The Income-tax laws permit certain taxpayers to get relief from TDS at a lower or nil rate under Section 197 of the Income Tax Act. Normally, TDS is deducted from salary and various other payments by Deductor and remitted with the Government. In case excess TDS is deducted, the taxpayer is allowed to apply and obtain an income tax refund by filing income tax return for the excess TDS deducted.
Income tax law provides for an option to obtain a certificate from the Assessing officer confirming either a lower rate of TDS compared to the rate specified under the law or a NIL rate of TDS, depending on facts and circumstances of each case based on the application made. Section 197 governs these provisions.
Section 197 application can be made by the recipient of income in case of the following category of receipts where TDS is required to be made under the following Sections:
Section 192 – Salary income
Section 193 – Interest on securities
Section 194 – Dividends
Section 194A – Interest other than interest on securities
Section 194C – Contractors income
Section 194D – Insurance commission
Section 194G – Commission/remuneration/prize on lottery tickets
Section 194H – Commission or brokerage
Section 194-I – Rent
Section 194J – Fee for Professional or technical services
Section 194LA – Compensation on acquisition of immovable property
Section 194LBB – Income in respect of units of investment fund
Section 194LBC – Income in respect of investment in securitization trust
Section 195 – Income of non residents
The eligibility of an assessee to claim the benefits of this rule is determined by the Assessing Officer by assessing his/her existing and estimated liability, which is determined by considering the following:
1. Tax payable on estimated income of the previous year relevant to the assessment year.
2. Tax payable on the assessed or returned income of the preceding three tears.
3. Existing liability under the Income-tax Act, 1961 and Wealth-tax Act, 1957.
4. Payment of advance tax for the assessment year relevant to the previous year until the date of making the relevant application.
5. Tax deducted at source for the assessment year relevant to the previous year until the date of making the relevant application.
6. Tax collected at source for the assessment year relevant to the previous year until the date of making the relevant application.
The certificate issued under Section 197 is only valid for the AY mentioned in the certificate unless it is cancelled or the date mentioned on the certificate expires.
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