For FY 2020-21 Application related to the Nil or Lower rate of TDS Certificate

According to the Income Tax Act provisions, Tax deducted at Sources (TDS) deduction is a compulsion while making payments. The taxpayer, who is making the payment, has to deduct the TDS and deposit it to the Income Tax Department before the due date of depositing TDS. Occasionally TDS is deducted from the total revenue/ income of the taxpayer i.e receiver though the taxpayer’s total tax liability is calculated on the profit of that financial year.

It is as per the prevailing Income Tax Rates/Rules, which may be less than the total amount of deducted TDS. While filing Income Tax Return (ITR), the taxpayer can claim the refund of excess amount of TDS deducted, in the cases in which TDS first gets deducted. In any case, the entire procedure ends up being an issue for many taxpayers because firstly TDS is deducted and later on the taxpayer asks for its refunds by filing ITR.

To diminish the problem, Govt. has introduced Section 197 which permits the taxpayers to benefit the Nil/Lower Deduction of TDS Certificate. In any case, regularly the way toward getting the Certificate of Nil /Lower Deduction TDS takes considerably more time than anticipated. To restraint this issue, the Government is permitting the taxpayers to apply for the Nil/Lower rate of TDS Deduction Certificate for the financial year 2020-21 from 28th February 2020. On the off chance that you are looking for one, the article here will help you to get all the required information.

1. What do you mean by a Certificate of Nil/Lower Rate of TDS?

As we have already mentioned that it is a compulsion to deduct TDS by the individual who is making payment and deposit to the Government. The taxpayer can file the return of income to claim the refund of excess amount of TDS deducted after comparing it to total tax liability. The taxpayer may find this process complicated to get the refund. That’s why Govt. introduced Section 197 under which a taxpayer may file an application to the Income Tax Office for issuing a certificate for the Nil/Lower Rate of TDS Deduction.

At the purpose when a taxpayer submits such a certificate granted under Section 197 to deductor/payer, the deductor/payer needs to deduct TDS at the rate mentioned in the Nil/Lower Deduction Certificate.  However, the Nil/Lower deduction of TDS Certificate is applicable only when it is issued by an Income Tax Officer in because of the application Form 13 submitted by a taxpayer. Next, the taxpayer needs to provide the certificate to the individual who’s deducting TDS.

This certificate is a compulsion to provide in all cases except for the payment of Interest on Securities or Interest on FD according to Section 197A. For such cases, the taxpayer has to fill Form 15G or Form 15H.

2. Due date to apply for Certificate

The provision of Income Tax hasn’t set any deadline for applying under Section 197. Since TDS gets deducted as per the income of the on-going financial year, it’s best to apply for the certificate at the start of a financial year.

Regardless of whether you are a salaried individual or have a contractor’s income- you may follow the same. However, here are a couple of focuses that you have to note. Application for Lower Tax Deduction Certificate takes time to get processed, to facilitate the taxpayer, the taxpayer can apply beforehand (on or after 28th February 2020) to see the effects from 1st April of Financial Year 2020-21.

On the other hand, it takes time to get the relevant data from various sources and process the application of the Lower/Nil Tax Deduction Certificate. That is the reason; request for issuing the certificate won’t be accepted after 15th March of a Financial Year, i.e., no taxpayer can apply for the certificate after 15th March 2020 for the Financial Year 2019-20.

For tax collection at source, all the above-mentioned dates will be also applicable.

3. Income Covered Under Section 197

Section 197 application can be made by the recipient of income if there is a case of the following category of receipts where TDS is required to be made under the following Sections:

4. Advantages for Certificate of the Lower rate of deduction TDS

The taxpayers, who have the Certificate of Lower deduction of TDS issued by an Income Tax Department, will pay only the mentioned amount to the individual who’s deducting the TDS. In the event the individual's total deducted amount is more than the tax liability, he/she doesn’t need to pay any amount as TDS.    

The Certificate of Lower deduction of TDS is acceptable only for the assessment year under Rule 28AA unless canceled prior to the expiry date mentioned in the certificate. Besides, the deductor should make a lower deduction of TDS only when his/her name is mentioned in the certificate, which is issued under Section 197 and as a response to the application Form 13.

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