- Determine the TDS deducted and advance tax paid till date and also determine the expected TDS on the revenue for the balance period of the financial year.
- Based on the above, review the tax payable/ refundable periodically.
- In case there is expected tax refundable for the company, the finance professional should not block this company’s fund in the hands of Income tax department for next 2-3 years and should apply for lower TDS application to the TDS department immediately.
- For applying lower TDS certificate to the TD department, following documents are required to be submitted:
- Covering letter disclosing nature of business of the company, reason for company should get lower TDS certificate and also details of the party with their correct address & TAN.
- New Form 13
- Estimated financials & computation of Total Income
- Audited financials for the last 3 Years
- Tax Audit Report of the Last 3 Years
- Income tax return acknowledgment of last 3 Years
- E TDS return acknowledgment for last 2 years of all the 4 quarters.
- In case of any short payment of TDS in last 3 years, proof of the payment of TDS.
- Copy of application & certificate obtained for earlier years.
- After submitting the aforesaid application to the TDS department, the AO will review your documents and they may ask further queries & documents to satisfy that your company is eligible for getting the lower TDS certificate.
- It must be noted that AO is not bound to issue TDS certificate, once the application had been filed. The AO issue the certificate based on the merit on case to case basis.
- You must provide the correct TAN of all the parties for whom you want the TDS certificate as now a days, department are issuing only system generated certificate based on the TAN.
- Further, from April 1, 2011 department are not issuing nil TDS certificate to anyone. Hence, you must apply only for lower TDS certificate only and must mention the lower rate as required. Also in cities like Bangalore, Income tax department makes the process online.
What To Do If The A.O Does Not Respond To Your Application For Lower Deduction Certificate?
The deliberate inaction by the A.O on an application made by the assessee for certificate u/s 197 is very unfortunate . The provision under section 197 does not give any discretion to sit on the application because the provison uses the word “shall ” . Read the provision u/s 197
- (1) Subject to rules made under sub-section (2A), 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-I 194J194K 194LAand 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.
Therefore, inaction in not giving any order is an illegal act. You should write to the A.O that in case he does not dispose off the application with in seven days from the receipt of reminder, you will be constrained to apply before Add.Commissioner/JtCIT concerned. If even ADCIT/JCIT does not give you relief after seven days , write to Commissioner of the charge.
After failing even from that level ,following remedy lies for you
1. File an application with the grievance cell ,stating the full facts. The grievance cell is a mechanism whose data goes to CBDT and even chief commissioner of income tax are accountable for its disposal.
1. File an application with the grievance cell ,stating the full facts. The grievance cell is a mechanism whose data goes to CBDT and even chief commissioner of income tax are accountable for its disposal.
- A softer approach is to write to CIT concerned and if he does not respond writing to his superior enclosing the proof of filing application with him.
3.As far as jurisdiction of ombudsman is concerned , there is no specific mention of such wrong doing within the purview of him, still there is clause “O” of section 9 of The Income Tax Ombudsman Guidelines 2006 which says
“9 . Grounds on which complaint shall be filed
i. (o) any other matter relating to violation of the administration instruction and circulars issued by the Central Board Of Direct Taxes in relation to income tax administration”
In this regard , circular no 774 dated 17.3.1999 is important to refer. The said circular warns A.Os , not issue the certificate u/s 197 in case where payment has already been done and TDS is made. But the point to be noted is that the said circular states under point 3 circumastances when the certificate should not be issued. In other words , in all other cases not falling under the condition mentioned in the circular , should be issued by the A.O.So, you can file application under clause (o) of Section 9 of The Income Tax Ombudsman Guidelines 2006. The said circular is as under
Circular No: 774, Date of Issue: 17/3/1999
Subject: Issue of certificate under section 197(1) of the I. T. Act.
Subject: Issue of certificate under section 197(1) of the I. T. Act.
Section 197(1) of the Act envisages that, where tax is deductible at source in terms of sections 192, 193, 194, 194A, 194D, 194-I, 194K and 195 of the Income-tax Act, and the recipient justifies the deduction of tax at any lower rate or no deduction of tax to the satisfaction of the Assessing Officer, the Assessing Officer shall issue an appropriate certificate. It has come to the notice of the Board that in certain charges a practice has developed to issue certificates under section 197(1) of the Income-tax Act even after the credit or payment of amounts subject to tax deduction at source. This is not in accordance with the provisions of law. It is, therefore, clarified that the certificate issued under section 197(1) of the Income-tax Act will be applicable only in respect of credit or payments, as the case may be, subject to tax deduction at source, made on or after the date of such certificate. Therefore, no certificate under section 197(1) of the Income-tax Act should be issued after the amounts subject to tax deduction at source stand credited or paid, whichever is earlier. In other words, henceforth application requesting for certificate under section 197(1) should not be acted upon if submitted after credit/payment of the amount subject to tax deduction at source. However, assessees having genuine hardship in submitting such applications on time may refer to the Board for condonation of delay in terms of section 119(2)(b) of the Income-tax Act.
(Sd.) Narottam Mishra, Deputy Secretary (Budget). [F. No. 275/98-IT(B)]
- Another remedy is to amke an application under Right to Information Act. These days A.Os have been made Public Information officer and Jt.CIT/Add.CITas CPIO. You can ask the A.O under RTI the reasons why no order for granting or rejecting the certificate was issued on your application. Since there is time limit within which a reply is to be given , something will move from otherwise inefficent official
Circulars in respect of section 197.
Section 197 of the Income-tax Act, 1961 – Deduction of tax at source – Certificate of lower deduction or non-deduction of tax at source Instruction No. 7/2009 [F.No. 275/23/2007- IT-(B)], dated 22-12-2009 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 197 certificates for lower deduction or nil deduction of TDS u/s 197 are not to be issued indiscriminately and for issue of each certificate, approval of the JCI/Add. CIT concerned need to be taken by the Assessing Officer (AO). Further, a letter of even number dated 6.10.2008 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 AOs 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 Sec, 197 during a financial year for a particular assessee exceeds Rs. 50 lakh in Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, Ahmadabad and Pune stations and Rs. 10 lakh 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.
Amendment in Rule 28AA made by Notification 46/2014 dated 24-09-2014
Under section 197(1) of the Income Tax Act, 1961, a person who is in receipt of any income on which tax is required to be deducted at source at the rates prescribed under the provisions of sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194I, 194J, 194K, 194LA and 195, can make an application in Form No. 13 to the Income Tax Assessing Officer for issue of a certificate for deduction of TDS at rates lower than prescribed.
If the Assessing Officer is satisfied that existing and estimated tax liability on the total income of the applicant justifies the deduction at lower rates or at no deduction at all, he/she may issue such certificate.
When the recipient furnishes such certificate to the person responsible for paying the income, the payer, until the certificate is revoked/cancelled by the Assessing Officer, shall deduct tax as per rates / deduct no tax as specified in the certificate.
Rule 28AA of the Income tax Rules, 1962, prescribes the rules to be observed in this regard. Sub Rule (2) provides that the existing and estimated tax liability shall be determined by the Assessing officer after taking into the consideration, the following:
- tax payable on estimated income of the previous year relevant to the assessment year
2. tax payable on the assessed or returned income, as the case may be, of the last three previous years.
3. existing liability under Income Tax Act, 1961 and Wealth tax Act, 1957
4. advance tax payment for the assessment year relevant to the previous year till the date of the making application.
5. tax deducted at source/tax collected at source for the assessment year relevant to the previous year till the date of the making application.
The certificate can be issued for part of or complete previous year. Sub Rule (3) provides that the certificate issued by the Assessing Officer shall be valid for such period of the previous year as specified unless cancelled before the expiry of such period.
Sub rule (4) and (5) of Rule 28AA has been substituted and new sub rule (6) has been added as under
| Rule | Before amendment | After amendment |
| 28AA(4) | The certificate shall be valid only with regard to the person responsible for deduction of tax named therein. | The certificate for no deduction of tax shall be valid only with regard to the person responsible for deducting the tax and named therein. |
| 28AA(5) | The certificate 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. | The certificate referred to in sub-rule (4) 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. |
| 28AA(6) |
–
| The certificate for deduction of tax at lower rate shall 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 |
Implications of the amendments:
The certificate for lower deduction could now be a general one, issued to the applicant directly. The previous requirement of issue to and naming the person responsible in the certificate has now been restricted only to certificate for no or nil-deduction of tax. Form 13 has also been amended accordingly.
CPC(TDS) has issued a letter to all deductors regarding clarification of “Lower Deduction/No deduction u/s 197 or 197A
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