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Section 197 – Nil or Lower rate deduction of TDS

An explanation of Section 197- lower deduction certificate for tds

In this post, We will go through Section 197 of the Income Tax Act of 1961 – Nil or reduced rate TDS deduction. Let’s go through each section in detail: 

What is section 197?

Section 197 of the Income Tax Act of 1961 provides the taxpayer with the option of a NIL or Lower tax rate deduction of TDS (or TDS exemption). You must submit Form 13 to the assessing officer to apply for this. Additionally, this section strikes a delicate balance between the need to provide cash to taxpayers and the need to settle government dues as soon as possible.

Applicability of TDS exemption

If TDS is deducted under sections 192,193,194,194A, 194C, 194D,194G, 194H, 194I, 194J, 194LA, and 195, and the assessee believes that no or lesser TDS deductions should be allowed, you must follow the method described below:

  • You must file Form 13 to the Income Tax Department/Assessing Officer (AO) to request an exemption of NIL or a lower tax rate deduction of TDS.
  • Within a frame of 30 days, the Assessing Officer has to dispose of the applications.
  • The taxpayer should file the complete and relevant details required in the first instance for processing the application.
  • You can attach this certificate to the invoice to claim the exemption for the client.
  • This certificate is only valid if the assessing officer does not cancel it.
  • TDS exemption / reduced TDS is not available under Sections 194B, 194BB, 194DA, 194E, and 194IA.

How to Claim Lower or Nil TDS

To claim lower/nil TDS, the assessee must file a Form 13 application with the Income Tax/Assessing Officer. The following information must be provided in this Form 13:

  • Name and PAN of the taxpayer/assessee 
  • Reason(s) for claim eligibility
  • Details about the tax liability based on the current income tax slabs
  • Tax payment details: for the previous three years
  • Information on advance tax paid. 
  • TDS deducted/collected for the current financial year

Note : 

  1. After 30 days, the AO discards the application.
  2. A certificate is issued to the assessee after the AO is satisfied with all the information he has provided. The certificate can then be attached to the tax invoice as evidence of the lower deduction he claims.

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


1, How does one validate a Section 197 certificate?

Ans: Individuals must log in to the TRACES website as a deductor using their login credentials to validate their certificate. After that, the home page will be shown. To validate a certificate, go to the statements/payments area and choose “197 certificate validation.”

2, How to view Form 26AS?

Ans: Taxpayers can see their Form 26AS using the following steps: 

1: Log in to the Income Tax Department’s official website. 

2: Go to the ‘My Account’ area and click the View Form 26AS link. 

3: The user must accept the disclaimer, which will take them to the CPC TDS site. 

4: View Form 26AS by clicking on the link.

3, Can NRIs claim a refund of tax deducted?

Ans: The TDS deduction applies to all payments made to NRIs, even if their income is nil. TDS is taken from mutual fund and bond income. NRIs can only receive a TDS refund if they file taxes on the due date.  

And with that, we end our discussion on Section 197. If you have any questions, drop them in the comment section below.

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