
application for lower deduction or no deduction under section 197 using digital
signature or EVC.
Similar changes were also made in rule 37G to
prescribe electronic filing of application under section 206C(9) for lower or
nil rate of tax collection at source (TCS).
The functionality for online filing has since been
made available by CPCTDS through TRACES portal. Form No. 13 is the common form
for application under sections 197 and 206C(9).
2. For proper administration of the provisions of
sections 197 and 206C (9) and to remove genuine hardship being faced by certain
applicants in filing online application in Form No. 13, the Board by virtue of
the powers conferred under section 119(1) of the Income-tax Act hereby—
(i) Allows non-resident Indians (NRIs), who are not
able to register themselves on TRACES, to file manual application in Form No.
13 before the TDS officer or in ASK Centers till 31.03.2019.
(ii) Allows resident applicants to file manual application
in Form No. 13 before the TDS officer or in ASK Centers till 31.12.2018.
Issue certificate of Nil or lower
rate TDS under sections 197 and 195 within 30 days
Certificate of Nil/lower rate TDS
under sections 197 and 195 of the Income Tax Act, 1961 to be issued within 30
days
As per CBDT’s instruction (275/20/2018-IT, dated
26.07.2018) issued in this regard, attention has been drawn to the time-line of
30 days prescribed as per the Citizen’s Charter-2014 for issue of certificates
for no deduction of tax or deduction of tax at lower rate under section 197 or
195 of the Act. The instruction says that several instances of inordinate delay
in issue of such certificates and non-adherence to the said time-line have been
brought to the notice of the Board, which have been viewed adversely.
The CBDT has reiterated that the 30 days time-line
for issue of certificates under section 197 or 195 of the Act must be adhered
to scrupulously and disposal of applications beyond the said time limit must be
for justifiable reasons to be recorded in writing and duly approved by CIT
(TDS)/CIT(Intl. Tax) concerned. It has been stated that the Board shall view
seriously, any delay without valid reasons and shall hold CIT (TDS)/CIT (Intl.
Tax) concerned responsible in this regard.
In case of Charitable
Trusts/religious trusts and societies
In case of Charitable Trusts/religious trusts and
societies whose income are exempted under section 11 or section 12, can request
to Income Tax Officer for Form 197 to claim exemption for unlimited amount of
interest. The application is submitted by the trust in Form No.13. The Income
Tax Officer will issue such certificate if the following conditions are
satisfied:—
(i) The person concerned has submitted all the
income-tax or TDS returns for all assessment years before the date of
application.
(ii) The person concerned is approved for the
purpose of income-tax exemption.
(iii) The name, addresses, PAN Numbers of the
persons from whom the interest is to be received during the financial year. The
amount of interest to be received from them is also to be mentioned during the
particular financial year.
(iv) The certificate given by Income Tax Officer is
valid only for one Financial Year.
The societies/religious trust/charitable trust can
submit Form 15-G up to the interest receivable for Rs. 2,50,000/- from a single
person, during a financial year 2018-19. For example, there are two persons
from whom a trust has to receive interest Rs. 2,40,000/- and Rs. 2,30,000/-
during a financial year 2018-19. In this case, the trust can submit separate
15-G forms to different parties.
If the interest amount is more than Rs. 2,50,000/-,
then the above mentioned persons have to apply with Income Tax Officer for TDS
exemption certificate. This certificate can be issued for any amount of
interest to be received during the financial year.
Certificate for lower rate – When
tax was deducted on the basis of certificate issued by the Assessing Officer
i.e. on handling and transport charges under Section 194C and on, warehousing
charges under Section 194-I, the ITO (TDS) was unjustified in holding assessee
in default for short deduction of tax on grounds that assessee was liable to
deduct TDS on entire amount under Section 194-I
Allowing the appeal of the assessee the Tribunal
held that when tax was deducted on the basis of certificate issued by the
Assessing Officer i.e. on handling and transport charges under section 194C and
on, ware housing charges under section 194-I, the ITO (TDS) was unjustified in
holding assessee in default for short deduction of tax on grounds that assessee
was liable to deduct TDS on entire amount under section 194-I. (Assessment year
2009 - 10) - [Kribhco Shyam Fertilizers Ltd. v. ITO (TDS) (2018) 172 ITD 319
(ITAT Lucknow)]
CBDT’s Instruction No. 7/2009 [F.
No. 275/23/2007- IT-(B)], dated 22.12.2009
Subject : Section 197 of the
Income-tax Act, 1961 – Deduction of tax at source – Certificate of lower
deduction or non-deduction of tax at source
I am directed to bring to your notice on the subject
of issue of certificates under section 197. Instruction No. 8/2006, dated
13.10.2006, was issued stating that certificates for lower deduction or nil
deduction of TDS under section 197 are not to be issued indiscriminately and
for issue of each certificate, approval of the JCI/Addl. CIT concerned need to
be taken by the Assessing Officer (AO). Further, a letter of even number, dated
06.10.2008 was issued stating that power of issue of certificates under section
197 would ordinarily be exercised by the officers manning TDS Administration.
However, instances are being brought to the notice of Board that the Assessing
Officers are issuing certificates for lower or non-deduction of tax at source
under section 197 indiscriminately, in contravention of relevant Income Tax
Rules and Instructions.
I am, therefore, directed to communicate to you that
further to the contents of Instruction No. 8/2006, prior administrative
approval of the Commissioner of Income Tax (TDS) shall be taken (where the
cumulative amount of tax foregone by non-deduction/lesser rate of deduction of
tax arising out of certificate under section 197 during a financial year for a
particular assessee exceeds Rs. 50,00,000 in Delhi, Mumbai, Chennai, Kolkata,
Bangalore, Hyderabad, Ahmedabad and Pune stations and Rs. 10,00,000 for other
stations. Once the CIT (TDS) gives administrative approval of the above, a copy
of it has to be endorsed invariably to the jurisdictional CIT also. The content
of the above instruction may be brought to notice of all officers working in
your charge for strict compliance.
CPC (TDS) – Deductors must deduct
lower rate TDS on production of system generated certificate under section 197
to avoid defaults for wrong quoting of certificate number
The CBDT has issued an advisory in which it is
pointed out that instances of huge default of ‘Short Deduction’ have been
observed due to wrong quoting of 197 certificate number. The scenario of wrong
197 certificate generally arises when the deductor accepts from deductee a
manually issued lower deduction certificate by assessing officer & quotes
the same in TDS statements. It is explained that CPC (TDS) has provided the
facility of validating the 197 certificate to the deductors and that if the 197
certificate is not valid as per TRACES validation, the deductor should always
insist upon an ITD system generated certificate having a unique 10 digit alpha
numeric number. The entire procedure for this is explained in the advisory.
Press Release, Dated 01.01.2016
Advisory for Deductors
1. Deductors deduct tax at lower
rate on payment/credit to deductee on production of certificate duly issued by
assessing officers under section 197. Deductors quote such certificate number
in quarterly TDS statement. Instances of huge default of ‘Short Deduction’ have
been observed due to wrong quoting of 197 certificate number. The scenario of
wrong 197 certificate generally arises when the deductor accepts from deductee
a manually issued lower deduction certificate by assessing officer & quotes
the same in TDS statements.
2. CPC (TDS) has provided the
facility of validating the 197 certificate to the deductors on
www.tdscpc.gov.in (TRACES). This enables a deductor to first validate the 197
certificate given to him by their deductees and then furnish the same in the
TDS/TCS statement.
3. If the 197 certificate is not
valid as per TRACES validation, the deductor should always insist upon an ITD
system generated certificate having a unique 10 digit alpha numeric number.
This would minimize the generation of default of “Short Deduction due to 197
certificate”.
4. This also applies to certificates
issued under section 195(2) and 195(3) by LTU & international taxation
officers.
5. Instructions to field authorities
to issue only system generated certificate were issued vide instruction No. 36
through F.No. SW/TDS/2/2/08- DIT(S)-II[Vol.II], dated July 15th, 2009 (Annexure).
Deduction of tax deducted at
source and depositing with Government by the payee does not decide the final
tax liability of the recipient of the income which would be the subject-matter
of assessment - Petition is dismissed
Dismissing the petition the Court held that under
section 197(1), it is an Assessing Officer who can entertain and decide an
application of an assessee for either total exemption or permission for reduced
deduction of TDS. The statute has used the language that if the Assessing
Officer is satisfied that the total income of the recipient justifies the
deduction of income-tax at any low rates or no deduction of income-tax, as the
case may be, the Assessing Officer shall on application made by the assessee in
this behalf give to him such certificate as may be appropriate. It is
undoubtedly true that the deduction of TDS and depositing it with the Government
revenue by the payee does not decide the final tax liability of the recipient
of the income which would be the subject-matter of assessment of the return. If
tax higher than what is actually due to be paid by the assessee to the
Department is recovered in form of TDS, the assessee can always claim refund of
such excess tax. However, sub-section (1) of section 197 has been enacted to
give relief to the assessee, whose income may not justify deduction of tax at
full rate or no deduction altogether. Necessarily, therefore, the satisfaction
of the Assessing Officer at that stage about the total income of the recipient
justifying reduced collection of tax at source would be prima facie in
nature. Two things emerge from the said provisions; firstly, that such
consideration cannot be devoid of exercise of sound discretionary powers and
based on mere ipse dixit of the Assessing Officer. Secondly, that the
power vests with Assessing Officer. No provision or rule is brought to our
notice which would enable the higher authority to govern such discretion of the
Assessing Officer statutorily vested in him under sub-section (1) of section
197.—[OPJ Trading (P) Ltd. v. ITO (2018) 305 CTR 413 : 171 DTR 265 (Guj)]
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