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TDS Exemption Certificate

TDS Exemption Certificate

Section 197 of Income Tax Act, states the provision of a lower rate of TDS or no TDS on credit or payment as the case may be if Assessing Officer is satisfied to do so subject to evidence production for doing so by the applicant. Basically, TDS Exemption Certificate is not suo moto rather the assessed need to apply for the same to concerned Assessing Officer. Therefore the burden of justification on which such certificate to be issued needs to be provided by the applicant itself to take an informed decision by Assessing Officer.

Eligibility for Making an Application Under Section 197

Any accessee whose income is derived from section covered by 197 and those derived income are below the minimum amount chargeable to tax or specifically exempt or person is not liable to pay tax as per the existing tax law then the person is eligible to apply for TDS exemption certificate u/s 197.

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 on-going 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.

Validity of an Application Made Under Section 197

Section 197 is issued for a particular financial year and stands valid from the date of issue and throughout the financial year unless cancelled by the assessing officer (TDS) before the expiry.

Section covered under the provision of Section 197

Section 197 has covered the following particular section to issuance TDS Exemption Certificate:-

It means any person having income from the above-listed section  and the income is specifically exempt, income is below minimum amount chargeable to tax or person is not liable to pay tax on such income then person can file application to its concern Assessing Officer to allow him Nil or Low rate of Tax rate to deducted. Meaning thereby the person getting such certificate can attach to every invoice send to its client and the TDS Penalty will not be deducted.

It is pertinent to note it down that the payment other than above section is not supposed to apply for TDS Exemption Certificate under the provision of Section 197.

How to obtain the TDS Exemption Certificate?

A person eligible to obtain a certificate under the provision of income tax law in India can file an application in Form No. 13 u/r 28 of Income Tax Rules, 1962. Assessing Officer required to provide decision either allowing or rejecting the application for Nil or Low rate of TDS applicable to the applicant within 30 days from the date of receiving the application.

Certificate of no deduction of tax or low rate of tax shall be valid only with regard to the person responsible for deducting tax and named therein.

Application to be filed with concerned Assessing Officer only. The period of applicability will be either mentioned in a certificate or till the cancellation from a concerned assessing officer is issued.

After submitting the application disclosing all the required information with relevant evidence or supporting documents to substantiate the information true and correct, the applicant is required to mention date, place and affix the signature of applicant itself on Form 13 to the AO.

The AO will issue the exemption certificate if he is satisfied with the documents otherwise raise objection to seek the clarification.

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