Form 13 is used by taxpayers to request the Assessing Officer of the Income Tax Department for a nil or reduced deduction of TDS. In many cases, the actual tax liability of a taxpayer is lower than the TDS already being deducted. This results in blocking of funds and creates liquidity issues.
To avoid such situations, taxpayers can submit Form 13 to the Income Tax Department. After reviewing the assessee’s income, the Assessing Officer may issue a certificate permitting lower or no deduction of TDS on specified income sources.
Understanding Tax Deducted at Source (TDS)
TDS is a mechanism where the person making a payment is required to deduct tax at prescribed rates, either at the time of crediting the amount in the books or during payment, whichever happens earlier. The remaining balance is then paid to the recipient. This system ensures tax collection in advance, prevents evasion, and helps monitor income of taxpayers. However, for some individuals or businesses with little or no taxable income, TDS deductions may cause unnecessary financial strain.
What is Form 13?
Form 13, governed by Section 197, allows individuals and companies to apply for a lower or nil deduction of TDS when their estimated tax liability is less than the tax being deducted. The form is submitted to the Assessing Officer, who, upon being satisfied with the income details, issues a certificate that specifies the reduced TDS rate applicable on certain types of payments.
Causes for Nil or Lower Tax Liability Compared to TDS Deducted
- The taxpayer has incurred losses during the current financial year.
- Losses carried forward from earlier years are available for set-off in the current year.
- The taxpayer is entitled to specific exemptions or deductions during the year.
These situations may result in the taxpayer having no taxable income for that year. Since TDS rates are generally prescribed based on broader income categories and applicable to a larger taxpayer base, certain individuals end up facing difficulties when tax is deducted even though they have little or no taxable income. While such taxpayers can later claim a refund (with interest), their funds remain blocked until the refund is processed. Additionally, they must go through the return-filing procedure just to claim the refund, even if they are otherwise not required to file a return.
To avoid such hardship, income tax law allows taxpayers to apply for a certificate from the Assessing Officer under Section 197. This certificate specifies a reduced rate of TDS or, in some cases, a nil deduction, depending on the facts of the case.
Eligibility for Application Under Section 197
A taxpayer can apply for a lower or nil TDS certificate if their income, though falling under the scope of TDS, justifies reduced or no deduction based on their estimated final tax liability.
Types of Income Covered Under Section 197
| Section | Nature of Income | Threshold Limit (₹) |
| 192 | Salary | Basic exemption limit |
| 193 | Interest on securities | 10,000 (debentures of widely held companies) / 10,000 (8% taxable savings bonds, 7.75% bonds, 2018, Floating Rate Bonds 2020) / 10,000 (6.5% Gold Bonds 1977, 7% Gold Bonds 1980) |
| 194 | Dividend to individual shareholder | 10,000 |
| 194A | Interest (other than securities) | 1,00,000 (senior citizens) / 50,000 (others, when payer is bank, cooperative society, or post office) / 10,000 (other cases) |
| 194C | Contractor’s payments | 30,000 (single payment) / 1,00,000 (aggregate per year) |
| 194D | Insurance commission | 20,000 |
| 194G | Commission, prize, etc. on lottery tickets | 20,000 |
| 194H | Commission or brokerage | 20,000 |
| 194-I | Rent | 6,00,000 per financial year |
| 194J | Professional/technical fees | 50,000 |
| 194K | Income from units of mutual funds | 10,000 |
| 194LA | Enhanced compensation | 5,00,000 |
| 194LBB | Income from investment fund units | Nil |
| 194LBC | Income from securitization trust | Nil |
| 194O | E-commerce operator payments | 5,00,000 (if PAN/Aadhaar furnished) |
| 194M | Payments by certain individuals or HUF | 50,00,000 |
| 195 | Payments to non-residents | Nil |
| 206C(1G) | LRS remittances & overseas tour packages | 10,00,000 |
Timeline for Submitting the Application
There is no specific deadline prescribed under the Income Tax Act for filing an application under Section 197. However, since TDS is deducted on income earned during the financial year, it is advisable to apply at the start of the year if the income is recurring, and at the time of receipt if it is a one-time income.
Validity of an Application under Section 197
A certificate issued under Section 197 applies to a particular financial year. It remains valid from the date of issuance until the end of that year unless revoked earlier by the Assessing Officer (TDS).
Procedure for Filing an Application under Section 197
To obtain permission for nil or lower TDS deduction, taxpayers must file Form 13 with the Assessing Officer (TDS). This form can be submitted either manually or online. Online filing facilities are available in regions such as Mumbai, Tamil Nadu, and Karnataka, allowing faster processing of lower/nil TDS certificates under Section 197(1) of the Income Tax Act, 1961.
It is important that taxpayers provide accurate and complete details when filing the application. Once satisfied, the Assessing Officer will issue the certificate. A copy of this certificate can then be attached to the invoice, enabling the deductor to justify lower tax deduction.
In Karnataka, taxpayers can also apply online by logging into TRACES or registering through the specified portal.
Steps to Apply for Form 13 Online
- Login to TRACES: Access the TRACES portal and log in with your credentials.
- Select Form 13: Navigate to the option to apply for lower or nil TDS deduction.
- Enter Required Details: Provide income projections, tax liability estimates, and the reason for requesting reduced or nil deduction.
- Upload Documents: Attach supporting documents such as tax returns, financial statements, and other relevant records.
- Submit Application: Review all details and submit the application.
- Acknowledgement: An acknowledgement receipt is generated. The Assessing Officer may seek further clarification if necessary.
- Certificate Issuance: Upon approval, a certificate is issued authorizing the deductor to apply a lower TDS rate or none at all.
Documents Required for Form 13 Submission
To apply using Form 13, you need to submit the following documents:
- Signed copy of Form 13
- Copies of Income Tax Returns (ITR) with enclosures and acknowledgements for the last 3 financial years
- Copies of Assessment Orders for the last 3 financial years
- If you have business or professional income, submit financial statements along with audit reports (if applicable) for the last 3 financial years
- Projected Profit & Loss Account for the current financial year
- Computation of Income for the last 3 financial years and estimated computation for the current year
- Copy of PAN Card
- TAN details of all parties responsible for making payments to you
- E-TDS return acknowledgements for the last 2 financial years
- Details of estimated income for the current financial year
- Any other supporting documents depending on the type of income
- Details of any TDS defaults (if applicable)
Once the application is fully submitted to the jurisdictional Assessing Officer (TDS), it will be processed within 30 days from the end of the month of submission. The Assessing Officer may review the documents, ask for additional details, and then either issue the certificate or reject the application.
FAQ’s
Q: Can salaried individuals apply for Form 13?
Yes, salaried individuals can apply for Form 13 if their overall tax liability is lower than the TDS being deducted by their employer.
Q: How can I apply for Form 13?
Form 13 can be filed online through the TRACES portal or submitted offline to the jurisdictional Assessing Officer with the required documents.
Q: Is there any fee to apply for Form 13?
No, there is no application fee for filing Form 13.
Q: How long does it take to process Form 13?
The Assessing Officer usually processes the application within 30 days from the end of the month in which it is received, provided all documents are in order.
Q: What is the validity of the certificate issued under Form 13?
The certificate issued is valid for the financial year for which the application is made, unless cancelled earlier by the Income Tax department.
Q: Can non-residents apply for Form 13?
Yes, non-resident taxpayers who receive income from India and whose tax liability is lower than the TDS rate can apply for a nil/lower deduction certificate through Form 13.
Q: What happens if the Assessing Officer rejects the Form 13 application?
If the application is rejected, the taxpayer has to continue with the regular TDS deduction and can claim a refund while filing the Income Tax Return (ITR).
Q: Is Form 13 applicable for all types of income?
Yes, Form 13 can be applied for various incomes such as salary, interest, contract payments, professional fees, rent, dividends, and commission, subject to eligibility.
Q: Can a company apply for Form 13?
Yes, companies can also apply for Form 13 if their estimated tax liability is lower than the TDS being deducted.
