One Step ahead and 2 steps backwards. Why? This principle of the dilemma is equally applicable in the tax mechanism also. The same error/ fault was persisting in the regime of Tax Deducted at Source (TDS) for certain categories of taxpayers. But Now, by insertion of section 197 related to the Income-tax Form 13, no more hardships to the people on whom Tax deducted at source is imposed.
Sometimes the amount deducted from the income of the assessee in the name of TDS is more as compared to actual liability to pay to the Income Tax Department. This leads to overpayment on behalf of the taxpayer and thereafter the taxpayer has to claim and get the money back again from income tax machinery that causes hardships and the wastage of time also.
Now, a mechanism has been devised for avoiding such dilemmas wherein a certificate shall be delivered to such assessee by the Income Tax Department so as to avoid the trouble of getting back your own money. We shall start from Scratch
What is Tax Deducted at Source (TDS)?
In TDS the taxpayer who receives income does not pay the tax to the government. Rather the person who is paying the income to the person cuts the tax at the primary stage (so that he can pay it to the government treasury/exchequer) and pays the rest to the taxpayer. In essence, the person who has tax liability does not pay the tax to the government. Rather the person who is giving money to the taxpayer cuts the tax deposits it to the account of the central government and pays the rest of the money to the taxpayer. The amount which a person has deducted in the name of tax is deposited to the Central Government and this tax is what is named as Tax Deducted at Source via income tax form 13.
In Which Cases TDS is Deducted?
TDS is deducted at the time of making specified payments such as commission, rent, professional fees, salary and so on by the persons making such payments.
Example of Dilemma
It is very common in the case of the sale of real estate by the Non-resident Indian (NRI) wherein more than 20% of TDS is deducted
- On the Entire Sales Value
- Rather than Deducting on the Capital Gain
And this leads to the deduction of more TDS. Thereafter comes the trouble. NRI has to claim a refund of TDS at the time of filing Income Tax return form 13. And the dilemma goes on.
What Steps Government has Taken to Avoid Such Misconvenience?
Section 197 has been inserted by the Central Government. As per this amendment, the person caught in the aforesaid dilemma shall compose and submit an application to the Income Tax Officer to give him a certificate for Nil/ Lower deduction of TDS. The application is required to be filed in Form 13 under section 197 to the Income Tax Officer & after being satisfied the lower tax deduction is justifiable, he/she shall issue the certificate.
Once the above-mentioned certificate is issued under section 197, the TDS will be deducted after considering the TDS rate mentioned in the certificate in Income tax form 13. Worth mentioning here that the certificate shall be issued via online mode and the taxpayer could download the same from the web portal of the Income Tax Department.
Details Required While Filing Form 13
Following details shall be required:
- Name and Permanent Account Number
- Information of income of the last three years & the projected current year’s income
- Information about the purpose for which the payment is being received
- Information of tax deducted paid for the current year
- Information of tax payment of the last 3 years
- Email ID
- Mobile Number
- Tax Liability Estimated for the current year
Important Section About Income Tax Form 13 for Lower/Nil TDS Deduction
“Application in Form 13 can only be filed for payments on which TDS is required to be deducted under Section 192, Section 193, Section 194, Section 194A, Section 194C, Section 194D, Section 194G, Section 194H, Section 194I, Section 194J, Section 194K, Section 194LA, Section 194BB, Section 194LBC, Section 194M, Section 194-O and Section 195. If the payment is required to be deducted under any other section of the Income Tax Act, the application in Form 13 cannot be filed.
The Lower/ Nil TDS Certificate would only be issued provided the Income Tax Officer is satisfied that the income of the taxpayer justifies lower deduction of TDS”
