The payer is duty bound to do Tax Deduction At Source (TDS) if such payment is covered by TDS provision.  There may be instances where recipient want payment without TDS as he is incurring losses or may be having lesser tax liability. In such cases, recipient can approach income tax department whereby they can get authorized the payer to make the payment without TDS or TDS at a lower rate.

Income-tax Act & Rules thereto provides for a facility to obtain Nil Deduction Certificate or Lower Deduction Certificate by filing an application in Form 13 with Jurisdictional Assessing Officer (AO). It may be noted that Jurisdictional AO is a TDS AO and not regular AO where Assessee is filing income tax return.

After reviewing the case, AO can issues a certificate seeking a list of customers of the assessee to neither deduct taxes nor deduct at lower rate.

 

LIST OF DOCUMENTS BEFORE MAKING AN APPLICATION:

 

For getting the lower deduction certificate, the following documents are required to be kept ready for uploading and feeding the data in the system. It is advisable to have the scanned copy of all the documents below.:

1. Income Tax returns, computation of income  & Financial statements of last 3 years and projected financial statements for FY 2018-19.
2. A compilation of the income of last 3 years and projected current year’s income of FY 2018-19
3. Details of tax deduction of last 3 years as per Form 26AS vis a vis as claimed in the ITR
4. List of payer with their TAN and expected payment from them in the relevant assessment year
5. Details of tax deduction of the last 3 years.
6. in case of certain entities covered under section 11 or 12, Registration/exemption Certificate. Similarly,  Registration/exemption Certificate in case of certain entities covered under section 139(4C) where income is exempt under section 10.
7. Assessment Orders if assessee for the last four assessment years.

Physical or Manual Filing of application in Form 13?

Now, there is a facility of online portal to file Form 13 application. Physical application is not required for lower deduction certificate.

Stepwise Procedure to File online Form 13 for Lower or Non Deduction of TDS U/s. 197

1. Login to TRACES website with your User ID, Password, PAN for the Taxpayer and the Verification Code.
2. After login, one has to Go to ‘’Statements/Forms’’ tab and click on Request for Form 13 to initiate request. A Pop-Up window will be displayed (If DSC is not registered). Click on ”Yes” to proceed further.

3. Select the residential status as Resident.

4. Check list for Section 197/ 206C(9) will appear on the next screen. Click on Proceed button.

5. Form No. 13 will be auto-populated, select Financial Year and Request Type from drop down then click on Proceed button.

6. Now, one has to Select option with TAN & Amount – Deductor TAN & Amount both are available. A Pop up will be displayed on the screen to select the number of entries. One has to Select on Less than or equal to 50 (Online) option to submit request through online.

7. User need to fill details which needs to be furnished in Form No. 13. In Form No. 13, few common details are auto-populated on the basis of TRACES profile. Also user need to select at least any one declaration for exemption under section 10, section 11 or section 12 for certain entities covered under Income Tax Rule 28AB or not.

8. If user selects a declaration for exemption under section 10, section 11 or section 12 for certain entities covered under Income Tax Rule 28AB then one has to opt for either Declaration No. 1 or Declaration No. 2 whereby after filling up the basic details Annexure-I will open to fill the annexure details accordingly.

9. If user selects a declaration of Other than Rule 28AB of the Income Tax Rules 1962 then the Declaration No. 3 will be required wherein after selecting the type of annexure from dropdown and after clicking the Proceed button there will be
   a) Annexure-I for No/Lower Deduction in case of Tax deduction at Source (TDS) or
   b) Annexure-II for Lower Collection in case of Tax Collection at Source (TCS) will be displayed .

One has to press the Template button to fill Computation of Estimated Income of Financial Year for which certificate is sought then submit. If Details is saved, successfully saved message will appear on screen.

10. After submitting declaration, one has to click on Preview & Submit button to review the Form No. 13 details. Click on Submit for final submission.

11. After submitting it, a pop-up will be displayed to validate the Form No. 13 request through DSC (Digital Signature Certificate) E- Verification (Through Internet Banking) or Mobile OTP or Aadhaar Number.

12. Click on Proceed after selecting available validating option.

13. After validation, request for Form No. 13 will be submitted successfully. An e-mail and SMS will be sent for submission of Form No. 13.
14. User can check the status under Track Request for Form No. 13 option available under Statements/Forms tab.
15. User can cancel the requests till the status is Submitted or  Clarification required by AO.

After all this formalities and submission, Taxpayers may receive the email or query from the AO for further processing it. The taxpayers must ensure to submit it timely.

It may be noted that authorization for lower deduction certificate is with CIT (TDS) and so the process may take the time of around 15 days to 1 month as AO need to forward it to the CIT through JCIT recommendations.