Section 197 - Nil or Lower rate deduction of TDS

Hello, in this post we will discuss all about Section 197 of the Income Tax Act, 1961 – Nil or Lower rate deduction of TDS.

What is Section 197?

Section 197 of the Income Tax Act, 1961 allows the taxpayer the facility of NIL or Lower tax rate deduction of TDS (or TDS exemption). In order to apply for this you need to submit Form 13 to the assessing officer. Also, this section strikes a delicate balance between the requirement of cash flow to the taxpayer and realizing the government dues at the earliest.

Applicability of TDS exemption

If TDS is deducted u/s 192,193,194,194A, 194C, 194D,194G, 194H, 194I, 194J, 194LA & 195 and if the assessee feels that no or lower tax deductions of TDS should be there then you need to follow the below procedure.

  • You need to submit Form 13 to Income tax department/Assessing Officer (AO) for exemption of  NIL or Lower tax rate deduction of TDS.
  • Within a frame of 30 days, Assessing Officer has to dispose off the applications.
  • Taxpayers are advised to file complete and relevant details required for processing the application in the first instance itself.
  • If the assessing officer is satisfied then, will process the issuance of certificate u/s 197.
  • The copy of this certificate can be attached to the invoice raised to the client to claim the exemption.
  • This certificate is valid only until the assessing officer does not cancel it.
  • TDS exemption / lower TDS is not applicable u/s 194B, 194BB, 194DA, 194E, 194IA.

What Happens After Deductor Receives Certificate?

  • The deductor validates the PAN details
  • Checking the validity of the certificate for the current financial year
  • Correct certificate number
  • Raises flag A in a statement for a certificate u/s 197 and flag B for the certificate under section 197A

This ends the post on Section 197. Also, let us know your opinion by commenting below.